Bitong vs. CA (292 SCRA 503 [1998])
FACTS:
Petitioner Nora Bitong, claiming to be a former Treasurer and Member of the Board of Directors of Mr. & Ms.Publishing Co. filed a derivative suit before the SEC allegedly for the benefit of private respondent Mr. & Ms.PublishingCo., Inc. to hold respondent spouses Eugenia & Jose Apostol liable for fraud, misrepresentation, disloyalty, among others.
The petition principally sought to enjoin respondent spouses from further acting a president-director and director, respectively.
Private respondents refuted the allegations of petitioner saying that she was merely a holder-in-trust of JAKA shares and only represented and continue to represent JAKA in the board.
JAKA, owned by spouses Senator Juan Ponce Enrile and Cristina Ponce Enrile, is one of the original stockholders of Mr. & Ms. Co.
The respondents averred that the real party-in-interest was JAKA and not petitioner.
Bitong testified at trial that she became the registered owner of 997 shares of stock of Mr. & Ms.after she acquired them from JAKA through a deed of sale.
The SEC Hearing Panel dismissed the derivative suit. The SEC En Banc reversed the decision of the Hearing Panel. The Court of Appeals reversed the decision of the SEC En Bancand held that from the evidence in record, petitioner was not the owner of the shares of stock in Mr. & Ms. and therefore not a real party-in-interest to prosecute the claim.
She was merely an agent who cannot file a derivative suit in behalf of her principal.
ISSUE:
Whether or not petitioner is a bona fide stockholder of Mr. & Ms. Publishing at the time of the transaction complained of which invests him with standing to institute a derivative action for the benefit of the corporation.
RULING:
NO.
Petitioner admitted respondent Eugenia D. Apostol signed the Certificate of Stock No. 008 in petitioner's name in 1989, BUT it was issued by the corporate secretary in 1983 and that the other certificates covering shares in Mr. & Ms. had not yet been signed by respondent Eugenia D. Apostol at the time of the filing of the complaint with the SEC although they were issued years before.
In this case, contrary to petitioner's submission, the Certificate of Stock No. 008 was only legally issued on 17 March 1989 when it was actually signed by the President of the corporation, and not before that date.
Hence, when Certificate of Stock No. 008 was admittedly signed and issued only on 17 March 1989 and not on 25 July 1983, even as it indicates that petitioner owns 997 shares of stock of Mr. & Ms., the certificate has no evidentiary value for the purpose of proving that petitioner was a stockholder since 1983 up to 1989.
The basis of a stockholder's suit is always one in equity.
However, it cannot prosper without first complying with the legal requisites for its institution. The most important of these is the bona fide ownership by a stockholder of a stock in his own right at the time of the transaction complained of which invests him with standing to institute a derivative action for the benefit of the corporation.
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Verily, a formal certificate of stock could not be considered issued in contemplation of law unless signed by the president or vice-president and countersigned by the secretary or assistant secretary.
While a certificate of stock is not necessary to make one a stockholder, e.g., where he is an incorporator and listed as stockholder in the articles of incorporation although no certificate of stock has yet been issued, it is supposed to serve as paper representative of the stock itself and of the owner's interest therein.
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Sec. 63 of the Corporation Code envisions a formal certificate of stock which can be issued only upon compliance with certain requisites.
First , the certificates must be signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation. A mere typewritten statement advising a stockholder of the extent of his ownership in a corporation without qualification and/or authentication cannot be considered as a formal certificate of stock.
Second , delivery of the certificate is an essential element of its issuance. Hence, there is no issuance of a stock certificate where it is never detached from the stock books although blanks therein are properly filled up if the person whose name is inserted therein has no control over the books of the company.
Third, the par value, as to par value shares, or the full subscription as to no par value shares, must first be fully paid.
Fourth, the original certificate must be surrendered where the person requesting the issuance of a certificate is a transferee from a stockholder.
The certificate of stock itself once issued is a continuing affirmation or representation that the stock described therein is valid and genuine and is at least prima facie evidence that it was legally issued in the absence of evidence to the contrary. However, this presumption may be rebutted.
Similarly, books and records of a corporation which include even the stock and transfer book are generally admissible in evidence in favor of or against the corporation and its members to prove the corporate acts, its financial status and other matters including one's status as a stockholder. They are ordinarily the best evidence of corporate acts and proceedings.
However, the books and records of a corporation are not conclusive even against the corporation but are prima facie evidence only. Parol evidence may be admitted to supply omissions in the records, explain ambiguities, or show what transpired where no records were kept, or in some cases where such records were contradicted.
The effect of entries in the books of the corporation which purport to be regular records of the proceedings of its board of directors or stockholders can be destroyed by testimony of a more conclusive character than mere suspicion that there was an irregularity in the manner in which the books were kept.
These considerations are founded on the basic principle that stock issued without authority and in violation of law is void and confers no rights on the person to whom it is issued and subjects him to no liabilities.
Where there is an inherent lack of power in the corporation to issue the stock, neither the corporation nor the person to whom the stock is issued is estopped to question its validity since an estopped cannot operate to create stock which under the law cannot have existence.
WHEREFORE, the petition is DENIED.
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