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*
G.R. No. 164588. October 19, 2005.

NAUTICA CANNING CORPORATION, FIRST DOMINION

PRIME HOLDINGS, INC. and FERNANDO R. ARGUELLES, JR.,
petitioners, vs. ROBERTO C. YUMUL, respondent.

Civil Procedure; Appeals; Certiorari; A petition for review under Rule

45 is the proper remedy of a party aggrieved by a decision of the Court of
Appeals, which is not identical to a petition for certiorari under Rule 65.—
A petition for review under Rule 45 is the proper remedy of a party
aggrieved by a decision of the Court of Appeals, which is not identical to a
petition for certiorari under Rule 65. Under Rule 45, decisions, final orders
or resolutions of the Court of Appeals is appealed by filing a petition for
review, which is a continuation of the appellate process over the original
case. On the other hand, the writ of certiorari under Rule 65 is filed when
petitioner has no plain, speedy and adequate remedy in the ordinary course
of law against its perceived grievance. A remedy is considered “plain,
speedy and adequate” if it will promptly relieve the petitioner from the
injurious effects of the judgment and the acts of the lower court or agency.
Corporation Law; Stockholders; As between the corporation on the
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.—It is possible for a business to be wholly owned by one
individual. The validity of its incorporation is not affected when such
individual gives nominal ownership of only one share of stock to each of the
other four incorporators. This is not necessarily illegal. But, this is valid
only between or among the incorporators privy to the agreement. It does
bind the corporation which, at the time the agreement is made, was non-
existent. Thus, incorporators continue to be stockholders of a corporation
unless, subsequent to the incorporation, they have validly transferred their
subscriptions to the real parties in interest. As between the corporation on
the 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.

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* FIRST DIVISION.

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Same; Same; 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.—We held in Ponce v. Alsons Cement Corp. that:... [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. It is only when the transfer has been
recorded in the stock and transfer book that a corporation may rightfully
regard the transferee as one of its stockholders. From this time, the
consequent obligation on the part of the corporation to recognize such rights
as it is mandated by law to recognize arises. Hence, without such recording,
the transferee may not be regarded by the corporation as one among its
stockholders and the corporation may legally refuse the issuance of stock
certificates[.]
Civil Procedure; Appeals; Securities and Exchange Commission;
Findings of fact of quasi-judicial agencies, like the SEC, are generally
accorded respect and even finality by the Supreme Court, if supported by
substantial evidence, in recognition of their expertise on the specific matters
under their consideration.—We see no cogent reason to set aside the factual
findings of the SEC, as upheld by the Court of Appeals. Findings of fact of
quasi-judicial agencies, like the SEC, are generally accorded respect and
even finality by the Supreme Court, if supported by substantial evidence, in
recognition of their expertise on the specific matters under their
consideration, moreso if the same has been upheld by the appellate court, as
in this case.
Corporation Law; Statutes; Section 23 of Batas Pambansa (BP) Blg.
68 or the Corporation Code of the Philippines requires that every director
must own at least one share of the capital stock of the corporation of which
he is a director. Before one may be elected president of the corporation, he
must be a director.—Section 23 of Batas Pambansa (BP) Blg. 68 or The
Corporation Code of the Philippines requires that every director must own
at least one share of the capital stock of the corporation of which he is a
director. Before one may be elected president of the corporation, he must be
a director. Since Yumul was elected as Nautica’s Director and as President
thereof, it follows that he must have owned at least one share of the corpora-

417

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tion’s capital stock. Thus, from the point of view of the corporation, Yumul
was the owner of one share of stock. As such, the SEC correctly ruled that
he has the right to inspect the books and records of Nautica, pursuant to
Section 74 of BP Blg. 68 which states that the records of all business
transactions of the corporation and the minutes of any meetings shall be
open to inspection by any director, trustee, stockholder or member of the
corporation at reasonable hours on business days and he may demand, in
writing, for a copy of excerpts from said records or minutes, at his expense.
Same; Same; Courts; Jurisdictions; Intra-Corporate Disputes; The
Securities Regulation Code (Republic Act No. 8799); Republic Act No. 8799
transferred from the SEC to the regional trial court jurisdiction over cases
involving intra-corporate disputes.—When the controversy involves matters
purely civil in character, it is beyond the ambit of the limited jurisdiction of
the SEC. As held in Viray v. Court of Appeals, the better policy in
determining which body has jurisdiction over a case would be to consider
not only the status or relationship of the parties, but also the nature of the
question that is the subject of their controversy. This, however, is now moot
and academic due to the passage of Republic Act No. 8799 or The Securities
Regulation Code which took effect on August 8, 2000. The Act transferred
from the SEC to the regional trial court jurisdiction over cases involving
intra-corporate disputes. Thus, whether or not the issue is intra-corporate, it
is now the regional trial court and no longer the SEC that takes cognizance
of the controversy.

PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.

The facts are stated in the opinion of the Court.

     Ma. Erlinda R. Calañgi for petitioners.
          Law Firm of Zamora, Poblador, Vasquez & Bretana
collaborating counsel for petitioners.
     Quasha, Ancheta, Peña & Nolasco for respondent.

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YNARES-SANTIAGO, J.:
1
Petitioners assail the September 26, 2001 Decision of the Court of
Appeals in CA-G.R. SP No. 61919, affirming in toto the Decision of
the Securities and Exchange Commission (SEC) En Banc in SEC
2
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2
Case No. 10-96-5455, as well as the July 16, 2004 Resolution
denying the motion for reconsideration.
The facts of the case show that Nautica Canning Corporation
(Nautica) was organized and incorporated on May 11, 1994 with an
authorized capital stock of P40,000,000 divided into 400,000 shares
with a par value of P100.00 per share. It had a subscribed capital
stock of P10,000,000 with paid-in subscriptions from its
3
incorporators as follows:

Name No. of Amount Amount

Shares Subscribed Paid
ALVIN Y. DEE 89,991 P8,999,100 P4,499,100
JONATHAN Y. DEE 2 200 200
JOANNA D. LAUREL 2 200 200
DARLENE EDSA MARIE 2 200 200
GONZALES
JENNIFER Y. DEE 2 200 200
ROBERTO C. YUMUL 1 100 100
JERRY ANGPING 10,000 1,000,000 500,000
100,000 P10,000,000 P5,000,000

On December 19, 1994, respondent Roberto C. Yumul was

appointed Chief Operating Officer/General Manager of Nautica with
a monthly compensation of P85,000 and an addi-

_______________

1 Rollo, pp. 9-29. Penned by Associate Justice Salvador J. Valdez, Jr. and
concurred in by Associate Justices Wenceslao I. Agnir, Jr. and Mariano C. Del
Castillo.
2 Id., at pp. 30-31.
3 CA Rollo, pp. 80-81.

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tional compensation equal4

to 5% of the company’s operating profit
for the calendar year. On the same date, First Dominion Prime
Holdings, Inc., Nautica’s parent company, through its Chairman
5
Alvin Y. Dee, granted Yumul an Option to Purchase up to 15% of
the total stocks it subscribed from Nautica. 6
On June 22, 1995, a Deed of Trust and Assignment was executed
between First Dominion Prime Holdings, Inc. and Yumul whereby

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the former assigned 14,999 of its subscribed shares in Nautica to the

latter. The deed stated that the 14,999 “shares were acquired and
paid for in the name of the ASSIGNOR only for convenience, but
actually executed in behalf of and in trust for the ASSIGNEE.”
In March 1996, Nautica declared a P35,000,000 cash dividend,
P8,250,000 of which was paid to Yumul representing his 15% share.
After Yumul’s resignation from Nautica on August 5, 1996, he
7
wrote a letter to Dee requesting the latter to formalize his offer to
buy Yumul’s 15% share in Nautica on or before August 20, 1996;
and demanding the issuance of the corresponding certificate of
shares in his name should Dee refuse to buy the same. Dee, through
Atty. Fernando R. Arguelles, Jr., Nautica’s corporate secretary,
denied the request claiming that Yumul was not a stockholder of
Nautica.
8 9
On September 6, 1996 and September 9, 1996, Yumul requested
that the Deed of Trust and Assignment be recorded in the Stock and
Transfer Book of Nautica, and that he, as a stockholder, be allowed
to inspect its books and records.

_______________

4 Id., at p. 249.
5 Id., at pp. 272-275.
6 Id., at pp. 127-128.
7 Id., at p. 239.
8 Id., at p. 126.
9 Id., at p. 129.

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Yumul’s requests were denied allegedly because he neither exercised

the option to purchase the shares nor paid for the acquisition price of
the 14,999 shares. Atty. Arguelles maintained that the cash dividend
received by Yumul is held by him only in trust for First Dominion
Prime Holdings, Inc.
Thus, Yumul filed on October 3, 1996, before the SEC a petition
for mandamus with damages, with prayer that the Deed of Trust and
Assignment be recorded in the Stock and Transfer Book of Nautica
and that the
10
certificate of stocks corresponding thereto be issued in
his name.
11
On October 12, 2000, the SEC En Banc rendered the Decision,
the dispositive portion of which reads:

“WHEREFORE, judgment is hereby rendered in favor of the petitioner and

against the respondents, as follows:

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1. Declaring petitioner as a stockholder of respondent Nautica;

2. Declaring petitioner as beneficial owner of 14,999 shares of
Nautica under the Deed of Trust and Assignment dated June 22,
1995
3. Declaring petitioner to be entitled to the right of inspection of the
books of the corporation pursuant to the pertinent provisions of the
Corporation Code; and
4. Directing the Corporate Secretary of Nautica to recognize and
register the Deed of Trust and Assignment dated June 22, 1995.
12
SO ORDERED.”

On appeal, the Court of Appeals affirmed the decision of the SEC

En Banc. Petitioners’ motion for reconsideration was denied in a
Resolution dated July 16, 2004.
Hence, this petition.

_______________

10 Id., at pp. 59-73.

11 Id., at pp. 53-58.
12 Id., at p. 57.

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At the outset, we note that petitioners’ recourse to this Court via a

“combined” petition under Rule 65 and an appeal under Rule 45 of
the Rules of Court is irregular. A petition for review under Rule 45
is the proper remedy of a party aggrieved by a decision of the Court
of Appeals, which is not identical to a petition for certiorari under
Rule 65. Under Rule 45, decisions, final orders or resolutions of the
Court of Appeals is appealed by filing a petition for review, which is
13
a continuation of the appellate process over the original case. On
the other hand, the writ of certiorari under Rule 65 is filed when
petitioner has no plain, speedy and adequate remedy in the ordinary
course of law against its perceived grievance. A remedy is
considered “plain, speedy and adequate” if it will promptly relieve
the petitioner from the injurious effects of the judgment and the acts
of the lower court or agency.
In this case, petitioners’ speedy, available and adequate remedy is
appeal via Rule 45, and not certiorari under Rule 65.
Notwithstanding petitioners’ procedural lapse, we shall treat the
petition as one filed under Rule 45.
The petition is partly meritorious.

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Petitioners contend that Yumul was not a stockholder of Nautica;

that he was just a nominal owner of one share as the beneficial
ownership belonged to Dee who paid for said share when Nautica
was incorporated. They presented China Banking Corporation
Check No. A2620636 and Citibank Check No. B82642 as proof of
payment by Dee; a letter by Dee dated July 15, 1994 requesting the
corporate secretary of Nautica to issue a certificate of stock in
Yumul’s name but in trust for Dee; and Stock Certificate No. 6 with
annotation “ITF Alvin Y. Dee” which means that respondent held
said stock “In Trust For Alvin Y. Dee.”
We are not persuaded.

_______________

13 Mercado v. Court of Appeals, G.R. No. 150241, November 4, 2004, 441 SCRA
463, 469.

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Indeed, it is possible for a business to be wholly owned by one

individual. The validity of its incorporation is not affected when
such individual gives nominal ownership of only one share of stock
to each of the other four incorporators. This is not necessarily
14
illegal. But, this is valid only between or among the incorporators
privy to the agreement. It does bind the corporation which, at the
time the agreement is made, was non-existent. Thus, incorporators
continue to be stockholders of a corporation unless, subsequent to
the incorporation, they have validly transferred their subscriptions to
the real parties in interest. As between the corporation on the one
hand, and its shareholders and third persons on the other, the
corporation looks only to its books for the purpose of determining
15
who its shareholders are.
In the case at bar, the SEC and the Court of Appeals correctly
found Yumul to be a stockholder of Nautica, of one share of stock
recorded in Yumul’s name, although allegedly held in trust for Dee.
Nautica’s Articles of Incorporation and By-laws, as well as the
General Information Sheet filed with the SEC indicated that Yumul
16
was an incorporator and subscriber of one share. Even granting that
there was an agreement between Yumul and Dee whereby the former
is holding the share in trust for Dee, the same is binding only as
between them. From the corporation’s vantage point, Yumul is its
stockholder with one share, considering that there is no showing that
Yumul transferred his subscription to Dee, the alleged real owner of
the share, after Nautica’s incorporation.
17
We held in Ponce v. Alsons Cement Corp. that:
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“. . . [A] transfer of shares of stock not recorded in the stock and transfer
book of the corporation is non-existent as far as the corpora-

_______________

14 Villanueva, Philippine Corporate Law, 1998, pp. 166-167.

15 Ponce v. Alsons Cement Corporation, 442 Phil. 98, 109-110; 393 SCRA 602, 612 (2002).
16 CA Rollo, p. 56.
17 Supra.

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tion 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. It is only
when the transfer has been recorded in the stock and transfer book that a
corporation may rightfully regard the transferee as one of its stockholders.
From this time, the consequent obligation on the part of the corporation to
recognize such rights as it is mandated by law to recognize arises.
Hence, without such recording, the transferee may not be regarded by the
corporation as one among its stockholders and the corporation may legally
refuse the issuance of stock certificates[.]”

Moreover, the contents of the articles of incorporation bind the

corporation and its stockholders. Its contents cannot be disregarded
considering that it was the basic document which legally triggered
18
the creation of the corporation.
The Court of Appeals, in affirming the factual findings of SEC,
held that:

“The evidence submitted by petitioners to establish trust is palpably

incompetent, consisting mainly of the self-serving allegations by the
petitioners and the China Banking Corporation checks issued as payment for
the shares of stock of Nautica. Dee did not testify on the supposed trust
relationship between him and Yumul. While Atty. Arguelles testified, his
testimony is barren of probative value since he had no first-hand knowledge
of the relationship in question. The isolated fact that Dee might have paid
for the share in the name of Yumul did not by itself make the latter a man of
straw. Such act of payment is so nebulous and equivocal that it can not yield
the meaning which the petitioners would want to squeeze from it without
19
the clarificatory testimony of Dee.”

We see no cogent reason to set aside the factual findings of the SEC,
as upheld by the Court of Appeals. Findings of fact of quasi-judicial
agencies, like the SEC, are generally ac-

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_______________

18 Lanuza v. Court of Appeals, G.R. No. 131394, March 28, 2005, 454 SCRA 54.
19 Rollo, p. 25.

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424 SUPREME COURT REPORTS ANNOTATED

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corded respect and even finality by the Supreme Court, if supported

by substantial evidence, in recognition of their expertise on the
20
specific matters under their consideration, moreso if the same has
been upheld by the appellate court, as in this case.
Besides, other than petitioners’ self-serving assertion that the
beneficial ownership belongs to Dee, they failed to show that the
subscription was transferred to Dee after Nautica’s incorporation.
The conduct of the parties also constitute sufficient proof of Yumul’s
status as a stockholder. On April 4, 1995, Yumul was elected during
the regular annual stockholders’ meeting as a Director of Nautica’s
21
Board of Directors. Thereafter, he was elected as president of
22
Nautica. Thus, Nautica and its stockholders knowingly held
respondent out to the public as an officer and a stockholder of the
corporation.
Section 23 of Batas Pambansa (BP) Blg. 68 or The Corporation
Code of the Philippines requires that every director must own at
least one share of the capital stock of the corporation of which he is
a director. Before one may
23
be elected president of the corporation,
he must be a director. Since Yumul was elected as Nautica’s
Director and as President thereof, it follows that he must have
owned at least one share of the corporation’s capital stock.
Thus, from the point of view of the corporation, Yumul was the
owner of one share of stock. As such, the SEC correctly ruled that
24
he has the right to inspect the books and records of Nautica,
pursuant to Section 74 of BP Blg. 68 which states that the records of
all business transactions of the corporation and the minutes of any
meetings shall be open to inspection

_______________

20 Quiambao v. Court of Appeals, G.R. No. 128305, March 28, 2005, 454 SCRA
17.
21 CA Rollo, p. 254.
22 Rollo, p. 15.
23 Section 25, BP Blg. 68.
24 CA Rollo, p. 56.

425

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by any director, trustee, stockholder or member of the corporation at

reasonable hours on business days and he may demand, in writing,
for a copy of excerpts from said records or minutes, at his expense.
As to whether or not Yumul is the beneficial owner of the 14,999
shares of stocks of Nautica, petitioners allege that Yumul was given
the option to purchase shares of stocks in Nautica under the Option
to Purchase dated December 19, 1994. However, he failed to
exercise the option, thus there was no cause or consideration for the
Deed of Trust and Assignment, which makes it void for being
25
simulated or fictitious.
Anent this issue, the SEC did not make a categorical finding on
whether Yumul exercised his option and also on the validity of the
Deed of Trust and Assignment. Instead, it held that:

. . . Although unsubstantiated, the apparent objective of the respondents’

allegation was to refute petitioners claim over the shares covered by the
Deed of Trust and Assignment. This must therefore be deemed as nothing
but a ploy to deprive petitioner of his right over the shares in question,
26
which to us should not be countenanced.

Neither did the Court of Appeals rule on the issue as it only held
that:

Petitioners also contend that the Deed is a simulated contract.

Simulation is “the declaration of a fictitious will, deliberately made by
agreement of the parties, in order to produce, for the purposes of deception,
the appearances of a judicial act which does not exist or is different with that
which was really executed.” The characteristic of simulation is that the
apparent contract is not really desired or intended to produce legal effect or
in any way alter the juridical situation of the parties.

_______________

25 Id., at p. 138.
26 Id., at p. 57.

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The requisites for simulation are: (a) an outward declaration of will different
from the will of the parties; (b) the false appearance must have been
intended by mutual agreement; and (c) the purpose is to deceive third
27
persons. These requisites have not been proven in this case.

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Thus, other than defining and enumerating the requisites of a

simulated contract or deed, the Court of Appeals did not make a
determination whether the SEC has the jurisdiction to resolve the
issue and whether the questioned deed was fictitious or simulated.
28
In Intestate Estate of Alexander T. Ty v. Court of Appeals, we
held that:

. . . The question raised in the complaints is whether or not there was indeed
a sale in the absence of cause or consideration. The proper forum for such a
dispute is a regular trial court. The Court agrees with the ruling of the Court
of Appeals that no special corporate skill is necessary in resolving the issue
of the validity of the transfer of shares from one stockholder to another of
the same corporation. Both actions, although involving different property,
sought to declare the nullity of the transfers of said property to the decedent
on the ground that they were not supported by any cause or consideration,
and thus, are considered void ab initio for being absolutely simulated or
fictitious. The determination whether a contract is simulated or not is an
issue that could be resolved by applying pertinent provisions of the
Civil Code, particularly those relative to obligations and contracts.
Disputes concerning the application of the Civil Code are properly
cognizable by courts of general jurisdiction. No special skill is necessary
that would require the technical expertise of the SEC. (Emphasis
supplied)

Thus, when the controversy involves matters purely civil in

character, it is beyond the ambit of the limited jurisdiction of

_______________

27 Rollo, p. 27.
28 G.R. Nos. 112872 & 114672, April 19, 2001, 356 SCRA 661, 667-668.

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29
the SEC. As held in Viray v. Court of Appeals, the better policy in
determining which body has jurisdiction over a case would be to
consider not only the status or relationship of the parties, but also the
nature of the question that is the subject of their controversy. This,
however, is now moot and academic due to the passage of Republic
Act No. 8799 or The Securities Regulation Code which took effect
on August 8, 2000. The Act transferred from the SEC to the regional
trial court jurisdiction over cases involving intra-corporate disputes.
Thus, whether or not the issue is intra-corporate, it is now the
regional trial court and no longer the SEC that takes cognizance of
the controversy.

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Considering that the issue of the validity of the Deed of Trust and
Assignment is civil in nature, thus, under the competence of the
regular courts, and the failure of the SEC and the Court of Appeals
to make a determinative finding as to its validity, we are constrained
to refrain from ruling on whether or not Yumul can compel the
corporate secretary to register said deed. It is only after an
appropriate case is filed and decision rendered thereon by the proper
forum can the issue be resolved.
WHEREFORE, the petition is PARTIALLY GRANTED. The
September 26, 2001 Decision of the Court of Appeals in CA-G.R.
SP No. 61919, 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.
SO ORDERED.

          Davide, Jr. (C.J., Chairman), Quisumbing, Carpio and

Azcuna, JJ., concur.

_______________

29 G.R. No. 92481, November 9, 1990, 191 SCRA 308, 323.

428

428 SUPREME COURT REPORTS ANNOTATED

Re: Cases Left Undecided by Retired Judge Benjamin A. Bongolan
of the RTC, Br. 2, Bangued, Abra

Petition partially granted.

Notes.—Where the questioned Court of Appeals decision is a

disposition on the merits, and where said Court has no remaining
issue to resolve, the proper remedy available to the aggrieved party
is a petition for review under Rule 45, not Rule 65 of the Rules of
Court. (Siasoco vs. Court of Appeals, 303 SCRA 186 [1999])
A derivative action is a suit by a shareholder to enforce a
corporate cause of action; the corporation is a necessary party to the
suit. (Chua vs. Court of Appeals, 443 SCRA 259 [2004])

——o0o——

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5/8/22, 11:28 PM SUPREME COURT REPORTS ANNOTATED VOLUME 473

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