Joseph Omar Andaya vs. Rural Bank of Cabadbaran, Inc. (799 SCRA 325 [2016]) CORPLAW CASE DIGEST by: A.J. Gomez

 Joseph Omar Andaya vs. Rural Bank of Cabadbaran, Inc. (799 SCRA 325 [2016])

FACTS

Andaya bought from Conception Chute 2,200 shares of stock in the Rural Bank of Cabadbaran for P220,000.

Chute duly endorsed and delivered the certificates of stock to Andaya and, subsequently, requested the bank to register the transfer and issue new stock certificates in favor of the latter.

The bank’s corporate secretary wrote Chute to inform her that he could not register the transfer due to a previous’ stockholder’s Resolution where existing stockholders were given priority [RIGHT OF FIRST REFUSAL]  to buy the shares of others in the event that the latter offered those shares for sale

  

Citing Section 98 of the Corporation Code, Andaya claimed that the purported restriction on the transfer of shares of stock agreed upon during the 2001 stockholders’ meeting could not deprive him of his right as a transferee, and that the restriction did not appear in bank’s AOI, by-laws and certificate of stock. 

 

The bank still refused the transfer arguing that it may refuse to accept a competitor as one of its stockholders. (conflict of interest, as he was then president and chief executive officer of the Green Bank of Caraga, a competitor bank). 

 Andaya instituted an action for mandamus and damages against Rural Bank of Cabadbaran which was dismissed by the RTC, hence this petition for review.

ISSUE:

Whether Andaya, as a transferee of shares of stock, may initiate an action for

mandamus compelling the Rural Bank of Cabadbaran to record the transfer of shares in its stock and transfer  book, as well as issue new stock certificates in his name.

RULING:

Yes. 

A bona fide transferee, who is able to establish a clear legal right of the registration of the transfer, may resort to the remedy of mandamus to compel corporations that wrongfully or unjustifiably refuse to record the transfer or to issue a new certificate of stock.

Andaya has been able to establish that he is a bona fide transferee of Chute’s shares of stock. 

According to Price vs Martin, a person who has purchased stock, and who desires to be recognized as a stockholder, for the purpose of voting, must secure a standing by having the transfer recorded upon the books. If the transfer is not duly made upon request, he has, as his remedy, to compel it to be made. 

The registration of a transfer of shares of stock is a ministerial duty on the part of the corporation. 

SEC. 97. Validity of Restrictions on Transfer of Shares. – Restrictions on the right to transfer shares must appear in the articles of incorporation, in the bylaws, as well as in the certificate of stock; otherwise, the same shall not be binding on any purchaser in good faith. Said restrictions shall not be more onerous than granting the existing stockholders or the corporation the option to purchase the shares of the transferring stockholder with such reasonable terms, conditions or period stated. If, upon the expiration of said period, the existing stockholders or the corporation fails to exercise the option to purchase, the transferring stockholder may sell their shares to any third person.

Petition GRANTED. The RTC Decision Order is SET ASIDE. The action is hereby REINSTATED and the case REMANDED to the court of origin  for further proceedings.