This case involves a dispute over the ownership of shares of stock in the Rural Bank of Lipa City. Private respondents Reynaldo and Avelina Villanueva had executed documents assigning their shares to the bank and acknowledging a debt, but failed to settle the debt. As a result, the bank converted the Villanuevas' shares to treasury stocks. However, the Supreme Court ruled that (1) the Villanuevas remained stockholders since there was no endorsement of their stock certificates as required to legally transfer shares, and (2) the Villanuevas should have been notified of the meeting to elect new bank directors where they could have exercised their rights as stockholders.
This case involves a dispute over the ownership of shares of stock in the Rural Bank of Lipa City. Private respondents Reynaldo and Avelina Villanueva had executed documents assigning their shares to the bank and acknowledging a debt, but failed to settle the debt. As a result, the bank converted the Villanuevas' shares to treasury stocks. However, the Supreme Court ruled that (1) the Villanuevas remained stockholders since there was no endorsement of their stock certificates as required to legally transfer shares, and (2) the Villanuevas should have been notified of the meeting to elect new bank directors where they could have exercised their rights as stockholders.
This case involves a dispute over the ownership of shares of stock in the Rural Bank of Lipa City. Private respondents Reynaldo and Avelina Villanueva had executed documents assigning their shares to the bank and acknowledging a debt, but failed to settle the debt. As a result, the bank converted the Villanuevas' shares to treasury stocks. However, the Supreme Court ruled that (1) the Villanuevas remained stockholders since there was no endorsement of their stock certificates as required to legally transfer shares, and (2) the Villanuevas should have been notified of the meeting to elect new bank directors where they could have exercised their rights as stockholders.
This case involves a dispute over the ownership of shares of stock in the Rural Bank of Lipa City. Private respondents Reynaldo and Avelina Villanueva had executed documents assigning their shares to the bank and acknowledging a debt, but failed to settle the debt. As a result, the bank converted the Villanuevas' shares to treasury stocks. However, the Supreme Court ruled that (1) the Villanuevas remained stockholders since there was no endorsement of their stock certificates as required to legally transfer shares, and (2) the Villanuevas should have been notified of the meeting to elect new bank directors where they could have exercised their rights as stockholders.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 2
The Rural Bank of Lipa City, Inc. vs.
Court of Appeals G.R. No. 124535, September 28, 2001 Ynares-Santiago, J.
Facts: Private respondent Reynaldo Villanueva, Sr., a stockholder of petitioner Bank, executed a Deed of Assignment, wherein he assigned his shares, as well as those of other shareholders under his control, in favor of the stockholders of the Bank represented by its directors. Thereafter, Villanueva, Sr. and his wife, Avelina Villanueva, executed an Agreement acknowledging their indebtedness to the Bank in the amount of P4,000,000, and stipulated that the same will be paid out of the proceeds of the sale of their real property. During a meeting with the BOD of the Bank, the Villanuevas assured the Board that their debt would be paid on or before December 31 of that same year; otherwise, the Bank would be entitled to liquidate their shareholdings, including those under their control.
The Villanuevas failed to settle their obligation, and ignored the demands of the Bank. Consequently, their shares of stock were converted into Treasury Stocks. Later, the Villanuevas questioned the legality of the conversion of their shares.
Meanwhile, a meeting was held for the election of new directors of the Bank. However, the Villanuevas were not notified of said meeting. In this regard, the Villanuevas filed with the SEC a petition for annulment of the stockholders; meeting and election of directors and officers, with damages and prayer for preliminary injunction.
Issue: Whether or not private respondents are still stockholders of the petitioner bank despite the conversion of their shares of stock into Treasury Stocks.
Held: Yes. Private respondents are still stockholders of petitioner bank despite the conversion of their shares of stock into Treasury Stocks.
Transfer of title to shares of stock is ineffective until and unless the duly indorsed certificate of stock is delivered to them. No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.
Section 63 of the Corporation Code provides, in part, that “[s]hares od 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.”
While there was an assignment of private respondents’ shares to the petitioners, said assignment was not sufficient to effect the transfer of shares since there was no endorsement of the certificates of stocks. The rules is that the delivery of the stock certificate duly endorsed by the owner is the operative act of transfer of shares from the
Page 1 of 2 lawful owner to the transferee. Thus, title may be vested in the transferee only by delivery of the duly indorsed certificate of stock.
Consequently, private respondents should be notified of the meeting for the election of new directors and be allowed to exercise their rights as stockholders of the Bank.
Hence, the petition for review on certiorari is denied.
