G.R. No. 154130 - Astorga vs. People

Case Summary (G.R. No. 154130)

Petitioner’s Allegations

Petitioner alleged that on January 8, 1980 he received, as pledgee and by endorsed delivery, 300 shares each from Guiok and Sy Lim to secure two P40,000 loans payable in six months. He alleged that upon default the contracts authorized him to foreclose and transfer the shares to his name, and he sought mandamus ordering the corporate secretary of Go Fay & Co., Inc. to register the transfers, issue new certificates in his name, and pay dividends.

Respondents’ Position and Defenses

Respondent corporation and intervenors (Guiok and the estate of Sy Lim) denied that petitioner was a shareholder or owner. They asserted that (a) the pledge contracts authorized foreclosure by public or private sale and did not effect automatic ownership transfer; (b) petitioner had not foreclosed or conducted any sale; (c) petitioner was not a real party in interest and the SEC had no jurisdiction to adjudicate ownership; and (d) defenses of redemption, lack of foreclosure formalities, pactum commissorium, and offers to compromise were pleaded.

Procedural History

Petitioner filed a Petition for Mandamus with the SEC (SEC Case No. 03894) in October 1990. A Hearing Officer dismissed the complaint for failure to prove legal basis to compel transfer. The SEC en banc affirmed (March 7, 1996), holding that mandamus requires a clear showing of ownership and that determination of disputed ownership is within regular courts. The Court of Appeals denied the petition for certiorari and dismissed the case (October 24, 1996). Petitioner brought a Rule 45 petition to the Supreme Court.

Applicable Law and Constitutional Basis

Constitutional basis: 1987 Philippine Constitution (decision rendered in 1998). Statutory and doctrinal sources relied upon in the decision: Sec. 5, PD No. 902-A (defining SEC’s original and exclusive jurisdiction over intra‑corporate controversies); Civil Code provisions invoked in the opinion—Arts. 2093, 2095 (requirements for pledge and delivery of instruments), 2102, 2103, 2105 (rights and obligations of pledgor and pledgee regarding fruits, ownership, and redelivery), 2112 (foreclosure by auction and appropriation), Article 1132 (extraordinary prescription), and jurisprudence cited in the record (Abejo v. De la Cruz; Rural Bank of Salinas; and other precedents referenced by the lower tribunals).

Issue Presented

Primary issues: (a) Whether the SEC had jurisdiction to entertain petitioner’s mandamus action; and (b) Whether petitioner had a clear legal right to a writ of mandamus directing the corporate secretary to record and issue shares in his name and to collect dividends.

Jurisdictional Principle Applied by the Court

The Court applied the rule that SEC jurisdiction over intra‑corporate controversies is governed by Sec. 5, PD 902‑A and that, generally, a tribunal’s subject‑matter jurisdiction is determined by the allegations of the complaint. If a plaintiff’s complaint demonstrates prima facie that he is a shareholder (i.e., ownership has been perfected and is not essentially in dispute), the controversy is intra‑corporate and within the SEC’s original and exclusive jurisdiction. Conversely, where the complaint itself shows that the plaintiff’s claim to ownership is not prima facie established or is negated by its own allegations, the SEC lacks jurisdiction and the regular courts must determine ownership.

Mandamus Standard Applied by the Court

The Court reiterated the principle that mandamus issues only to enforce a clearly established right and to command the performance of an imperative duty; mandamus will not be issued to establish a legal right or to determine matters that are substantially in dispute. The writ is a remedial command, not an adjudicatory vehicle to resolve contested claims of title.

Analysis of Pleadings and Why SEC Jurisdiction Was Lacking

The Court examined petitioner’s complaint and the incorporated pledge contracts. Those contracts expressly provided that, upon default, the pledgee was “authorized to foreclose the pledge … by selling the same at public or private sale” and, at his option, to transfer the shares on the corporate books only following such foreclosure and sale. The complaint conceded petitioner’s status as pledgee and did not allege that he had foreclosed or purchased the shares at any auction or sale. Because the pleadings and annexes showed that petitioner’s claimed ownership was premised on contractual authorization to foreclose rather than on an actual completed foreclosure or other established title‑transferring event, the complaint failed to present a prima facie ownership sufficient to render the controversy intra‑corporate and within the SEC’s exclusive domain.

Ownership, Foreclosure and Civil Code Provisions

Relying on Arts. 2103 and 2112 of the Civil Code, the Court emphasized that the pledgor remains owner of the pledged thing unless and until foreclosure and sale occur in accordance with law (public auction with notices and the formalities required by Art. 2112). Article 2112 contemplates sale by public auction (with prescribed notice) and only after two unsuccessful auctions may the creditor appropriate the pledged thing (with obligations to account). The contract clause permitting private sale or transfer at the pledgee’s option did not itself effect ownership transfer absent compliance with the foreclosure/sale formalities. Because petitioner made no showing that foreclosure and sale had been conducted, ownership did not pass to him.

Prescription and Extraordinary Prescription Rejected

Petitioner argued ownership by extraordinary prescription (Art. 1132) or by prescription generally. The Court held prescription of the pledgor’s right to recover the shares accrues only when the pledgor has paid the debt and demanded return; a cause of action to recover the pledged thing arises upon payment and demand. Prescription of the creditor’s action to demand payment may run earlier, but not prescription of the pledgor’s action to recover the pledge while the indebtedness subsists. Further, for acquisitive (extraordinary) prescription to ripen into ownership, possession must be in the concept of an owner; possession by a pledgee pursuant to contractual delivery is possession under a juridical title and not possession in the concept of an owner unless the juridical relation is expressly repudiated and com

Case Syllabus (G.R. No. 154130)

Procedural Posture and Disposition

Petition for Review on Certiorari under Rule 45 assailing the Court of Appeals Decision of October 24, 1996 in CA-GR SP No. 40832, which denied the petition and dismissed the case.
The Court of Appeals effectively affirmed the Securities and Exchange Commission (SEC) en banc Decision of March 7, 1996 dismissing Lim Tay’s appeal from the Hearing Officer’s August 16, 1993 Decision that had dismissed the petition for mandamus.
The Supreme Court, per Panganiban, J., rendered judgment on August 5, 1998, denying the petition and affirming the lower courts’ rulings; costs were taxed against petitioner. Davide, Jr. (Chairman), Bellosillo, Vitug, and Quisumbing, JJ., concurred.
Case citations and record references in the source: 355 Phil. 381; G.R. No. 126891; docketed materials and decisions are cited throughout the record (e.g., rollo page references and prior jurisprudence cited by the courts).

Core Legal Holdings Announced by the Supreme Court

The duty of a corporate secretary to record transfers of stocks is ministerial, but the corporate secretary cannot be compelled by mandamus where the transferee’s title to the shares lacks prima facie validity or is otherwise uncertain.
A pledgee, prior to foreclosure and sale under the law and contract, does not acquire ownership rights over the pledged shares and therefore cannot compel the corporate secretary to record the shares in his name on the basis of a mere contract of pledge.
The SEC does not acquire jurisdiction over a dispute where a party’s claim to being a shareholder is, on the face of the complaint, invalid, inadequate, or negated by the complaint’s own allegations; jurisdiction depends on whether ownership is already prima facie established.
Mandamus is not available to establish a right; it may only be issued to enforce a right that is already clearly established.

Statement of Facts (as found by the Court of Appeals and set out in the record)

On January 8, 1980, Sy Guiok secured a P40,000 loan from Lim Tay payable within six months and executed a Contract of Pledge covering 300 shares of Go Fay & Company, Inc.; interest at 10% per annum was stipulated.
On the same date, Alfonso Sy Lim likewise secured a P40,000 loan from Lim Tay payable within six months and executed a Contract of Pledge covering 300 shares of Go Fay & Company, Inc.; interest at 10% per annum was similarly stipulated.
The Contracts of Pledge contained, among other stipulations, provisions authorizing the pledgee upon default (after six months) to foreclose the pledge by selling the shares at public or private sale, with the pledgee authorized to be purchaser and, at his option, to transfer the shares on the books of the corporation to his own name and hold the certificate issued in lieu thereof; surplus proceeds, redemption, and redelivery upon payment were also addressed in the contracts.
Guiok and Sy Lim endorsed their respective certificates of stock in blank and delivered them to Lim Tay as part of the pledge arrangements.
Guiok and Sy Lim defaulted on their loans and interest.
In October 1990, Lim Tay filed a Petition for Mandamus with the SEC (SEC Case No. 03894) seeking an order directing the corporate secretary of Go Fay & Co., Inc. to register transfers and issue new certificates in favor of Lim Tay and to pay unclaimed dividends to him.
The respondent corporation asserted as affirmative defenses that the complaint stated no cause of action, that Lim Tay was not a stockholder, and that a pledge did not automatically vest ownership in the pledgee.
Alfonso Sy Lim died during the proceedings; Guiok and the intestate estate of Alfonso Sy Lim (represented by Conchita Lim) intervened, denying that foreclosure and sale had been effected and asserting that no foreclosure sale (public or private) or compliance with chattel mortgage formalities had occurred.
Intervenors alleged they had offered to settle and redeem but that Lim Tay refused validly to accept payment; they also raised defenses including lack of SEC jurisdiction, lack of real party in interest, and allegations that any appropriation without lawful formality would amount to pactum commissorium and be void.

Administrative and Appellate Proceedings Below

SEC Hearing Officer Rolando C. Malabonga promulgated an August 16, 1993 Decision dismissing the complaint for mandamus on grounds that the SEC, although having jurisdiction over intra-corporate disputes, could not compel the corporate secretary absent a legal basis showing he must register the transfers in Lim Tay’s favor.
On appeal by Lim Tay, the SEC en banc, in a March 7, 1996 Decision, dismissed the appeal: it found that mandamus will issue only upon a clear showing of ownership over the assailed shares and determination of ownership was within the jurisdiction of the regular courts rather than the SEC under the facts presented.
The Court of Appeals (Fifth Division) affirmed the SEC’s dismissal on October 24, 1996, denying the petition and dismissing Lim Tay’s action; it held that mandamus will not issue where the petitioner failed to establish a clear and legal right and where ownership of the shares was in dispute or uncertain.

Issues Presented to the Supreme Court (Assignments of Error / Questions Framed)

Whether the Securities and Exchange Commission had jurisdiction over the complaint filed by Lim Tay.
Whether Lim Tay was entitled to the writ of mandamus against respondent Go Fay & Co., Inc.
Secondary contentions raised by petitioner: claims that ownership had been acquired by "extraordinary prescription" (Article 1132 Civil Code), by respondents’ subsequent acts amounting to novation, by dacion en pago (deemed sale extinguishing the loans), and that respondents were barred by laches from recovering the shares.

Jurisdictional Analysis and Governing Statute (SEC Jurisdiction)

The Court applied Section 5 of Presidential Decree No. 902-A delineating SEC’s original and exclusive jurisdiction over intra-corporate controversies among stockholders, and over controversies arising out of intra-corporate relations, subject to the caveat that jurisdiction depends on whether the issue requires the SEC’s technical expertise and whether ownership is prima facie established.
The Court emphasized the general rule that subject matter jurisdiction is determined by the allegations in the complaint, but noted an exception when the complaint’s own allegations negate the tribunal’s jurisdiction by showing the absence of a prima facie claim (i.e., whe