G.R. No. 204089, July 29, 2015
GRACE BORGONA INSIGNE, DIOSDADO BORGONA, OSBOURNE BORGONA, IMELDA BORGONA RIVERA, AND ARISTOTLE BORGONA, Petitioners, vs. ABRA VALLEY COLLEGES, INC. AND FRANCIS BORGONA, Respondents.

FACTS

Petitioners are siblings and children of the late Pedro Borgona by his second wife. Respondent Francis Borgona is their older half-brother. Pedro was the founder, president, and majority stockholder of respondent Abra Valley Colleges, Inc. (Abra Valley). After Pedro’s death, Francis succeeded him as president. On March 26, 2002, petitioners filed a complaint in the RTC against Abra Valley, praying to be allowed to inspect corporate books and records and to be furnished financial statements. The RTC initially ruled in favor of petitioners due to Abra Valley’s failure to file a timely responsive pleading. The CA later remanded the case, ordering the RTC to admit Abra Valley’s belated answer. Petitioners amended their complaint to implead Francis and to include a cause of action for the immediate holding of an annual stockholders’ meeting. They alleged they were bona fide stockholders, attaching copies of stock certificates indorsed in their favor. In their answers, respondents asserted that petitioners were not stockholders of record because the stock certificates were not in their names and the transfers were not recorded in the corporation’s books. The RTC ordered petitioners to present stock certificates issued under their names. Petitioners complied by submitting various documents, including a Certification from the Corporate Secretary listing their shareholdings, SEC-certified documents showing issuance of shares to them, official receipts of payment, and minutes of meetings showing their attendance as stockholders. They also filed a Motion for Production/Inspection of Documents to examine Abra Valley’s Stock and Transfer Book. The RTC dismissed the complaint for failure to comply with its order, ruling the submitted documents were not stock certificates. The CA affirmed the dismissal.

ISSUE

Is the presentation of a stock certificate a condition sine qua non for proving one’s shareholding in a corporation?

RULING

No. The Supreme Court ruled that the presentation of a stock certificate is not an indispensable requirement to prove shareholding. Ownership of shares in a stock corporation is primarily evidenced by the corporation’s stock and transfer book, not by the mere possession of a stock certificate. A stock certificate is only prima facie evidence of the holder’s shareholding. The Court found that petitioners had submitted ample documentary evidence to establish their status as stockholders, including a Certification from the Corporate Secretary, SEC-certified documents, official receipts of payment, and corporate minutes listing them as stockholders and directors. The RTC and CA erred in dismissing the complaint solely for petitioners’ failure to present stock certificates in their names. The dismissal under Rule 17, Section 3 of the Rules of Court was too drastic a sanction, as petitioners had shown a clear right to inspect the corporate books based on the evidence of their shareholding. The Court also noted the RTC should have granted petitioners’ Motion for Production/Inspection of the Stock and Transfer Book, as this book is the best evidence to determine stock ownership. The decisions of the CA and RTC were reversed and set aside, and the case was remanded to the RTC for further proceedings.