Lim Tay vs. CA (293 SCRA 634 (1998) )
Lim Tay vs. CA (293 SCRA 634 (1998) )
Lim Tay vs. CA (293 SCRA 634 (1998) )
SUPREME COURT
Manila
FIRST DIVISION
LIM TAY, petitioner,
vs.
COURT OF APPEALS, GO FAY AND CO. INC., SY GUIOK, and THE ESTATE
OF ALFONSO LIM, respondents.
PANGANIBAN, J.:
There are the principles, used by this Court in resolving this Petition for Review
on Certiorari before us, assailing the October 24, 1996 Decision 1 of the Court of
Appeals 2 in CA-GR SP No. 40832, the dispositive portion of which reads:
By the foregoing disposition, the Court of Appeals effectively affirmed the March 7, 1996
Decision 4 of the Securities and Exchange Commission (SEC) en banc:
The Facts
As found by the Court of Appeals, the facts of the case are as follows:
PRAYER
Plaintiff further prays for such other relief just and equitable
in the premises. ( page 34, Rollo)
AFFIRMATIVE DEFENSE
In the interim, Sy Lim died. Respondents Guiok and the Intestate Estate of
Alfonso Sy Lim, represented by Conchita Lim, filed their Answer-In-
Intervention with the SEC alleging, inter alia, that:
x x x x x x x x x
3. costs of suit.
. . . [T]he [p]etitioner failed to establish a clear and legal right to the writ of
mandamus prayed for by him. . . . Mandamus will not issue to enforce a
right which is in substantial dispute or to which a substantial doubt exists .
. . . The principal function of the writ of mandamus is to command and
expedite, and not to inquire and adjudicate and, therefore it is not the
purpose of the writ to establish a legal right, but to enforce one which has
already been established. 9 [citations omitted]
The Court of Appeals debunked petitioner's claim that he had acquired ownership over
the shares by virtue of novation, holding that respondents' indorsement and delivery of
the shares were pursuant to Articles 2093 and 2095 of the Civil Code and that
petitioner's receipt of dividends was in compliance with Article 2102 of the same Code.
Petitioner's claim that he had acquired ownership of the shares by virtue of prescription
was likewise dismissed by Respondent Court in this wise:
The prescriptive period for the action of Respondent[s] Guiok and Sy Lim
to recover the shares of stock from the [p]etitioner accrued only from the
time they paid their loans and the interests thereon and [made] a demand
for their return. 10
Hence, the petitioner brought before us this Petition for Review on Certiorari in
accordance with Rule 45 of the Rules of Court. 11
Assignment of Errors
In addition, petitioner contends that it has acquired ownership of the shares "through
extraordinary prescription," pursuant to Article 1132 of the Civil Code, and through
respondents' subsequent acts, which amounted to a novation of the contracts of pledge.
Petitioner also claims that there was dacion en pago, in which the shares of stock were
deemed sold to petitioner, the consideration for which was the extinguishment of the
loans and the interests thereon. Petitioner likewise claims that laches bars respondents
from recovering the subject shares.
The registration of shares in a stockholder's name, the issuance of stock certificates, and
the right to receive dividends which pertain to the said shares are all rights that flow
from ownership. The determination of whether or not a shareholder is entitled to
exercise the above-mentioned rights falls within the jurisdiction of the SEC. However, if
ownership of the shares is not clearly established and is still unresolved at the time the
action for mandamus is filed, then jurisdiction lies with the regular courts.
Sec. 5 of Presidential Decree No. 902-A sets forth the jurisdiction of the SEC as follows:
In his Complaint, petitioner alleged that, pursuant to the contracts of pledge, he became
the owner of the shares when the term for the loans expired. The Complaint contained
the following pertinent averments:
x x x x x x x x x
However, the contracts of pledge, which were made integral parts of the Complaint,
contain this common proviso:
3. In the event of the failure of the PLEDGOR to pay the amount within a
period of six (6) months from the date hereof, the PLEDGEE is hereby
authorized to foreclose the pledge upon the said shares of stock hereby
created by selling the same at public or private sale with or without notice
to the PLEDGOR, at which sale the PLEDGEE may be the purchaser at his
option; and the PLEDGEE is hereby authorized and empowered at his
option, to transfer the said shares of stock on the books of the corporation
to his own name and to hold the certificate issued in lieu thereof under the
terms of this pledge, and to sell the said shares to issue to him and to apply
the proceeds of the sale to the payment of the said sum and interest, in the
manner hereinabove provided;
This contractual stipulation, which was part of the Complaint, shows that plaintiff was
merely authorized to foreclose the pledge upon maturity of the loans, not to own them.
Such foreclosure is not automatic, for it must be done in a public or private sale.
Nowhere did the Complaint mention that petitioner had in fact foreclosed the pledge
and purchased the shares after such foreclosure. His status as a mere pledgee does not,
under civil law, entitle him to ownership of the subject shares. It is also noteworthy that
petitioner's Complaint did not aver that said shares were acquired through
extraordinary prescription, novation or laches. Moreover, petitioner's claim, subsequent
to the filing of the Complaint, that he acquired ownership of the said shares through
these three modes is not indubitable and still has to be resolved. In fact, as will be
shown, such allegation-has no merit. Manifestly, the Complaint by itself did not contain
any prima facie showing that petitioner was the owner of the shares of stocks. Quite the
contrary, it demonstrated that he was merely a pledgee, not an owner. Accordingly, it
failed to lay down a sufficient basis for the SEC to exercise jurisdiction over the
controversy. In fact, the very allegations of the Complaint and its annexes negated the
jurisdiction of the SEC.
At the time the Bragas questioned the validity of the sale, the contract had already been
perfected, thereby demonstrating that Telectronic Systems, Inc. was already the prima
facie owner of the shares and, consequently, a stockholder of Pocket Bell Philippines,
Inc. Even if the sale were to be annulled later on, Telectronic Systems, Inc. had, in the
meantime, title over the shares from the time the sale was perfected until the time such
sale was annulled. The effects of an annulment operate prospectively and do not, as a
rule, retroact to the time the sale was made. Therefore, at the time the Bragas
questioned the validity of the tranfers made by the Abejos, Telectronic Systems, Inc. was
already a prima facie shareholder of the corporation, thus making the dispute between
the Bragas and the Abejos "intra-corporate" in nature. Hence, the Court held that "the
issue is not on ownership of shares but rather the non-performance by the corporate
secretary of the ministerial duty of recording transfers of shares of stock of the
corporation of which he is secretary." 19
Unlike Abejo, however, petitioner's ownership over the shares in this case was not yet
perfected when the Complaint was filed. The contract of pledge certainly does not make
him the owner of the shares pledged. Further, whether prescription effectively
transferred ownership of the shares, whether there was a novation of the contracts of
pledge, and whether laches had set in were difficult legal issues, which were unpleaded
and unresolved when herein petitioner asked the corporate secretary of Go Fay to effect
the transfer, in his favor, of the shares pledged to him.
In Rural Bank of Salinas, Melenia Guerrero executed deeds of assignment for the
shares in favor of the respondents in that case. When the corporate secretary refused to
register the transfer, an action for mandamus was instituted. Subsequently, a motion for
intervention was filed, seeking the annulment of the deeds of assignment on the grounds
that the same were fictitious and antedated, and that they were in fact donations
because the considerations therefor were below the book value of the shares.
Like the Abejo spouses, the respondents in Rural Bank of Salinas were already prima
facie shareholders when the deeds of assignment were questioned. If the said deeds
were to be annulled later on, respondents would still be considered shareholders of the
corporation from the time of the assignment until the annulment of such contracts.
Petitioner prays for the issuance of a writ of mandamus, directing the corporate
secretary of respondent corporation to have the shares transferred to his name in the
corporate books, to issue new certificates of stock and to deliver the corresponding
dividends to him. 20
In order that a writ of mandamus may issue, it is essential that the person petitioning
for the same has a clear legal right to the thing demanded and that it is the imperative
duty of the respondent to perform the act required. It neither confers powers nor
imposes duties and is never issued in doubtful cases. It is simply a command to exercise
a power already possessed and to perform a duty already imposed. 21
In the present case, petitioner has failed to establish a clear legal right. Petitioner's
contention that he is the owner of the said shares is completely without merit. Quite the
contrary and as already shown, he does not have any ownership rights at all. At the time
petitioner instituted his suit at the SEC, his ownership claim had no prima facie leg to
stand on. At best, his contention was disputable and uncertain Mandamus will not issue
to establish a legal right, but only to enforce one that is already clearly established.
Petitioner initially argued that ownership of the shares pledged had passed to him, upon
Respondents Sy Guiok and Sy Lim's failure to pay their respective loans. But on appeal,
petitioner claimed that ownership over the shares had passed to him, not via the
contracts of pledge, but by virtue of prescription and by respondents' subsequent acts
which amounted to a novation of the contracts of pledge. We do not agree.
At the outset, it must be underscored that petitioner did not acquire ownership of the
shares by virtue of the contracts of pledge. Article 2112 of the Civil Code states:
The creditor to whom the credit has not been satisfied in due time, may
proceed before a Notary Public to the sale of the thing pledged. This sale
shall be made at a public auction, and with notification to the debtor and
the owner of the thing pledged in a proper case, stating the amount for
which the public sale is to be held. If at the first auction the thing is not
sold, a second one with the same formalities shall be held; and if at the
second auction there is no sale either, the creditor may appropriate the
thing pledged. In this case he shall be obliged to give an acquittance for his
entire claim.
3. In the event of the failure of the PLEDGOR to pay the amount within a
period of six (6) months from the date hereof, the PLEDGEE is hereby
authorized to foreclose the pledge upon the said shares of stock hereby
created by selling the same at public or private sale with or without notice
to the PLEDGOR, at which sale the PLEDGEE may be the purchaser at his
option; and "the PLEDGEE is hereby authorized and empowered at his
option to transfer the said shares of stock on the books of the corporation
to his own name, and to hold the certificate issued in lieu thereof under
the terms of this pledge, and to sell the said shares to issue to him and to
apply the proceeds of the sale to the payment of the said sum and interest,
in the manner hereinabove
provided; 22
There is no showing that petitioner made any attempt to foreclose or sell the shares
through public or private auction, as stipulated in the contracts of pledge and as
required by Article 2112 of the Civil Code. Therefore, ownership of the shares could not
have passed to him. The pledgor remains the owner during the pendency of the pledge
and prior to foreclosure and sale, as explicitly provided by Article 2103 of the same
Code:
Nevertheless, the creditor may bring the actions which pertain to the
owner of the thing pledged in order to recover it from, or defend it against
a third person.
No Ownership
by Prescription
Petitioner did not acquire the shares by prescription either. The period of prescription of
any cause of action is reckoned only from the date the cause of action accrued.
Since a cause of action requires as an essential element not only a legal right of the
plaintiff and a correlative obligation of the defendant, but also an act or omission of the
defendant in violation of said legal right, the cause of action does not accrue until the
party obligated refuses, expressly or impliedly, to comply with its duty." 23 Accordingly,
a cause of action on a written contract accrues when a breach or violation thereof occurs.
Under the contracts of pledge, private respondents would have a right to ask for the
redelivery of their certificates of stock upon payment of their debts to petitioner,
consonant with Article 2105 of the Civil Code, which reads:
The debtor cannot ask for the return of the thing pledged against the will
of the creditor, unless and until he has paid the debt and its interest, with
expenses in a proper case. 24
Thus, the right to recover the shares based on the written contract of pledge between
petitioner and respondents would arise only upon payment of their respective loans.
Therefore, the prescriptive period within which to demand the return of the thing
pledged should begin to run only after the payment of the loan and a demand for the
thing has been made, because it is only then that respondents acquire a cause of action
for the return of the thing pledged.
Prescription should not begin to run on the action to demand the return of the thing
pledged while the loan still exists. This is because the right to ask for the return of the
thing pledged will not arise so long as the loan subsists. In the present case, the
prescriptive period did not begin to run when the loan became due. On the other hand,
it is petitioner's right to demand payment that may be in danger of prescription.
Petitioner contends that he can be deemed to have acquired ownership over the
certificates of stock through extraordinary prescription, as provided for in Article 1132 of
the Civil Code which states:
Petitioner expressly repudiated the pledge, only when he filed his Complaint and
claimed that he was not a mere pledgee, but that he was already the owner of the shares.
Based on the foregoing, petitioner has not acquired the certificates of stock through
extraordinary prescription.
No Novation
in Favor of Petitioner
Neither did petitioner acquire the shares by virtue of a novation of the contract of
pledge. Novation is defined as "the extinguishment of an obligation by a subsequent one
which terminates it, either by changing its object or principal conditions, by substituting
a new debtor in place of the old one, or by subrogating a third person to the rights of the
creditor." 26 Novation of a contract must not be presumed. "In the absence of an express
agreement, novation takes place only when the old and the new obligations are
incompatible on every point." 27
In the present case, novation cannot be presumed by (a) respondents' indorsement and
delivery of the certificates of stock covering the 600 shares, (b) petitioner's receipt of
dividends from 1980 to 1983, and (c) the fact that respondents have not instituted any
action to recover the shares since 1980.
This stipulation did not effect the transfer of ownership to petitioner. It was merely in
compliance with Article 2093 of the Civil Code, 29 which requires that the thing pledged
be placed in the possession of the creditor or a third person of common agreement; and
Article 2095, 30 which states that if the thing pledged are shares of stock, then the
"instrument proving the right pledged" must be delivered to the creditor.
Moreover, the fact that respondents allowed the petitioner to receive dividends
pertaining to the shares was not meant to relinquish ownership thereof. As stated by
respondent corporation, the same was done pursuant to an agreement between the
petitioner and Respondents Sy Guiok and Sy Lim, following Article 2102 of the civil
Code which provides:
Novation cannot be inferred from the mere fact that petitioner has not, since 1980,
instituted any action to recover the shares. Such action is in fact premature, as the loan
is still outstanding. Besides, as already pointed out, novation is never presumed or
inferred.
No Dacion en Pago
in Favor of Petitioner
Neither can there be dacion en pago, in which the certificates of stock are deemed sold
to petitioner, the consideration for which is the extinguishment of the loans and the
accrued interests thereon. Dacion en pago is a form of novation in which a change takes
place in the object involved in the original contract. Absent an explicit agreement,
petitioner cannot simply presume dacion en pago.
Laches Not
a Bar to Petitioner
Petitioner submits that "the inaction of the individual respondents with respect to the
recovery of the shares of stock serves to bar them from asserting rights over said shares
on the basis of laches." 31
Laches has been defined as "the failure or neglect, for an unreasonable length of time, to
do that which by exercising due diligence could or should have been done earlier; it is
negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to
assert it." 32
In this case, it is in fact petitioner who may be guilty of laches. Petitioner had all the
time to demand payment of the debt. More important, under the contracts of pledge,
petitioner could have foreclosed the pledges as soon as the loans became due. But for
still unknown or unexplained reasons, he failed to do so, preferring instead to pursue his
baseless claim to ownership.
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED.
Costs against petitioner.
SO ORDERED.
ESCRA NOTES:
Civil Law; Contracts; Pledge; Petitioner’s status as a mere pledgee does not,
under civil law, entitle him to ownership of the subject shares.—This
contractual stipulation, which was part of the Complaint, shows that plaintiff was
merely authorized to foreclose the pledge upon maturity of the loans, not to own them.
Such foreclosure is not automatic, for it must be done in a public or private sale.
Nowhere did the Complaint mention that petitioner had in fact foreclosed the pledge
and purchased the shares after such foreclosure. His status as a mere pledgee does not,
under civil law, entitle him to ownership of the subject shares. It is also noteworthy that
petitioner’s Complaint did not aver that said shares were acquired through
extraordinary prescription, novation or laches. Moreover, petitioner’s claim, subsequent
to the filing of the Complaint, that he acquired ownership of the said shares through
these three modes is not indubitable and still has to be resolved. In fact, as will be
shown, such allegation has no merit. Manifestly, the Complaint by itself did not contain
any prima facie showing that petitioner was the owner of the shares of stocks. Quite the
contrary, it demonstrated that he was merely a pledgee, not an owner. Accordingly, it
failed to lay down a sufficient basis for the SEC to exercise jurisdiction over the
controversy. In fact, the very allegations of the Complaint and its annexes negated the
jurisdiction of the SEC.
Same; Same; Same; Mandamus will not issue to establish a legal right, but
only to enforce one that is already clearly established.—In the present case,
petitioner has failed to establish a clear legal right. Petitioner’s contention that he is the
owner of the said shares is completely without merit. Quite the contrary and as already
shown, he does not have any ownership rights at all. At the time petitioner instituted his
suit at the SEC, his ownership claim had no prima facie leg to stand on. At best, his
contention was disputable and uncertain. Mandamus will not issue to establish a legal
right, but only to enforce one that is already clearly established.
Same; Same; Same; Pledge; There is no showing that petitioner made any
attempt to foreclose or sell the shares through public or private auction, as
stipulated in the contracts of pledge and as required by Article 2112 of the
Civil Code.—There is no showing that petitioner made any attempt to foreclose or sell
the shares through public or private auction, as stipulated in the contracts of pledge and
as required by Article 2112 of the Civil Code. Therefore, ownership of the shares could
not have passed to him. The pledgor remains the owner during the pendency of the
pledge and prior to foreclosure and sale, as explicitly provided by Article 2103 of the
same Code: “Unless the thing pledged is expropriated, the debtor continues to be the
owner thereof. Nevertheless, the creditor may bring the actions which pertain to the
owner of the thing pledged in order to recover it from, or defend it against a third
person.”
Same; Same; Same; Same; Same; The prescriptive period within which to
demand the return of the thing pledged should begin to run only after the
payment of the loan and a demand for the thing has been made, because it
is only then that respondents acquire a cause of action for the return of the
thing pledged.—Under the contracts of pledge, private respondents would have a right
to ask for the redelivery of their certificates of stock upon payment of their debts to
petitioner, consonant with Article 2105 of the Civil Code, which reads: “The debtor
cannot ask for the return of the thing pledged against the will of the creditor, unless and
until he has paid the debt and its interest, with expenses in a proper case.”
Same; Same; Same; Same; Same; Prescription should not begin to run on
the action to demand the return of the thing pledged while the loan still
exists.—Prescription should not begin to run on the action to demand the return of the
thing pledged while the loan still exists. This is because the right to ask for the return of
the thing pledged will not arise so long as the loan subsists. In the present case, the
prescriptive period did not begin to run when the loan became due. On the other hand,
it is petitioner’s right to demand payment that may be in danger of prescription.
Same; Same; Same; Same; Same; Petitioner’s possession of the stock
certificates came about because they were delivered to him pursuant to the
contracts of pledge. His possession as a pledgee cannot ripen into
ownership by prescription.—In the present case, petitioner’s possession of the stock
certificates came about because they were delivered to him pursuant to the contracts of
pledge. His possession as a pledgee cannot ripen into ownership by prescription. As
aptly pointed out by Justice Jose C. Vitug: “Acquisitive prescription is a mode of
acquiring ownership by a possessor through the requisite lapse of time. In order to ripen
into ownership, possession must be in the concept of an owner, public, peaceful and
uninterrupted. Thus, possession with a juridical title, such as by a usufructory, a trustee,
a lessee, agent or a pledgee, not being in the concept of an owner, cannot ripen into
ownership by acquisitive prescription unless the juridical relation is first expressly
repudiated and such repudiation has been communicated to the other party.” Petitioner
expressly repudiated the pledge, only when he filed his Complaint and claimed that he
was not a mere pledgee, but that he was already the owner of the shares. Based on the
foregoing, petitioner has not acquired the certificates of stock through extraordinary
prescription.
Same; Same; Same; Same; Same; Article 2095 states that if the thing
pledged are shares of stock, then the “instrument proving the right
pledged” must be delivered to the creditor.—Respondents’ indorsement and
delivery of the certificates of stock were pursuant to paragraph 2 of the contract of
pledge which reads: “2. The said certificates had been delivered by the PLEDGOR
endorsed in blank to be held by the PLEDGEE under the pledge as security for the
payment of the aforementioned sum and interest thereon accruing.” This stipulation did
not effect the transfer of ownership to petitioner. It was merely in compliance with
Article 2093 of the Civil Code, which requires that the thing pledged be placed in the
possession of the creditor or a third person of common agreement; and Article 2095,
which states that if the thing pledged are shares of stock, then the “instrument proving
the right pledged” must be delivered to the creditor.