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    226 Rural Bank of Lipa v. CA

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    miyumi
    This case involved a dispute over the ownership of shares in the Rural Bank of Lipa City. Reynaldo Villanueva Sr. had assigned his shares in the bank to the bank due to owing a debt, but failed to deliver the endorsed stock certificates or have the transfer recorded. The Supreme Court upheld lower court rulings that without delivery of the endorsed certificates and recordation of the transfer, the assignment was not a valid transfer of ownership under the Corporation Code, so the Villanuevas remained shareholders.

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    226 Rural Bank of Lipa v. CA

    Uploaded by

    miyumi
    88 views4 pages
    This case involved a dispute over the ownership of shares in the Rural Bank of Lipa City. Reynaldo Villanueva Sr. had assigned his shares in the bank to the bank due to owing a debt, but failed to deliver the endorsed stock certificates or have the transfer recorded. The Supreme Court upheld lower court rulings that without delivery of the endorsed certificates and recordation of the transfer, the assignment was not a valid transfer of ownership under the Corporation Code, so the Villanuevas remained shareholders.

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    This case involved a dispute over the ownership of shares in the Rural Bank of Lipa City. Reynaldo Villanueva Sr. had assigned his shares in the bank to the bank due to owing a debt, but failed to deliver the endorsed stock certificates or have the transfer recorded. The Supreme Court upheld lower court rulings that without delivery of the endorsed certificates and recordation of the transfer, the assignment was not a valid transfer of ownership under the Corporation Code, so the Villanuevas remained shareholders.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    88 views4 pages

    226 Rural Bank of Lipa v. CA

    Uploaded by

    miyumi
    This case involved a dispute over the ownership of shares in the Rural Bank of Lipa City. Reynaldo Villanueva Sr. had assigned his shares in the bank to the bank due to owing a debt, but failed to deliver the endorsed stock certificates or have the transfer recorded. The Supreme Court upheld lower court rulings that without delivery of the endorsed certificates and recordation of the transfer, the assignment was not a valid transfer of ownership under the Corporation Code, so the Villanuevas remained shareholders.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    RURAL BANK OF LIPA v.

    CA
    J. Ynares-Santiago | September 28, 2001
    VIC - Control and Management; Stockholders
    Petition for Review on Certiorari

    PARTIES:

    THE RURAL BANK OF LIPA CITY, INC., THE OFFICERS AND DIRECTORS,
    BERNARDO BAUTISTA, JAIME CUSTODIO, OCTAVIO KATIGBAK, FRANCISCO
    CUSTODIO, and JUANITA BAUTISTA OF THE RURAL BANK OF LIPA CITY,
    INC., petitioners, 
    vs.
    HONORABLE COURT OF APPEALS, HONORABLE COMMISSION EN BANC,
    SECURITIES AND EXCHANGE COMMISSION, HONORABLE ENRIQUE L.
    FLORES, JR., in his capacity as Hearing Officer, REYNALDO VILLANUEVA, SR,
    AVELINA M. VILLANUEVA, CATALINO VILLANUEVA, ANDRES GONZALES,
    AURORA LACERNA, CELSO LAYGO, EDGARDO REYES, ALEJANDRA
    TONOGAN and ELENA USI, respondents.

    DISPUTED MATTER:

    WON transfer of title to shares is ineffective until and unless the duly indorsed certificate of
    stock is delivered

    SYNOPSIS:

    Reynaldo Villanueva Sr. owned stocks of the Rural Bank of Lipa. Because he owed the Bank
    P4 million, he assigned his shares to the Bank. He stipulated that in case they failed to pay their
    indebtedness, the Bank would liquidate their shareholdings, including those under their control.
    Because Villanueva and his wife failed to pay, the Bank converted Villanueva’s stocks into
    treasury stocks. When the stockholders of the Bank met to elect new directors and officers, the
    Villanuevas were not notified. The spouses then petitioned to annul said meeting.

    The SEC, CA, and SC ruled in favor of the Villanuevas. While the Villanuevas executed a
    deed of assignment of the shares in favor of the Bank, the same was not coupled with delivery.
    Absent delivery, there is no transfer of title, and the Villanuevas are still presumed to be
    stockholders.

    FACTS:
     Reynaldo Villanueva Sr. is a stockholder of the Rural Bank of Lipa City. He assigned his
    shares (and the shares of 8 other shareholders) in favor of the stockholders of the Bank
    represented by its directors Bernardo Bautista, Jaime Custodio and Octavio Katigbak.
     Sometime thereafter, Villanueva, Sr. and his wife, Avelina, executed an
    Agreement wherein they acknowledged their indebtedness to the Bank of P4,000,000.00.
    o They stipulated that said debt will be paid out of the proceeds of the sale of their
    real property described in the Agreement.
    o They assured the Bank that they will pay on or before December 31 of that year.
    Otherwise, the Bank would liquidate their shareholdings, including those under
    their control.
     Because the spouses Villanueva failed to settle their obligation on the due date, the Board
    sent them a letter demanding:
    o the surrender of all the stock certificates issued to them
    o the delivery of sufficient collateral to secure the balance of their debt amounting
    to P3,346,898.54
     The Villanuevas ignored the bank's demands, and their shares of stock were converted
    into Treasury Stocks.
    o Later, they questioned the legality of this conversion.
     When the stockholders of the Bank met to elect their new directors and officers, the
    Villanuevas were not notified of the meeting. They then questioned its legality, and the
    validity of all the proceedings therein.
     They filed a petition for annulment of the stockholders’ meeting and election of directors
    and officers before the SEC.
     SEC:
    o The SEC issued a temporary restraining order enjoining the respondents,
    petitioners herein, from acting as directors and officers of the Bank, and from
    performing their duties and functions as such.
    o Since the Villanuevas' have not disposed of their shares, whether voluntarily or
    involuntarily, they were still stockholders entitled to notice of the annual
    stockholders' meeting was sustained by the SEC. Accordingly, a writ of
    preliminary injunction was issued enjoining the petitioners from acting as
    directors and officers of the bank.
     CA:
    o The Court of Appeals dismissed the petition for review for lack of merit.
     Section 63 of the Corporation Code states: "x x x Shares of stock so issued
    are personal property and may be transferred by delivery of the certificate
    or certificates indorsed by the owner x x x. No transfer, however, shall be
    valid, except as between the parties, until the transfer is recorded in the
    books of the corporation so as to show the names of the parties to the
    transaction, the date of the transfer, the number of the certificate or
    certificates and the number of shares transferred."
     In this case, when the Villanuevas executed a deed of assignment of their
    shares of stocks in favor of the Stockholders of the Rural Bank of Lipa
    City, title to such shares will not be effective unless the duly indorsed
    certificate of stock is delivered to them. For an effective transfer of shares
    of stock, the mode and manner of transfer as prescribed by law should be
    followed. Private respondents are still presumed to be the owners of the
    shares and to be stockholders of the Rural Bank.

    ISSUES/HELD:

    W/N transfer of title to shares is ineffective until and unless the duly indorsed certificate of
    stock is delivered – YES.

     Section 63 of the Corporation Code provides, in part:


    o Shares of stocks so issued are personal property and may be transferred by
    delivery of the certificate or certificates indorsed by the owner or his attorney-in-
    fact or other person legally authorized to make the transfer. No transfer, however,
    shall be valid, except as between the parties, until the transfer is recorded in the
    books of the corporation so as to show the names of the parties to the transaction,
    the date of the transfer, the number of the certificate or certificates and the
    number of shares transferred.
     For a valid transfer of stocks, there must be strict compliance with the mode of transfer
    prescribed by law.
    o There must be delivery of the stock certificate
    o The certificate must be endorsed by the owner or his attorney-in-fact or other
    persons legally authorized to make the transfer
    o To be valid against third parties, the transfer must be recorded in the books of the
    corporation.
     As it is, compliance with any of these requisites has not been clearly and sufficiently
    shown.
     The Villanuevas cannot, as yet, be deprived of their rights as stockholders, until and
    unless the issue of ownership and transfer of the shares in question is resolved with
    finality.
    o While it may be true that there was an assignment of the Villanuevas’ shares to
    the petitioners, said assignment was not sufficient to effect the transfer of shares
    since there was no endorsement of the certificates of stock by the owners, their
    attorneys-in-fact or any other person legally authorized to make the transfer.
    o Moreover, petitioners admit that the assignment of shares was not coupled with
    delivery, the absence of which is a fatal defect.

    DISPOSITIVE:

    WHEREFORE, in view of all the foregoing, the instant petition for review on certiorari is
    DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 38861 are
    hereby AFFIRMED. The case is ordered REMANDED to the Regional Trial Court of Batangas
    City, Branch 32, for proper disposition. The temporary restraining order issued by the SEC
    Hearing Officer dated January 13, 1995 is ordered LIFTED.

    ____________________________________________________________________________
    HELPFUL INFORMATION

    DOCTRINE:

    For a valid transfer of stocks, there must be strict compliance with the mode of transfer
    prescribed by law. The requirements are: (a) There must be delivery of the stock certificate: (b)
    The certificate must be endorsed by the owner or his attorney-in-fact or other persons legally
    authorized to make the transfer; and (c) To be valid against third parties, the transfer must be
    recorded in the books of the corporation. As it is, compliance with any of these requisites has
    not been clearly and sufficiently shown.

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