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19 Phil. 138

[ G. R. No. 6230, March 21, 1911 ]




This is an original action brought in this court under section 515  of the Code of Civil Procedure to  secure a writ of mandamus  against the respondent, to  compel  him, as secretary of the Visayan Electric Company, to transfer upon the books of the company certain shares of stock mentioned in the petition.

The original petition and a statement of the facts  sufficiently  definite for the purposes of  this decision will be found in  the decision of this court filed January  18, 1911,[1] sustaining a demurrer to the original petition  on the ground that it did not state facts constituting a cause of action.

The petitioner now submits an amended petition wherein he definitely and specifically alleges in addition to the allegations of the original petition, "that the Visayan  Electric Company holds no  unpaid claims against the shares of stock the subject of this action, and that said petitioner, A. R. Eager, is not indebted in any manner to said  Visayan Electric Company."  To  this  amended  petition respondent demurs, on the ground that as amended it still does not state facts which constitute a cause of action.

We are all agreed that, if the  petitioner were himself the registered owner of the stock which he  seeks to have transferred to Mr. Levering, to whom he alleges he agreed to sell it oh February 25,  1910, he would be entitled to his remedy  by mandamus upon his amended petition, and that under all  the circumstances of this case the mandamus would issue  from this court.  So  far as the petitioner is concerned,  the amended  petition  clearly,  definitely  and specifically alleges facts which, if true,  squarely meet and refute the contention that a mandamus  should not issue to compel the secretary of the company to transfer the stock because  of the possibility of the existence of unpaid claims against it,  a possibility which, as pointed out in the former opinion,  might impose upon the secretary a duty to refuse to make such transfer under the provisions  of section 35 of "The  Corporation Law."  (Act No. 1459.)

Were the petitioner the registered owner oil the stock, we think  that the  additional allegations  contained in  the amended petition, taken  together  with  the allegations in the original petition, would undoubtedly take his case out of the class of "ordinary  cases" in which Judge  Sanborn, in his article  on Mandamus in the Cyclopedia of Law and Procedure  (26 Cyc,  347), says mandamus, by the weight of authority, will not  lie; because as it appears and is clearly alleged in  the amended petition, first, an ordinary action against the corporation, for damages would in this case be wholly inadequate; second, an action of the nature of a  suit in  equity to  secure a decree ordering the  transfer would also be inadequate, in view of the delay involved in the trial and possible appeal of such action,  which under the allegations of  the amended petition  would defeat the principal purpose  for which this action is brought, that is to say, to secure to the  purchaser the right to  vote this stock at the regular and special meetings of the stockholders; and third, because we think that the  statute if not expressly, at least impliedly, imposes the duty upon a corporation, organized under Act No. 1459,  and the officer in charge of the books       of such corporation, to provide for the entry and noting upon the books  of the corporation of lawful transfers of stock when the entry of such transfer is lawfully demanded.

Section 52 of Act No. 1459 is as follows:
"Business corporations must also keep a book to be known as the  'Stock and transfer book,' in  which must be kept a record of all stock, the names of the stockholders or members alphabetically arranged;  the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any installment; a statement of every alienation, sale, or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may  prescribe.  The stock and transfer book shall be open to the  inspection of any director, stockholder,  or member of the corporation at reasonable hours."
Without  inserting the  numerous  citations with which Judge Sanborn supports the text, we quote at length from his observations on the "Transfer of shares" contained in his article on  Mandamus  (26 Cyc, 347), believing, as we do, that as appears from his discussion of the doctrine, we are supported  by both reason and  authority in our ruling in this regard:
"g. Transfer of shares. - By the weight of authority mandamus will not lie in ordinary cases to compel a corporation or its officers to transfer  stock on its books and issue new certificates  to the transferee,  since the right is a purely private one, and there is  generally  an adequate remedy by an action against the corporation for damages or by a suit in equity to secure a decree ordering the transfer.  Some courts, however,  have held that mandamus will lie, as the remedy by  action for refusal to permit a transfer is too doubtful and  uncertain in its  character to  supersede the specific and speedier remedy by mandamus.  The writ will lie if it is authorized by statute or, it seems, if the duty to register transfers is  expressly imposed by statute,  or  if there are special circumstances in any case rendering the remedy by  action for damages inadequate.   Mandamus will lie, where the right is clear, to compel a transfer of stock to the purchaser of the same at a judiciarsale, as required by statute.  In no case will the writ be granted if the title to the stock is disputed and the right to the relief asked for is not clear, or where the  relator's claim rests on a mere equitable right, or equitable issues are involved."
It appears,  however,  from  the  original as well  as  the amended petition, that this petitioner is not the registered owner of the stock which he seeks to have transferred, and except in  so far as he alleges that he is the owner of the stock and that it was "indorsed" to him on February 5 by the Bryan-Landon Company, in whose name it is registered on the books of the Visayan  Electric  Company, there is no allegation that the petitioner holds any power of attorney from the Bryan-Landon Company authorizing him to make demand on the secretary  of the Visayan Electric Company to make the transfer which petitioner seeks to have made through the medium of the mandamus of this court.

Without discussing or  deciding the respective rights of the parties which might be properly asserted in an ordinary action or an action in the nature of an equitable suit, we are all agreed that in a case such as that at bar, a mandamus should not issue to compel the secretary of a corporation to make a transfer of the stock on the books of the company, unless it affirmatively appears that he has failed or refused so to do, upon the demand either of the person in  whose name the stock is registered, or of some  person holding a power of  attorney for that purpose from the registered owner of the stock.  There is  no allegation in the petition that the petitioner or  anyone else holds a power of attorney from the  Bryan-Landon  Company authorizing a demand for the transfer of the stock, or that the Bryan-Landon Company has ever itself made such demand upon the Visayan Electric Company, and in the absence of such allegation we are not able to say that there was  such a clear indisputable duty, such a clear legal obligation upon the respondent, as to justify the issuance of the writ to compel him to perform it.

Under  the provisions of our statute touching the transfer of stock (sees. 35 and 36 of Act No. 1459), the mere indorsement of stock certificates  does  not in itself  give  to the indorsee such a right to have a transfer of the shares of stock on the books of the company as will entitle him to the writ of mandamus to compel the company and its officers to make such transfer at his  demand, because, under such circumstances the duty, the legal obligation,  is not so clear.and indisputable as to justify the issuance of the  writ.  As a general rule and especially under the above-cited statute, as between the corporation  on the one hand, and its shareholders and third persons  on the other, the corporation looks only to its books for the purpose of  determining who  its shareholders are, so  that a mere indorsee of  a stock certificate, claiming to be the owner, will not necessarily  be recognized as such W the  corporation and its officers, in the absence of express instructions of the registered  owner to make such transfer to the indorsee, or a power of attorney authorizing such transfer.  

The usual practice in the United States in effecting transfers by indorsement and  delivery of certificate with power of attorney in blank is thus stated in 10 Cyc, 594,  595: "The usual share certificate contains on its back  a printed assignment or  indorsement and  also a power  of  attorney in blank, like the following: 'For value received  I hereby assign the within named shares to....................,  and appoint attorney to make the transfer  on the books of the company.'  This is  signed by the person to whom the shares are  issued.  In this manner, by the usages of business, of which the courts take judicial notice, the certificate may be passed from hand  to hand indefinitely by the person to whom the certificate is issued simply signing this indorsement and delivering the certificate with the blanks unfilled to his assignee.  When it reaches the hands of some one who desires to assume the legal rights of a shareholder, so as to be entitled to vote at corporate elections and  to receive  dividends, he fills up the blanks by inserting his own name as transferee, just as the holder of a promissory note indorsed in blank  is entitled by the law merchant to insert  any name  he pleases above the indorsement as  the payee,   He also inserts  in the second blank the name of  the attorney in fact whom he wishes to make the transfer  for him on the books of the corporation.  This person is usually the secretary or some other officer of the company, although he  may insert the  name of whomsoever he pleases.  The attorney so appointed does exactly what the original shareholder would have done had he gone to the company's office to make the transfer of the shares to his vendee.  He makes an entry on the book kept by the company for that purpose, usually the stock ledger, to the effect that the shares have been transferred to the new purchaser.  Then the certificate is surrendered, as hereafter indicated, and a new certificate is issued to the transferee."

It may be that some such method as this was  adopted in making the transfer in the case at bar, and that this is what is meant by  the allegation  of the petition  that the stock certificates were "indorsed"  to the petitioner, but the point having been  raised, and there being no  express allegation to this effect in the petition, we think the demurrer must be sustained  and the petition dismissed  with costs, unless within ten days from the receipt of notice of this decision petitioner files an amended complaint.

It may be  proper to add,  in conclusion, that the specific point on which the demurrer to the amended  petition is sustained was not directly brought to  the attention of  the court in the discussion of the demurrer on the original petition, and for this  reason, apparently, was not discussed in the former opinion,  that demurrer being sustained on a different ground.

Mapa, Moreland, and  Trent, JJ., concur.

Arellano, C. J., concurs in the result.

[1]   Not Reported.