GR 164588; (October, 2005) (Digest)
G.R. No. 164588 October 19, 2005
NAUTICA CANNING CORPORATION, FIRST DOMINION PRIME HOLDINGS, INC. and FERNANDO R. ARGUELLES, JR., Petitioners vs. ROBERTO C. YUMUL, Respondent.
FACTS
Nautica Canning Corporation was incorporated in 1994. Respondent Roberto Yumul was listed as a subscriber to one share. He was later appointed Chief Operating Officer and granted an option to purchase up to 15% of the stock held by the parent company, First Dominion Prime Holdings, Inc. On June 22, 1995, a Deed of Trust and Assignment was executed, assigning 14,999 shares from First Dominion to Yumul, stating the shares were held in trust for him. Yumul received a cash dividend corresponding to a 15% share. After his resignation in 1996, Yumul demanded the issuance of stock certificates for the 14,999 shares and sought to inspect corporate books. Petitioners, through Corporate Secretary Fernando Arguelles, Jr., refused, asserting Yumul was not a stockholder and held the dividend in trust. Yumul filed a petition for mandamus with the Securities and Exchange Commission (SEC) to compel registration of the Deed and recognize his stockholder rights.
ISSUE
The primary issues were: (1) Whether Yumul is a stockholder of Nautica entitled to inspection rights; and (2) Whether the Deed of Trust and Assignment is valid and can be compelled to be registered in the corporate books.
RULING
The Supreme Court partially granted the petition. It affirmed that Yumul is a stockholder of Nautica. The Court ruled that while an incorporator may hold shares nominally for another under a trust agreement, such an arrangement is binding only between the parties privy to it and not on the corporation itself at the time of incorporation. As between the corporation and its recorded subscribers, the persons appearing in the articles of incorporation and stock and transfer book are considered the stockholders. Therefore, Yumul, being a recorded subscriber to one share, is rightfully a stockholder entitled to the corresponding rights, including inspection of corporate books.
However, the Court reversed the ruling on the validity and registrability of the Deed of Trust and Assignment. It held that the issue of the Deed’s validity is essentially a civil dispute over ownership, not a purely intra-corporate matter. With the passage of the Securities Regulation Code (RA 8799), jurisdiction over such civil controversies was transferred from the SEC to the regular courts. Neither the SEC nor the Court of Appeals made a definitive finding on the Deed’s validity. Consequently, the Supreme Court refrained from ruling on its enforceability, stating that Yumul must seek resolution in the proper regional trial court. The mandamus to compel registration was therefore set aside pending a judicial determination of the Deed’s validity.