Cagayan Sugarcane Planters Association, Inc.

January 8, 1987 Cagayan Sugarcane Planters Association, Inc. c/o Mr. Supremo N. Bautista Piat, Cagayan Sir : This has reference to your letter dated November 15, 1986, requesting for the opinion of this Commission on the query posed therein. It appears therein that Cagayan Sugar Corporation failed to issue certificates of stock worth P2.4 million of preferred shares, to planters, in accordance with the terms of the Milling contract between the mill and the planters, quoted hereunder: "SUBSCRIPTION TO CAPITAL STOCK 30. The PLANTER undertakes and agrees to subscribe to or buy preferred shares of the capital stock of the CENTRAL IN an amount proportionate to his production, which in no case shall be less than ONE THOUSAND PESOS (P1,000.00),Philippine Currency. Payment of such shares may be made, at the option of the PLANTER, by cash or by deduction yearly of FOUR (P4.00) PESOS, Philippine Currency, per picul, from the value of the Planters' annual share of raw centrifugal sugar, until such time as when the amortizations on the cost of the mill shall have been fully paid, but not to exceed ten (10) crop year from the crop year during which the mill commenced operation. The Philippine National Bank is hereby authorized to retain the stipulated amounts as payments for shares of the capital stock, and to hold same in escrow, for application subsequently to amortizations on the cost of the mill. You further alleged that said amount of P2.4 Million was liened from the planters' raw sugar production during the past years. This amount was paid by the mill to the Philippine National Bank for payment of its amortizations for the cost of the mill. The planters, on the other hand, expected the mill to issue the corresponding certificates of stock, which up to this date were not issued despite repeated written demands by the planters. You wish to be informed as to whether or not the Cagayan Sugar Corporation has still unissued shares of stock to pay subscriptions due to the mill's failure to issue said certificates of stock. An examination of our records shows that on April 8, 1980, said corporation filed a request for exemption with this Commission to issue preferred shares in favor of 48 planters, in the amount of P907,166.00. Copies of said letter and the corresponding list of planters are herewith attached. Please note that in said letter, the corporation declared that said preferred shares shall come from their still unissued preferred shares of their capital stock. Relative to the issuance of certificates of stock please be informed that Sec. 64 of the Corporation Code provides, and we quote: "SECTION 64. Issuance of stock certificates . No certificate of stock shall be issued to a subscriber until the full amount of his subscription together with interest and expenses (in case of delinquent shares) if any, is due, has been paid." From the above, it is clear that certificates of stock can be issued only to a subscriber who has fully paid the amount of his subscription. Every stockholder has a right to have a proper certificate issued to him by the corporation as soon as he has complied with the conditions which entitle him to one as by payment for shares or the like, in the absence of some provision or agreement to the contrary. A purchaser of, or a subscriber for preferred stock has the same right as a holder of common stock to a certificate of stock as evidence of his rights and he is entitled to a certificate showing that his stock is preferred ...(State v. Cherav & C.R.,Co. 16 SC 524, cited in Fletchers, Vol. 11, p. 563). There are four remedies available to a stockholder if a corporation wrongfully refuses to issue a certificate of stock: 1. He may file a suit for specific performance of an express or implied contract (Rock v. Gustaveson) Oil, Co. 61 Utah 399, 214 cited in Fletchers' Vol. 11, p. 301). 2. He may file for an alternative relief by way of damages whose specific performance cannot be granted (Synden v. Charleston & Southside Bridge Co. 65 W. Va, 1, 63 SE 616, 131 Am. St. Rep, 947.) 3. He may also file a petition for mandamus to compel the issuance of a certificate where the conditions, facts and circumstances of the particular case bring it within the legal rules which govern the granting of that writ. cdll 4. He may rescind his contract of subscription if the corporation wrongfully refuses to deliver a certificate and sue to recover back what he has paid (Patty v. Wallace, 32 F 272, p. 272.) Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman