Tan vs. SEC, G.R. No. 95696, March 3, 1992 Doctrines: Certificate of stock: The certificate is not stock in the corporation but is merely evidence of the holder’s interest and status in the corporation, his ownership of the share represented thereby, but is not in law the equivalent of such ownership. Transfer of shares: “…delivery is not essential where it appears that the persons sought to be held as stockholders are officers of the corporation, and have the custody of the stock book . . .” Facts: Alfonso Tan was the president of Visayan Educational Supply Corporation when it was incorporated. Initially, 400 shares of stock was in his name, represented by Stock Certificate Number 2. But when two other incorporators, Young and Ong assigned to the corporation their shares, Alfonso sold 50 shares to his brother Angelo, and another incorporator, Alfredo Uy, sold 50 shares to Teodora S. Tan. The above sale was necessary in order to complete the membership requirement of the Board of Directors. Because of the mentioned transactions, Stock Certificate Number 2 was cancelled, and the corresponding stock certificates 6 and 8 were issued, with certificate 6 representing 50 shares sold to Angelo, and certificate 8 representing the 350 shares for the petitioner Alfonso Tan. A certain Mr. Buzon, was requested by Mr. Tan Su Ching to ask that Alfonso Tan endorse the cancelled Stock Certificate Number 2. However, Alfonso did not sign Stock Certificate Number 2 and only returned Stock Certificate Number 8. Later on, Alfonso Tan withdrew from the corporation because he was dislodged by respondent Tan Su Ching as president. Part of the condition of his withdrawal was that he be paid with stocks-intrade equivalent to 33% in lieu of stock value of his shares in the amount of P35,000.00. Due to the withdrawal, the cancellation of Stock Certificate 2 and 8 was effected and recorded in the stock and transfer book. Alfonso then filed a case with Cebu SEC, questioning the cancellation of his aforesaid Stock Certificates 2 and 8. Petitioner argues that he was deprived of his shares despite the non-endorsement or surrender of Stock Certificates 2 and 8 which is contrary to Section 63 of the Corporation Code which requires: “…No transfer, however, shall be valid, except as between the parties, until the transfer is recorded to the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, and the number of the certificates and the number of shares transferred.” Issue: Whether or not the cancellation of Stock Certificate 2 and the subsequent issuance of Stock Certificate Number 8 was null and void because of the non-endorsement of Stock Certificate Number 2 by Alfonso Tan. Held: No. The cancellation and the transfers of stock were valid.
There was a delivery of Stock Certificate No. 2 made by Alfonso Tan to the corporation before it was replaced with Stock Certificate No. 6 for 50 shares to Angel Tan and Stock Certificate No. 8 for 350 shares to the Alfonso. From the facts deduced in the case, there was already delivery of the unendorsed Stock Certificate No. 2, which made the issuance of Stock Certificate Nos. 6 and 8 valid. All the acts required for the transferee to exercise its rights over the acquired stocks were attendant and even the corporation was protected from other parties, considering that the said transfer was earlier recorded or registered in the corporate stock and transfer book. Furthermore, it is necessary to delineate the function of the stock itself form the actual delivery or endorsement of the certificate of stock itself because a certificate of stock is not necessary to render one a stockholder in a corporation. The certificate is not stock in the corporation but is merely evidence of the holder’s interest and status in the corporation, his ownership of the share represented thereby, but is not in law the equivalent of such ownership. It expresses the contract between the corporation and the stockholder, but is not essential to the existence of a share in stock or the nation of the relation of the shareholder to the corporation. The fact of the matter is, the new holder, Angel S. Tan has already exercised his rights and prerogatives as stockholder and was even elected as member of the board of directors in the respondent corporation with the full knowledge and acquiescence of petitioner. Due to the transfer of 50 shares, Angel S. Tan was clothed with rights and responsibilities in the board of the respondent corporation when he was elected as officer thereof.
