June 2010 Philippine Supreme Court Decisions on Commercial Law

Here are selected June 2010 rulings of the Supreme Court of the Philippines on commercial law:

Shares; proposed sale by stockholder not holding stock certificate.  On December 27, 1995, when McFoods offered for sale one Class “A” share of stock to MSCI for the price of P2,800,000.00 for the latter to exercise its pre-emptive right as required by Section 30(e) of MSCI’s Amended By-Laws, it legally had the right to do so since it was already an owner of a Class “A” share by virtue of its payment on November 28, 1995, and the Deed of Absolute Share dated December 15, 1995, notwithstanding the fact that the stock certificate was issued only on January 5, 1996.  A certificate of stock is the paper representative or tangible evidence of the stock itself and of the various interests therein.  The certificate is not a 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. It 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 of stock or the nature of the relation of shareholder to the corporation.  Makati Sports Club, Inc. vs. Cecile H. Cheng, et al., G.R. No. 178523, June 16, 2010.

Shares; preemptive rights.  McFoods properly complied with the requirement of Section 30(e) of the Amended By-Laws on MSCI’s pre-emptive rights.  Without doubt, MSCI failed to repurchase McFoods’ Class “A” share within the thirty (30) day pre-emptive period as provided by the Amended By-Laws.  It was only on January 29, 1996, or 32 days after December 28, 1995, when MSCI received Mc Foods’ letter of offer to sell the share, that Mc Foods and Hodreal executed the Deed of Absolute Sale over the said share of stock.

MSCI cannot argue that McFoods was not yet a registered owner of the share of stock when the latter offered it for resale, in order to void the transfer from Mc Foods to Hodreal.  The corporation’s obligation to register is ministerial upon the buyer’s acquisition of ownership of the share of stock.  The corporation, either by its board, its by-laws, or the act of its officers, cannot create restrictions in stock transfers.  Makati Sports Club, Inc. vs. Cecile H. Cheng, et al., G.R. No. 178523, June 16, 2010.

Stock certificate;  issuance.   Upon payment by McFoods of P1,800,000.00 to MSCI and the execution of the Deed of Absolute Sale on December 15, 1995, it then had the right to demand the delivery of the stock certificate in its name.  The right of a transferee to have stocks transferred to its name is an inherent right flowing from its ownership of the stocks. Makati Sports Club, Inc. vs. Cecile H. Cheng, et al., G.R. No. 178523, June 16, 2010.

(Note: As of the date of this post, the Supreme Court has not yet published all cases promulgated in June 2010. This post will be updated after the remaining June 2010 cases are published.)