Arturo Q. Maggay vs. Eddy Van Bruggen, et al.

[SEC-SICD * CASE NO. 3433. October 16, 1989.] ARTURO Q. MAGGAY , petitioner , vs . EDDY VAN BRUGGEN, ET AL. , respondents . D E C I S I O N This is a petition for mandamus to compel the respondent to transfer in the stock and transfer book of the corporation one hundred fifty (150) shares and to issue in the name of the petitioner a new certificate of stock covering said shares. Petitioner alleged that sometime in May, 1988, he acquired one hundred fifty (150) shares of the capital stock of Get Wide Import and Export Corporation covered by Stock No. 003 by virtue of a Deed of Assignment duly executed by Ma. Milagrosa S. Maggay dated July 8, 1988; that he sent three (3) successive communications dated July 18, 1988, August 1, 1988 and August 8, 1988 to respondent Eddy Van Bruggen requesting Get Wide Import and Export Corporation to issue a new stock certificate for one hundred fifty (150) shares in his favor which was refused to his prejudice; that a communication from the Commission dated July 15, 1988 was sent to respondent corporation advising it that the necessary recording be made and/or recorded in the stock and transfer book which was ignored and refused, again to his prejudice; and that the continued refusal of the respondents to record the transfer and issue new stock certificate resulted to an irreparable loss to him. Acting upon the petition, the Commission issued Summons on September 8, 1988. However, respondents failed to file their answer within the prescribed period despite receipt of the Summons. Accordingly, the Commission proceeded with the hearing of the case ex-parte in accordance with Rule XXI of the New Rules of Procedure in the Securities and Exchange Commission . From the evidence presented by the petitioner, both testimonial, as well as documentary, the following facts were duly established: 1. Maria Milagrosa Severino Maggay was one of the incorporators and subscribers of stocks in GET WIDE IMPORT AND EXPORT CORPORATION; 2. She has fully paid for her 150 shares of stock covered by Stock Certificate No. 003; 3. In May, 1988, she endorsed her 150 shares to Arturo Q. Maggay, petitioner in this case and on July 8, 1988, she executed a Deed of Assignment covering the same 150 shares; 4. That notwithstanding repeated demands as contained in petitioner's letters dated July 18, August 1 and 8, 1988, respondents still refused to cancel Stock Certificate No. 003 and issue a new stock certificate in his name covering the 150 shares assigned to him by his wife and to record the transfer in the corporation's Stock and Transfer Book. While Mandamus will lie to compel the corporation to transfer the shares of stock upon the books of the corporation and issue a new certificate, certain requisites must be obtained to entitle one to this remedy. As held in A.R. Hager vs. Alben J. Bryan, G.R. No. L-6230, March 21, 1911, 19 Phil. 138, the requisites are as follows: a. That due application therefore has been made and denied; b. That there are no unpaid claims against the stock by the corporation; c. That an ordinary action against the corporation for damages would be inadequate; and d. That an action in the nature of a suit in equity to secure a decree ordering the transfer would be inadequate. Another requisite, which is not only an imposition of law but a condition precedent in the transfer of shares of stock is Revenue Regulations 2-82 thereby bringing to five (5) the total number of the requisites. Under Section 8 of Revenue Regulations 2-82 in relation to Section 24(e) (2) of the National Internal Revenue Code (Revenue Regulation No. 2-82, pp. 140-148, 1986 Revised Edition, National Internal Revenue Code by Epifanio G. Gonzales and Dr. Celestina M. Robledo-Gonzales and 1988 Revised Edition, National Internal Revenue Code, Jose Nolledo) it expressly provides: "SECTION 8. Effect of Non-Payment of Tax . No sale, exchange, transfer or similar transaction intended to convey ownership of, or title to any share of stock shall be registered in the books of the corporation unless the receipt of payment of the tax herein imposed is filed with and recorded by the stock transfer agent or secretary of the corporation. It shall be the duty of the aforesaid persons to inform the Bureau of Internal Revenue in case of non-payment of the tax. Any tax transfer agent or secretary of the corporation who caused the registration in violation of the aforementioned requirement shall be punished by a fine of not more than P2,000.00 or by imprisonment for not more than six (6) months or both." Petitioner however, failed to materially allege and prove by evidence compliance with the above-requisite which is a condition precedent to entitle herein petitioner to a writ of mandamus. Thus in the following cases it was held: "1. If the plaintiff's right of action depends upon a condition precedent, he must allege and prove the fulfillment of the condition or a legal excuse for its non-fulfillment, and if he omits such allegation, his declaration, complaint or petition will be bad on demurrer" (Government of the Philippine Islands vs. Inchausti & Co., G.R. No. 6957, February 14, 1913, 24 Phil. 316); 2. If the cause of action of the plaintiff depends upon a condition precedent, the complaint must allege the fulfillment of the condition or a legal excuse for its non-fulfillment. Omission of such allegation will make the complaint insufficient. (De Guzman vs. J.M. Tuasan & Co., Inc., G.R. No. L-26264, Dec. 26, 1969) . . . Hence, unless it is alleged in the complaint that these conditions were or have been complied with, and the plaintiff's complaint in the present case does not so allege, the complaint would state no cause of action against the defendants (IBID)". Likewise, it has not been shown that the original certificate has been surrendered to the corporation for cancellation. What was transmitted/surrendered as evidence show is only a copy of the original certificate. It is well settled that a corporation is not bound and cannot be required to register a transfer of stock and issue a new certificate unless the original certificate is produced and surrendered, or is clearly shown to have been destroyed or lost (Section 5537, Vol. 12, Chapter 58 Fletcher p.579, Permanent Edition). Moreover, we cannot under facts of the case fail to bring up the validity of the transfer of shares made in view of Article 1490 of the Civil Code of the Philippines which is quoted hereunder: "ARTICLE 1490. The husband and wife cannot sell property to each other, except: (1) when a separation of property was agreed upon in the marriage settlement (2) when there has been a judicial separation of property." As held in Uy Siu Pin vs. Cantollas, 70 Phil. 55, a sale by one spouse to another is generally void. However, not everybody can assail the validity of the transaction. Thus, creditors who became such only after the transaction cannot assail its validity for the reason that they cannot be said to have been prejudicial (Cook vs. Mcmicking, G.R. No. 8913, March 3, 1914, 27 Phil. 10). But prior creditors (creditors at the time of the transfer) as well as the heirs of either spouses may invoke the nullity of the sale. When the proper party brings the actions, the sale should be declared void by the courts. The spouses themselves, since they are parties to an illegal act cannot avail themselves of the illegality of the sale. The law will generally leave them as they are. The reason for said law is to avoid prejudice to third persons; to prevent one spouse from unduly influencing the other and to avoid by indirection the violation of the prohibition against donations. (Comment of Edgardo L. Paras, Author, Civil Code the Philippines, page 77 Volume V of Special contracts) WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant case. SO ORDERED. (SGD.) TRINIDAD L. DABBAY Hearing Officer