Ybarra is the registered shareholder of 500 shares in Yakal Inc., of which only 50% has been paid up, but for which the corporation had erroneously issued a covering certificate of stock for the entire 500 shares. Ybarra sells the entire 500 shares for cash pursuant to a notarized Deed of Sale in favor of Ynchon, and which certificate was duly endorsed and delivered. When Ynchon presented the Deed of Sale and the endorsed certificate of stock, as well as proof of payment to the Bureau of Internal Revenue (BIR) of the tax due on the sale of shares, the Corporate Secretary of Yakal Inc. refused to register the sale on the ground of lack of written authority from Ybarra to cancel the certificate and have the shares registered in the name of Ynchon.
(a) Does Ynchon have a cause of action to file a petition for mandamus to compel the corporation to register the 500 shares in his name in the corporation books? (2.5%)
(b) Who is liable to pay the remaining unpaid 50% balance – Ybarra or Ynchon? (2.5%)
Suggested answer only. Not an official answer and not legal advice.
(a) **Yes**, Ynchon has a cause of action for mandamus. (b) **Ynchon** is liable for the unpaid balance, without prejudice to recovering from Ybarra. Under jurisprudence, a transferee holding an endorsed stock certificate and deed of sale is
Unlock the full Commercial and Tax Law answers365 days of full access. GCash, Maya and card accepted.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
What is the nature of the corporate secretary's duty when presented with a duly endorsed stock certificate and notarized deed of sale?
The corporate secretary performs a ministerial duty in registering validly endorsed stock transfers presented with proof of tax payment.
Can a corporate secretary legally require a separate written authorization from the transferor before registering a stock transfer?
Presentation of the endorsed certificate and notarized deed of sale provides full legal authority to record the transfer.
Who is primarily liable to the corporation for the remaining unpaid subscription balance following a valid transfer of shares?
A valid transfer of subscribed shares novates the subscription contract, making the transferee liable for the unpaid balance.
Under the Revised Corporation Code, when may a corporation validly issue a certificate of stock?
Choices available with full access.
Which legal remedy is available to a transferee if the corporate secretary unlawfully refuses to register a valid transfer of stock?
Choices available with full access.
Learn more about these topics
1. Stock Transfer Mandamus
Under the Revised Corporation Code and established jurisprudence, a transferee who holds a duly endorsed certificate of stock and a notarized deed of sale possesses a clear legal right to have the transfer recorded in the corporate books. The corporate secretary performs a ministerial duty when registering valid stock transfers. Consequently, the corporate secretary cannot demand a separate written authority from the transferor as a condition for registration. When the corporate secretary refuses to perform this duty, the transferee as a real party in interest may properly file a petition for mandamus to compel stock registration.
2. Unpaid Subscription Liability
Under Philippine corporate law, a subscription to capital stock constitutes an indivisible contract. Where subscribed shares are sold prior to full payment, the transfer operates as a novation of the subscription contract, transferring the obligation to pay the remaining unpaid balance from the original subscriber to the transferee upon corporate recognition. While the corporation may refuse to issue a new certificate of stock until the full subscription price is paid, the transferee assumes financial liability for unpaid call assessments, without prejudice to any contractual recourse or reimbursement claim the transferee may have against the transferor.
3. Erroneous Stock Certificate
Under the Doctrine of Indivisibility of Subscription, no certificate of stock shall be issued to a subscriber until the full amount of the subscription, together with interest and expenses if any, has been fully paid. Where a corporation erroneously issues a covering stock certificate for partially paid shares, the certificate remains subject to the statutory lien and claim of the corporation for the unpaid balance. The transferee who acquires such shares takes them subject to the corporation's right to enforce collection of the unpaid balance before issuing an unencumbered new certificate.