PARTIES INVOLVED: ISSUE:

Makati Sports  MAKATI SPORTS CLUB, INC.– Acting in his capacity as  W/N Cheng in collaboration with Mc Foods committed fraud in
Club, Inc. v Cheng receiver of the Mercantile Bank of China. the transaction/transfer of the stock?
 CECILE H. CHENG – Treasurer and Director of the Makati
Sports Club Inc. DEED OF ABSOLUTE SALE
 MC FOODS, INC – Interested buyer of plaintiff’s shares.  Punzalan declared that, in December 1995, she received a Deed
 RAMON SABARRE - Sy has an account with the Mercantile of Absolute Sale between MSCI and Mc Foods of a Class A share
Bank of China in the form of “Trust Receipts” for P1,800,000.00 signed by Atty. Rico Domingo and Cheng, in
their respective capacities as then President and Treasurer of
HOW THE CASE STARTED: MSCI, and by Ramon Sabarre, as President of Mc Foods, what she
 On October 20, 1994, plaintiff’s Board of Directors adopted a merely did was to inquire from her immediate superior Becky
resolution authorizing the sale of 19 unissued shares at a floor Pearanda what share to issue; and the latter, in turn, replied that
price of P400,000 and P450,000 per share for Class A and B, it should be an original share.
respectively.  Thereafter, Punzalan prepared a letter, signed by then corporate
 On July 7, 1995, one Hodreal expressed his interest to buy a secretary, Atty. Rafael Abiera, to be sent to MSCIs stock transfer
share, for this purpose he sent the letter. In said letter, he agent for the issuance of the corresponding certificate of stock.
requested that his name be included in the waiting list.(buti Then, Certificate A 2243 was issued in favor of Mc Foods on
pa sya marunong maghintay) January 5, 1996.
 Sometime in November 1995, McFoods expressed interest in  Charged with ascertaining the compliance of all the requirements
acquiring a share of the plaintiff, and subsequently it was for the purchase of MSCIs shares of stock, the Membership
acquired with the payment to the plaintiff by McFoods of Committee failed to question the alleged irregularities attending
P1,800,000 through Urban Bank Mc Foods purchase of one Class A share at P1,800,000.00
 On December 15, 1995, the Deed of Absolute Sale, was  In fact, the purchase price of P1,800,000.00 cannot be said to be
executed by the plaintiff and McFoods Stock Certificate No. A detrimental to MSCI, considering that it is the same price paid for
2243 was issued to McFoods on January 5, 1996. a Class A share in the last sale of an original share to Land Bank
 On December 27, 1995, McFoods sent a letter to the plaintiff of the Philippines on September 25, 1995, and in the sale by
giving advise of its offer to resell the share. Marina Properties Corporation to Xanland Properties, Inc. on
 It appears that while the sale between the plaintiff and October 23, 1995.
McFoods was still under negotiations, there were  These circumstances have not been denied by MSCI. What is
negotiations already between McFoods and Hodreal for the more, the purchase price of P1,800,000.00 is P1,400,000.00 more
purchase by the latter of a share of the plaintiff. than the floor price set by the MSCI Board of Directors for a Class
 On November 24, 1995, Hodreal paid McFoods P1,400,000. A share in its resolution dated October 20, 1994.
Another payment of P1,400,000 was made by Hodreal to  Further, considering that Mc Foods tendered its payment of
McFoods on December 27, 1995, to complete the purchase P1,800,000.00 to MSCI on November 28, 1995, even assuming
price of P2,800,000. arguendo that it was driven solely by the intent to speculate on
 On February 7, 1996, plaintiff was advised of the sale by the price of the share of stock, it had all the right to negotiate and
McFoods to Hodreal of the share evidenced by Certificate No. transact, at least on the anticipated and expected ownership of
2243 for P2.8 Million. the share, with Hodreal.
 Upon request, a new certificate was issued. In 1997, an  In other words, there is nothing wrong with the fact that the first
investigation was conducted and the committee held that installment paid by Hodreal preceded the payment of Mc Foods
there is prima facie evidence to show that defendant Cheng for the same share of stock to MSCI because eventually Mc Foods
profited from the transaction because of her knowledge. became the owner of a Class A share covered by Certificate A
 Thus, petitioner sought judgment that would order 2243.
respondents to pay the sum of P1,000,000.00, representing  Upon payment by Mc Foods of P1,800,000.00 to MSCI and the
execution of the Deed of Absolute Sale on December 15, 1995, it
 the amount allegedly defrauded, together with interest and then had the right to demand the delivery of the stock certificate
damages. 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
RTC stocks.
 Dismissed the complaint
 Hence the appeal to the CA VIOLATION OF PRE-EMPTIVE RIGHTS
 As provided by MSCI’s By-Laws:
CA
 Affirmed RTC decision Sale of Shares of Stockholder. Where the registered owner of
share of stock desires to sell his share of stock, he shall first offer
Hence this petition the same in writing to the Club at fair market value and the club
shall have thirty (30) days from receipt of written offer within
MSCI INSIST’S THAT which to purchase such share, and only if the club has excess
 Cheng, in collaboration with Mc Foods, committed fraud in revenues over expenses (unrestricted retained earning) and with
transacting the transfers involving Stock Certificate No. A the approval of two-thirds (2/3) vote of the Board of Directors. If
2243 (Certificate A 2243) on account of the following the Club fails to purchase the share, the stockholder may dispose
circumstances: of the same to other persons who are qualified to own and hold
 1.) On November 24, 1995, Joseph L. Hodreal (Hodreal) paid shares in the club. If the share is not purchased at the price
the first installment of P1,400,000.00 for the purchase of a quoted by the stockholder and he reduces said price, then the
Class A share in favor of Mc Foods; Club shall have the same pre-emptive right subject to the same
 2.) on November 28, 1995, Mc Foods deposited to MSCIs conditions for the same period of thirty (30) days. Any transfer of
account an Allied Banking Corporation managers check for share, except by hereditary succession, made in violation of these
the purchase of the same share in the amount of conditions shall be null and void and shall not be recorded in the
P1,800,000.00, sans an official receipt from MSCI; books of the Club.
 3.) On December 15, 1995, MSCI and Mc Foods executed a
Deed of Sale for the purchase of a Class A share. The share of stock so acquired shall be offered and sold by the
 4) on December 27, 1995, Hodreal paid the last installment of Club to those in the Waiting List in the order that their names
P1,400,000.00 to Mc Foods; appear in such list, or in the absence of a Waiting List, to any
 5) on December 27, 1995, Mc Foods sent a letter to MSCI, applicant
offering to sell its purchased share of stock in the amount of
P2,800,000.00;  December 27, 1995, when Mc Foods offered for sale one Class A
 6) on January 5, 1996, Certificate A 2243 was issued to Mc share of stock to MSCI for the price of P2,800,000.00 for the latter
Foods by MSCI; and to exercise its pre-emptive right as required by Section 30(e) of
MSCIs Amended By-Laws, it legally had the right to do so since it
 7) on January 29, 1996, Mc Foods and Hodreal executed a
Deed of Sale for the same share of stock. 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
 In other words MSCI asserts that Mc Foods never intended to
December 15, 1995, notwithstanding the fact that the stock
become a legitimate holder of its purchased Class A share but
certificate was issued only on January 5, 1996.
did so only for the purpose of realizing a profit in the amount
of P1,000,000.00 at the expense of the former.  Therefore, Mc Foods properly complied with the requirement of
Section 30(e) of the Amended By-Laws on MSCIs pre-emptive
rights. Without doubt, MSCI failed to repurchase Mc Foods 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. While Hodreal had the right to
demand the immediate execution of the Deed of Absolute Sale
after his full payment of Mc Foods Class A share, he did not do so.
 The corporations obligation to register is ministerial upon the
buyers 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.

CHENG x McFoods?
 The mere fact that she performed acts upon authority of Mc
Foods, i.e., receiving the payments of Hodreal in her office and
claiming the stock certificate on behalf of Mc Foods, do not by
themselves, individually or taken together, show badges of fraud,
since Mc Foods did acts well within its rights and there is no proof
that Cheng personally profited from the assailed transaction.
Even the statement of MSCI that Cheng doctored the books to give
a semblance of regularity to the transfers involving the share of
stock covered by Certificate A 2243 remains merely a plain
statement not buttressed by convincing proof.

FALLO: WHEREFORE, the petition is DENIED for lack of merit. The

PARTIES INVOLVED: ISSUE: W/N Bitong is the true holder of stock certificates to be able
Bitong v CA institute a derivative suit (NO)
NORA A. BITONG (Petitioner)
Sundin kasi lahat  Sec 63 of the Corporation Code envisions a formal certificate
ng requirements CA, EUGENIA D. APOSTOL, JOSE A. APOSTOL, MR. & MS. of stock which can be issued only upon compliance with
hindi yung kulang PUBLISHING CO., certain requisites:
LETTY J. MAGSANOC, AND ADORACION G. NUYDA (Respondents)
First, the certificates must be signed by the president or vice-
HOW THE CASE STARTED: president, countersigned by the secretary or assistant secretary, and
 Bitong had been the Treasurer and a Member of the Board of sealed with the seal of the corporation. A mere typewritten statement
Directors of Mr. & Ms. from the time it was incorporated on 29 advising a stockholder of the extent of his ownership in a corporation
October 1976 to 11 April 1989, and was the registered owner without qualification and/or authentication cannot be considered as a
of 1,000 shares of stock out of the 4,088 total outstanding formal certificate of stock.
shares, petitioner complained of irregularities committed
from 1983 to 1987 by Eugenia D. Apostol, President and Second, delivery of the certificate is an essential element of its
Chairperson of the Board of Directors. issuance. There is no issuance of a stock certificate where it is never
 Petitioner claimed that except for the sale of the name detached from the stock books although blanks therein are properly filled
Philippine Inquirer to Philippine Daily Inquirer (PDI) all other
 transactions and agreements entered into by Mr. & Ms. with up if the person whose name is inserted therein has no control over the
PDI were not supported by any bond and/or stockholders books of the company.
resolution and upon instructions of Eugenia D. Apostol, Mr. &
Ms. made several cash advances to PDI on various occasions Third, the par value, as to par value shares, or the full subscription as
amounting to P3.276 million. On some of these borrowings to no par value shares, must first be fully paid.
PDI paid no interest whatsoever. Despite the fact that the
advances made by Mr. & Ms. to PDI were booked as advances Fourth, the original certificate must be surrendered where the
to an affiliate, there existed no board or stock holders person requesting the issuance of a certificate is a transferee from a
resolution, contract nor any other document which could stockholder.
legally authorize the creation of and support to an affiliate.
 Respondent spouses moved to dismiss on the ground that  The certificate of stock itself once issued is a continuing
petitioner had no legal standing to bring the suit as she was affirmation or representation that the stock described therein is
merely a holder-in-trust of shares of JAKA Investments which valid and genuine and is at least prima facie evidence that it was
continued to be the true stockholder of Mr. & Ms. legally issued in the absence of evidence to the contrary.
 The SEC Hearing Panel issued a writ of preliminary injunction However, this presumption may be rebutted.
enjoining private respondents from disbursing any money
except for the payment of salaries and other similar expenses Aside from petitioner’s own admissions, several corporate documents
in the regular course of business. disclose that the true party-in-interest is not petitioner but JAKA. It
 Petitioner testified at the trial that she became the registered should be emphasized that JAKA executed, a deed of sale over 1,000 Mr. &
and beneficial owner of 997 shares of stock of Mr. & Ms. out of Ms. shares in favor of respondent Eugenio D. Apostol. On the same day,
the 4,088 total outstanding shares after she acquired them respondent Apostol signed a declaration of trust stating that she was the
from JAKA through a deed of sale executed on 25 July 1983 registered owner of 1,000 Mr. & Ms. shares covered by a Certificate of
and recorded in the Stock and Transfer Book of Mr. & Ms. Stock. There is nothing in the records which shows that JAKA had
under Certificate of Shares of Stock No. 008. She pointed out revoked the trust it reposed on respondent Eugenia D. Apostol.
that Senator Enrile decided that JAKA should completely Neither was there any evidence that the principal had requested her to
divest itself of its holdings in Mr. & Ms. and this resulted in the assign and transfer the shares of stock to petitioner. In fine, the records
sale to her of JAKAs interest and holdings in that publishing are unclear on how petitioner allegedly acquired the shares of stock
firm. of JAKA.
 Private respondents refuted the statement of petitioner that
she was a stockholder of Mr. & Ms. since 25 July 1983.  For a valid transfer of stocks, the requirements are as
 The SEC Hearing Panel dismissed the derivative suit filed by follows:
petitioner and dissolved the writ of preliminary injunction
barring private respondents from disposing of their PDI First, there must be delivery of the stock certificate;
shares and any of Mr. & Ms. assets. The Hearing Panel ruled
that there was no serious mismanagement of Mr. & Ms. which Second, the certificate must be endorsed by the owner or his attorney-in-
would warrant drastic corrective measures. The Apostol fact or other persons legally authorized to make the transfer;
spouses sold the PDI shares registered in the name of their
holding company, JAED Management Corporation, to Edgardo Third, to be valid against third parties, the transfer must be recorded in
B. Espiritu. Bitong appealed to the SEC En Banc. the books of the corporation.
 The SEC En Banc reversed the decision of the Hearing Panel.
The SEC En Banc also declared the August 1993 sale of the PDI  Petitioner has satisfied only the third requirement.
shares of JAED Management Corporation to Edgardo B. Compliance with the first two requisites has not been clearly
Espiritu to be tainted with fraud, hence, null and void, and and sufficiently shown.
considered Mr. & Ms. as the true and lawful owner of all the
 PDI shares acquired by respondents Eugenia D. Apostol,  The basis of a stockholders suit is always one in equity. However,
Magsanoc and Nuyda. it cannot prosper without first complying with the legal
 Apostol spouses, Magsanoc, Nuyda, and Mr. & Ms. filed a requisites for its institution. The most important of these is the
petition for review before respondent Court of Appeals. bona fide ownership by a stockholder of a stock in his own right
dgardo B. Espiritu filed a petition for certiorari and at the time of the transaction complained of which invests him
prohibition also before respondent Court of Appeals. with standing to institute a derivative action for the benefit of the
The CA rendered a decision reversing the SEC En Banc and held that corporation.
from the evidence on record petitioner was not the owner of any share
of stock in Mr. & Ms. and therefore not the real party-in-interest to FALLO: WHEREFORE, the petition is DENIED. The 31 August 1995
prosecute the complaint she had instituted against private Decision of the Court of Appeals dismissing the complaint of petitioner
respondents. Petitioner alone and by herself as an agent could not file Nora A. Bitong in CA-G.R. No. SP 33291, and granting the petition for
a derivative suit in behalf of her principal. For not being the real party- certiorari and prohibition filed by respondent Edgardo B. Espiritu as well
in-interest, petitioners complaint did not state a cause of action, a as annulling the 5 November 1993, 24 January 1994 and 18 February
defense which was never waived; hence, her petition should have been 1994 Orders of the SEC En Banc in CA-G.R. No. SP 33873, is AFFIRMED.
dismissed. They also ruled that the assailed orders of the SEC were Costs against petitioner.
issued in excess of jurisdiction, or want of it, and thus were null and SO ORDERED.
void.