Pablo Son Keng Po vs. Joseph Son, et al.

[SEC-SICD * CASE NO. 4018. January 20, 1998.] PABLO SON KENG PO , complainant , vs .JOSEPH SON, ET AL. , respondents . D E C I S I O N This is a case where the undersigned Hearing Officer who heard this case to its conclusion is now presently assigned in the other department of the Commission but, by virtue of MEMORANDUM dated August 5, 1996 is required to render this decision. dctai Complainant prayed in his verified complaint for the issuance of a writ of preliminary prohibitory injunction enjoining the respondents from exercising certain corporate acts described therein, upon posting of the required bond and, that after due notice and hearing, judgment be rendered (a) making permanent the writ of preliminary prohibitory injunction; (b) declaring the acquisition by respondents of their shares of stocks in La Commercial Company, Inc. as null and void; (c) declaring the election of respondents as officers of the said corporation as null and void; and (d) ordering respondents to pay damages, attorney's fees and appearance fees. In support thereof, complainant alleged, among other matters, that he is related to the respondents, their common ancestors being his father, the late Son Keng Po, but this close relationship notwithstanding, complainant did not attempt at an amicable settlement which would have been futile if tried considering the irreparable rift in their relationship as a result of the criminal case of falsification of public documents filed against him by the respondents before the Office of the City Prosecutor of Manila; that complainant and respondents Mauricio Son Keng Po and Elisa Go became stockholders of the said corporation in 1988 when its capital stock was increased from P500,000.00 to P3,000,000.00; that sometime in August, 1990, complainant was shocked to receive a subpoena from the Office of the City Prosecutor of Manila, whereby he was accused, together with his sister Corazon Son and Felipe Chua, allegedly in confederation and conspiracy with his late father, Son Keng Po and his late brother, Eugenio Son Keng Po, who died in April, 1989 and March 1990, respectively, of the Crime of Falsification of Public Documents filed by no less than his brothers, respondents Mauricio Son Keng Po and Joseph Son and his nephew, respondent Harry Son, who claimed in their Joint Affidavit that they have become officers of the said corporation after having allegedly revived the revoked certificate of registration of the said corporation; that the said complaint for falsification against the complainant was dismissed in the Resolution dated November 14, 1990; and the Motion for Reconsideration was likewise denied in the Resolution dated December 21, 1990; that after verifying the records of the said La Commercial Company, Inc. in the Commission, complainant discovered that a petition/motion to Set Aside Order of Revocation dated May 21, 1990 signed under oath by respondent Joseph Son together with two (2) sets of minutes of the Stockholders' and directors' meetings have been filed by respondents, making it appear through falsification of documents that they have acquired shares of stocks in the said corporation, when in truth and in fact they have never validly acquired such shares; as a result, an Order dated June 21, 1990 was issued by this Commission reinstating the corporation's certificate of registration; that honestly believing that the said petition/motion to set aside order of revocation and the two (2) minutes of the supposed stockholders' and directors' meetings to have been falsified, complainant filed a complaint for falsification of public documents against respondent Joseph Son and Amelita Son Ngkaion with the Office of the City Prosecutor of Manila, where it is still pending resolution; that on the basis of the deliberate misrepresentations of respondents that they have acquired the shares of stocks in the said corporation through fraudulent maneuvers and illegal schemes, respondents also declared themselves as elected officers and directors of the said corporation to the detriment not only of the bonafide shareholders but also to the interest of the public; that respondents have fraudulently taken control of the real estate properties of the said corporation and appropriating unto themselves the fruits of the said properties to the total exclusion and damage of the other bonafide members of the corporation; and that respondents' fraudulent and malicious scheme to deprive complainant and other bonafide shareholders of their shares of stock became apparent when respondent Amelita Son Ngkalon, the supposed Corporate Secretary, wrote a letter to the complainant advising him to surrender his stock certificates, otherwise, they would become null and void. Respondents, in their verified Answer dated July 28, 1991, admitted some of the allegations in the complaint such as the personal circumstances of the complaint; part of the allegations in paragraph 2 with respect to the respondents' relationship by consanguinity and/or affinity with the complainant, the filing of the criminal complaint and the failure of the complainant to attempt a compromise agreement; the allegations of paragraph 3 as to the existence of the Certificate of Increase of Capital Stock and of the corporation; the allegations in paragraphs 4, 5 and 6 with respect to the filing of the criminal complaint for falsification of public documents by respondents Mauricio Son Keng Po. Joseph Son and Harry Son against the complainant, the dismissal of the said complaint, the filing of the Petition/Motion to Set Aside the Order of Revocation dated May 21, 1990 and the order dated June 21, 1990 issued by the Commission reinstating the certificate of registration of the corporation; and the allegations in paragraph 7 of the Complaint with respect to the filing of the Complaint for Falsification of Public Documents by complainant against respondents Joseph Son Keng Po and Amelita Son Ngkaion docketed as I.S. No. 91-07854 with the Office of the City Prosecutor of Manila. By way of opposition to the complainant's application for prohibitory preliminary injunction, respondent denied the allegations in paragraphs 12, 13, 14, 15 and 16 of the Complaint for being false, baseless and malicious, the truth of the matter being that complainant is not a stockholder of record of the corporation. Respondents also denied the rest of the material allegations in the Complaint and interposed special and affirmative defenses, among others, that there is no cause of action; that the filing of the case was premature, since complainant being admittedly related by consanguinity to some of the respondents, filed the instant case without exercising earnest efforts towards a compromise; that complainant has no personality to institute the instant case as he does not appear to be a stockholder of record of the La Commercial Company, Inc.;that respondents, in seeking the reinstatement of the franchise of the said corporation to operate as such, acted in the interest of the corporation and in order to protect their own rights and interests as stockholders; that as bonafide stockholders of the said corporation, respondents convened a stockholders'/board of directors' meeting and were elected directors and stockholders since, none has been called or convened for several years to the damage and prejudice of the corporation and the stockholders, and said election is valid unless annulled by competent authority; that complainant and other former stockholders never surrendered their alleged certificate/s of stocks to the corporation, despite due notice to them personally and by publication and therefore, the corporation thru its Board of Directors can declare any certificate/s cancelled and null and void. In support of his application for issuance of a writ of preliminary injunction, complainant presented Felipe Chua on August 22, 1991 who identified and affirmed all the statements in the Affidavit which he executed on August 5, 1991 to constitute his direct testimony as well as the documents attached thereto marked as Exhibits "G" to "K",inclusive. On September 11, 1991, complainant himself took the stand and identified the Affidavit which he executed on August 5, 1991 to form as his direct testimony and the documents attached thereto marked as Exhibits "A" to " F" inclusive. After the conclusion of the testimonies of the aforenamed witness, complainant formally offered his documentary evidence, Exhibits "A" to "K" and their respective sub-markings which were all admitted as part of the testimony of complainant's witnesses. Respondents also adduced evidence in support of their opposition to complainant's application for issuance of a writ of preliminary injunction and presented three (3) witnesses, namely, Mauricio Son Keng Po, Joseph Son and Amelita Son Ngkaion, who all affirmed and identified the Affidavits they executed to form as their respective direct testimonies. After conclusion of the testimonies of their witnesses, respondents formally offered their documentary evidence, Exhibits "1" to "29",inclusive and their respective submarkings which were all admitted as parts of the testimonies of respondents' witnesses. On May 28, 1992, Felipe Chua assumed the stand and testify as rebuttal witness for the complainant. No sur-rebuttal evidence was presented by respondents. During the hearing on June 4, 1992, complainants application for injunctive relief was submitted for resolution and the parties were given ten (10) days to simultaneously submit their respective memorandum, which the parties both complied with. On November 10, 1992, an Order was issued granting complainant's application for the issuance of a writ of preliminary injunction, the dispositive portion of which reads: "WHEREFORE, upon posting of a bond in the amount of FIFTY THOUSAND PESOS (P50,000.00) executed in favor of the respondents conditioned that petitioner will pay to the respondents all damages which they may sustain by reason of the injunction if the Commission should finally decide that the petitioner is not entitled thereto, let a writ of preliminary prohibitory injunction be issued against the respondent prohibiting and/or recognizing the complainant as stockholder of La Commercial Co.,Inc." "SO ORDERED" During the preliminary conference, the parties manifested that they were terminating the same and that the Hearing Officer will just issue a preliminary conference order on the basis of the preliminary conference brief submitted by them. During the hearing on March 6, 1996, the parties agreed to adopt their respective evidence presented on the injunction incident without adducing further evidence in support of and against their positions and to submit the case for decision after filing their memorandum simultaneously. On the part of respondents, they marked in evidence additionally Exhibits "34" and "35" which they subsequently formally offered in evidence and accordingly admitted objection from the complainant. On August 1, 1997, a Writ of Preliminary Injunction was issued by this Commission after complainant posted the required bond on July 23, 1997. The records of the case show that respondents were duly served with copies of the aforementioned writ. dctai On September 19, 1997, respondents filed their Motion to Quash Writ of Preliminary Injunction for which complainant filed his opposition to the Motion To Quash Writ of Preliminary Injunction on October 17, 1997. The questions to be resolved based on the preliminary conference brief submitted by the parties as defined in the Order dated October 26, 1995 are as follows: (a) Whether or not the cancellation of the shares of stock of directors was valid and legal; (b) Whether or not respondents' shares of stocks in La Commercial (Company),Inc. have been validly issued to and acquired by them and if not, whether said shares should be declared null and void; (c) Whether or not respondents should be enjoined from implementing the ouster of complainant from said corporation; and (d) Whether or not complainant or respondents are entitled to damages and attorney's fees in the above-entitled case. On the first issue, complainant maintains that he is a stockholder of La Commercial Company, Inc. and that respondents have deprived him and other bonafide stockholders of the corporation of their shares of stock by cancelling their stock certificates and declaring them null and void. On the other hand, respondents claim that complainant has no personality to institute the instant case as he does not appear to be a stockholder of record of La Commercial Company, Inc. and that the corporation can declare any certificate/s of stocks of the corporation null and void after notice personally and by publication. It is established from the evidence on record that on July 11, 1952, the Articles of Incorporation of La Commercial Company, Inc. were filed with the Securities and Exchange Commission (Exh. "13") to engage in realty business and were approved on July 16, 1952. The corporation had an authorized capital stock of Five Hundred Thousand Pesos (P500,000.00) divided into Five Thousand (5,000) shares at a par value of One Hundred Pesos (P100.00) per share. Of the authorized capital stock, five thousand (5,000) shares worth Five Hundred Thousand Pesos (P500,000.00) were subscribed and One Hundred Twenty-Five Thousand Pesos (P125,000.00) were paid for by the following incorporators, to wit: No. of Amount Amount Name Shares Subscribed Paid Yao Shiong Shio 1,500 P150,000.00 P37,500.00 Paz Nabong 800 80,000.00 20,000.00 Marciano G. Tinio 800 50,000.00 12,500.00 Cirilo Lim 400 40,000.00 10,000.00 Son Keng Po 1,500 150,000.00 37,500.00 Eugenio Son Keng 300 30,000.00 7,500.00 5,000 P500,000.00 P125,000.00 On December 17, 1973, the corporation filed a Certificate of Increase of Capital Stock (Exhs. "A";"9") from Five Hundred Thousand Pesos (P500,000.00) to Three Million Pesos (P3,000,000.00).It was shown in said certificate that P500,000.00 worth of shares have been subscribed and fully paid by way of 100% stock dividends declared out of the surplus profit of the corporation as of December 31, 1967 to the stockholders of record of the corporation as of January 8, 1988, namely: No. of Amount Amount Name Shares Subscribed Paid Son Keng Po 750 P75,000.00 P75,000.00 Eugenio Son Keng Po 290 29,000,00 29,000.00 Andres Son Keng Po 500 50,000.00 50,000.00 Pablo Son Keng Po 750 75,000.00 75,000.00 Paz Nabong 800 80,000.00 80,000.00 Elisa Go 400 40,000.00 40,000.00 Mauricio Son Keng Po 760 76,000.00 76,000.00 Lucio Son 750 75,000.00 75,000.00 5,000 P500,000.00 P500,000.00 On November 29, 1981, the Commission issued an Order (Exh. "11") revoking the Certificate of Registration of La Commercial Company, Inc. for failure to file the reportorial requirements of the Commission. On May 21, 1990, a Petition/Motion to Set Aside Order of Revocation (Exhs. "H";"9") was filed by respondent Joseph Son in his alleged capacity as President of the corporation, which motion was granted by the Commission on June 21, 1990 with the submission of the required reports and payment of the corresponding penalties. On June 21, 1990, the Commission issued an Order (Exh. "K") setting aside its previous Order (Exh. "11") revoking the certificate of registration of the said corporation. dctai On June 28, 1990, respondents called a special meeting among the alleged stockholders of the corporation at its alleged present office at 940-B R. Hidalgo, Quiapo, Manila for the election of a new Board of Directors. The Minutes of the Special Meeting (Exhs. "I";"10") was signed by respondent Amelita Son Ngkaion as Acting Secretary. Allegedly present in the meeting either in person as a stockholder or by proxy were all the respondents, except respondents Elisa Go, and absent in the said special meeting were the following stockholders of the corporation, namely: Pablo Son Keng Po; Albert Son; Herbert Son and Norbert Son. Immediately after the stockholders' meeting, a meeting of the alleged Board of Directors of the said corporation presided by respondent Joseph Son as Acting President was held to elect the officers. The Minutes of the Meeting (Exh. "J") was likewise signed by respondent Amelita Ngkaion as Acting Secretary. In a letter dated February 18, 1991 (Exh. "B"),respondent Amelita Ngkaion wrote complainant informing the latter to surrender his stock certificate in La Commercial Company, Inc. for replacement of a new one. His failure to comply which shall render the old stock certificate null and void. In separate letters dated 10 July 1991 (Exhs. "16","17","18" and "19") respondent Amelita Son Ngkaion wrote Son Keng Po, complainant Pablo Son Ken Po, Eugenio Son Keng Po and Lucio Son, informing them that the Board of Directors of La Commercial Company, Inc. had recalled and declared null and void the old certificates of stocks issued by the corporation in its meeting held on August 5, 1990. Upon a careful scrutiny of the evidence on record, it is beyond dispute that complainant is indeed a bonafide stockholder of record of La Commercial Company, Inc. owning a total of 1,500 shares of stock. Complainant acquired the first 750 shares from the original incorporator Yao Shiong Shio on January 10, 1961 by virtue of the document captioned Agreement of Transfer of Stock (Exh. "L-2") to which he was issued Stock Certificate No. 007 (Exh. "L").Complainant acquired the other 750 shares on January ( illegible portion in SEC files ) 1968 when the Board of Directors declared a stock dividend out of 100% the entire outstanding shares of the corporation as evidenced by Certificate of Increase of Capital Stock (Exh. "A"),the List of Stockholder (Exh. "G") of the corporation as of January 9, 1968 on file with the Commission, and the Stock Certificate No. 017 issued to him, (Exh. "L-1") February 2, 1968. As a stockholder of the said corporation, there is no question that complainant has the legal personality to institute the instant case. Even in absence of a Board of Directors or Trustees, those having any pecuniary interest in the assets, including not only the shareholders but also creditors of the corporation, acting for and in its behalf, might make pre-representations with the Securities and Exchange Commission, which primary and exclusive jurisdiction in matters of this nature, for working on final settlement of the corporate concerns. Respondents, however, assert that complainant and the other former stockholders of the corporation failed to surrender their stock certificates to the corporation despite due notice by the respondents personally and by publication and therefore, the corporation acting thru the newly elected Board of Directors can declare any cancelled certificate/s null and void The general rule is that a corporation, through its board of directors, should act in the manner and within the formalities, if any, prescribed by its charter or by the general law. The power to revoke or declare the cancellation and/or nullity of stock certificates for failure to surrender the same is not among the powers of a corporation expressly provided for by the Corporation Code nor can it be implied from express or incidental powers of a corporation. The complainant, being indisputably the owner of the 1,500 shares of stock in La Commercial company, Inc. evidenced by the Stock Certificates (Exhs. "L" and "L-2") cannot be deprived of property without due process of law. A share of stock in a corporation consist of a set of rights and duties between the corporation and the owner of the share. These rights and duties are in fact and law quite distinguishable from the certificate and the power to transfer those rights and duties. The certificate is an evidence that the person named therein possesses those rights and is subject to those duties. They are muniments of title, but not the title itself. Thus, complainant has a real and vested right over those corporate stocks as a consequence of which he cannot be deprived of his right of ownership over those shares by his mere refusal to surrender the stock certificates to the new Board of Directors of the corporation. The respondents have not advanced any justifiable reason for demanding the surrender of the certificates of stocks of the stockholders of the said corporation except to state that the certificates would be replaced by the issuance of new ones. The alleged need to replace the said certificates stocks with new ones was not necessary as no sale or disposition had taken place with respect to complainant's shareholdings. Moreover, under the facts of the case, there is no legal duty on the part of the complainant to surrender his certificates of stocks to the respondents. Hence, the cancellation of the shares of stocks of the complainant by respondents acting as a Board of Directors of the said corporation is not legally sanctioned and therefore not valid. Necessarily, the said certificates of stocks (Exhs. "L" and "L-2"),which are the evidence of ownership of the corporate stocks of complainant in said corporation should be, as they are hereby declared valid and subsisting. On the second issue, complainant alleges that respondents acquired their shares of stocks in said corporation through fraudulent means and illegal schemes and have become officers of said corporation after having allegedly revived the revoked certificate of registration of the corporation. Respondents assert that in seeking the reinstatement of the franchise of the said corporation to operate as such, they acted in the interest of the corporation and in order to protect their own rights and interests as stockholders, they convened a stockholders'/board of directors' meeting where they were elected as directors and officers. They further claim that said election is valid unless annulled by competent authority. The primary issue in this case is whether or not respondents have legally acquired their shares of stock in said corporation which could be declared null and void. It was shown on the Certificate of Increase of Capital Stock (Exh. "A") dated February 2, 1968 of La Commercial Company, Inc. that the late Son Keng Po subscribed and fully paid for 750 shares of stock by way of 100% stock dividends declared out of the surplus profit of the corporation as of December 31, 1967. In the Articles of Incorporation (Exh. "13"),the said Son Keng Po appeared as an original incorporator who subscribed to 1,500 shares worth, P150,000.00 and paid P37,500.00. The claim of respondent Joseph Son that he became a stockholder of the corporation in 1971 after his late father, Son Keng Po, who died on April 29, 1989 (Exh. "1-a") personally delivered his duly indorsed stock certificate to him on September 24, 1971 (TSN, December 3, 1991, pp. 16-23) which he allegedly surrendered to the Corporate Secretary, Felipe Chua, in exchange for his shares of stock (TSN, Ibid, p. 19),cannot be given credence. Firstly, the said Felipe Chua, testifying as rebuttal witness for the complainant, categorically denied this claim of respondent Joseph Son and insisted that he never came across any stock transaction between respondent and Son Keng Po. He also denied having signed the stock certificate (Exh. "28-e") (TSN, May 28, 1992, p. 30).It should be noted that no sur-rebuttal evidence was presented by respondents on this point. Secondly, on cross-examination, respondent Joseph Son changed his previous testimony regarding the delivery and indorsement of the stock certificate of the late Son Keng Po. He admitted in effect that he did not come across the said stock certificate of Son Keng Po as it was his mother who told him that the said stock certificate was indorsed by his father in his favor (TSN, January 27, 1992, pp. 32-33). Indeed, an examination of the Certificate of Stock No. 020 (Exh. "28-e") presented by the respondent during the hearing shows that it was issued on September 24, 1971 in his name and not in the name of his late father, Son Keng Po. The latter had no right to indorse the Certificate of Stock (Exh. "28-e") because it was not issued in his name. The Certificate of Stock issued in the name of the late Son Keng Po which the respondent claimed to have been personally delivered and duly indorsed to him, was not presented in evidence. Without the stock certificate of the late Son Keng Po indorsed in favor of the said respondent, which is the evidence of ownership of corporate stock, the assignment of corporate shares is effective only between the parties to the transaction. The delivery of the stock certificate, which represent the shares to be alienated, is essential for the protection of both the corporation and its stockholders (Nava vs. Peers Marketing Corporation, No. L-28120, November 25, 1976). There being no evidence of the delivery of the indorsed shares of stock, the said transfer of shares of stock of Son Keng Po to respondent Joseph Son has not effectively taken place. For an effective transfer of shares of stock, the mode and manner of transfer as prescribed by law must be followed (Nava vs. Peers Marketing Corporation, Supra). As provided under Section 63 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines, shares of stock may be transferred by delivery to the transferee of the certificate properly indorsed. Title may be vested in the transferee by the delivery of the duly indorsed certificate of stock. However, no transfer shall be valid, except as between the parties until the transfer is properly recorded in the books of the corporation (Embassy Forms, Inc. vs. Court of Appeals, G.R. No. 80682, August 13, 1990). Moreover, the corporation then had no Stock and Transfer Book where this particular transfer of shares of stock in favor of respondent Joseph Son could have been recorded in order to prejudice third parties. It is a settled rule that transfer must be registered in the books of the corporation to affect third persons. (Magsaysay-Labrador vs. Court of Appeals, G.R. No. 58168, December 19, 1989). Even assuming for the sake of argument that the indorsement was proper, at most the transfer made by the late Son Keng Po to respondent Joseph Son may be valid only between them but not against third persons like herein complainant, as the transfer was not recorded in the books of the corporation, there being none at that time. Since the indorsement certificate was not presented coupled with the fact that the transfer was not recorded in the Stock and Transfer Book, which is the repository of the records of transfer or movement of the shares of stock in a corporation, the transfer therefore of the shares of stock of the late Son Keng Po to respondent Joseph Son cannot be given due course. Respondent Joseph Son, however, may legitimize his claim to the said shares of stock by correcting the infirmities that beset the transfer in a separate proper action. On his part, respondent Mauricio Son Keng Po alleged in his Affidavit (Exh. "1") constituting his direct testimony that he was a stockholder of the said corporation since 1967 up to 1968 and up to the present. This claim of the said respondent is supported by the evidence on record. For one, the Certificate of Increase of Capital Stock (Exh. "A") shows that he subscribed and fully paid for 760 shares of stock by way of 100% stock dividends declared out of the surplus profit of the corporation as of December 31, 1967. He was issued Stock Certificate no. 008 (Exh. "28-b") on December 29, 1967 for 760 shares signed by the President, Eugenio Son Keng Po, who died on March 26, 1990 (Exh. "2") and the former Corporate Secretary, Manuel Coluso and likewise Stock Certificate No. 018 (Exh. "28-d") by the succeeding Corporate Secretary, Felipe Chua. Incidentally, the said Felipe Chua had admitted the genuineness of his signature on the said Stock Certificate no. 018 (TSN, May 28, 1992, p. 30). There is also evidence to support the allegation that respondent Elisa Go is a stockholder of the said corporation. Her name appears on the Certificate of Increase of Capital Stock (Exh. "A") whereby she subscribed and fully paid for 400 shares of stock by way of 100% stock dividends declared out of the surplus profit of the said corporation as of December 31, 1967 and to which she was issued Stock Certificate No. 005 (Exh. "28-a") on December 29, 1967 for 400 shares and Stock Certificate No. 015 (Exh. "28-c") on February 2, 1968 for another 400 shares. Complainant's rebuttal witness, Felipe Chua, also admitted the genuineness of his signature on Stock Certificate No. 015 (Exh. "28-c") which he signed in his capacity as the Corporate Secretary of the said corporation (TSN, May 28, 1992, pp. 29-30). Respondent Amelita Son Ngkaion claimed that she is a registered stockholder of La Commercial Company, Inc. owning 800 shares, having acquired 400 shares in 1975 from her mother, Paz Nabong, by virtue of a Deed of Donation and another 400 shares in 1989 pursuant to a Deed of Sale (TSN, February 26, 1992, pp. 34-36).In support of her claim, she presented in evidence cancelled Stock Certificate No. 022 (Exh. "28-g") issued in her name on August 8, 1975 for 400 shares and replaced by new Stock Certificate No. 009 dated July 15, 1991. While the evidence shows that the said Paz Nabong, from whom respondent Amelita Son Ngkaion allegedly acquired her shares of stock, is a stockholder of the said corporation and to which she had 800 shares outstanding in her name as shown by Stock Certificate No. 003 (Exh. "28") issued on December 29, 1967, the records of the case is deplete with evidence showing that the said shares of stock had been effectively and validly transferred to the said respondent. The purported Deed of Donation for 400 shares was not presented in evidence. Under Article 725 of the Civil Code, in order to be valid, such a donation must be made in a public document and the acceptance must be made in the same or in a separate instrument. In the latter case, the donor shall be notified of the acceptance in an authentic form and such step must be noted in both instruments. Non-compliance with this requirement renders the donation null and void. There is no need to rule on the aforesaid Deed of Sale which was marked as Exhibit "29" during the hearing on February 26, 1992 as it was not formally offered in evidence by the respondents. Evidence not formally offered or whose purpose has not been specified is not supposed to be considered by the court. (Section 34, Rule 132, Revised Rules on Evidence). Besides, respondents, Exhibit "29" which was formally offered and admitted as Evidence is Certificate of Increase of Capital Stock from P500,000.00 to P3,000,000.00 approved by the SEC on December 17, 1973. Respondent Robert Son did not testify to support the allegation that he is a stockholder of La Commercial Company, Inc. The testimony of respondent Amelita Ngkaion that her brother, Robert Son had acquired the other 800 shares of their mother, Paz Nabong (TSN, March 4, 1992, pp. 19-19) is not supported by the evidence. Not only was the alleged Certificate of Stock issued to Paz Nabong for her 800 shares not presented in evidence, but there is also no proof of its delivery and indorsement to respondent Robert Son. As stated above, without the stock certificate of the Paz Nabong delivered and properly indorsed to respondent Robert Son, which is the evidence of ownership of corporate stock, the assignment of corporate shares is effective only between the parties to the transaction (Nava vs. Peers Marketing Corporation, supra; Section 63, Batas Pambansa Bilang 68). The records are deplete of any evidence to sustain the validity of Stock Certificate No. A53 (Exh. "28-l") which was allegedly issued to respondent Harry Son for 579 shares on March 15, 1990. No evidence at all was presented to prove delivery and indorsement of the Certificate of Stock issued to the original subscriber from where the said Stock Certificate No. A53 (Exh. "28-l") originated from. It is to be noted that subject corporation had no Stock and Transfer Book registered with the Commission. Precisely, this was one of the grounds why the Commission had revoked its Certificate of Registration (Exhibit "11").In the absence of a Stock and Transfer Book, there is therefore no record to show that the shareholdings of both complainant and the respondents were registered in the books of the corporation. The Stock and Transfer Book (STB for brevity) registered with the Commission on June 18, 1990 (Exh. "25") was registered through the initiative of the respondents after the latter revived the Certificate of Registration of La Commercial Company, Inc. It is in this STB that the certificates of stocks or shareholdings of the respondents are now registered and are now being questioned by the complainant. Since the matter of declaring the election of respondents as officers and directors is not one of the issues agreed upon by the parties in the preliminary conference, hence, discussion on the matter is not necessary. Under the factual milieu, there is no basis for the award of moral damages, it appearing that there is no evidence that respondents acted improvidently in making it appear that they have acquired shares of stock in the said corporation and in convening the special meeting on June 28, 1990. The award of exemplary damages is also not justified. It is not enough to say that an example should be made, so corrective measures be employed, for the public good especially in corporate concerns. The causative negligence in such cases is personal to the stockholders actually involved in intra-corporate controversies. In the instant case, there is no clear showing that respondents acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner (Article 2232, Civil Code). On the other hand, there is justification in the award of attorney's fees. Respondents had clearly deprived complainant of his rights as stockholder of La Commercial Company, Inc. as a consequence of which complainant was compelled to litigate to protect his rights and interest. The sum P25,000.00 for and as attorney's fees is reasonable under the circumstances of the case. The counterclaims, being without basis in fact and in law, are hereby dismissed. ACCORDINGLY, judgment is hereby rendered as follows: (1) Making the writ of preliminary injunction permanent; (2) Declaring as valid and subsisting the Certificates of Stocks (Exhs. "L" and "L-2") issued to the complainant for a total of 1,500 shares representing his ownership of shares of stocks in La Commercial Company, Inc.; (3) Declaring valid the acquisition by respondents Mauricio Son Keng Po and Elisa Go of their shares of stocks and annulling the acquisition by respondents Joseph Son, Robert Son, Harry Son and Amelita Son Ngkaion of their respective shares of stocks in La Commercial Company, Inc. for being not validly transferred, including all Certificates of Stocks correspondingly issued in their names as a consequence of such acquisition; (4) Ordering the respondents to pay the complainant the sum of P25,000.00 for and as attorney's fees plus costs of suit; (5) Dismissing the counterclaims for lack of merit. LLjur SO ORDERED. (SGD.) JUANITO B. ALMOSA, JR. Hearing Officer