140.

Torres vs. CA
FACTS:
Judge Manuel Torres, Jr. owns about 81% of the capital stocks of Tormil Realty &
Development Corporation (TRDC). TRDC is a small family owned corporation and other
stockholders thereof include Judge Torres’ nieces and nephews. However, even though
Judge Torres owns the majority of TRDC and was also the president thereof, he is only
entitled to one vote among the 9-seat Board of Directors, hence, his vote can be easily
overridden by minority stockholders. So in 1987, before the regular election of TRDC
officers, Judge Torres assigned one share (qualifying share) each to 5 “outsiders” for the
purpose of qualifying them to be elected as directors in the board and thereby
strengthen Judge Torres’ power over other family members.
However, the said assignment of shares were not recorded by the corporate secretary,
Ma. Christina Carlos (niece) in the stock and transfer book of TRDC. When the validity of
said assignments were questioned, Judge Torres ratiocinated that it is impractical for
him to order Carlos to make the entries because Carlos is one of his opposition. So what
Judge Torres did was to make the entries himself because he was keeping the stock
and transfer book. He further ratiocinated that he can do what a mere secretary can do
because in the first place, he is the president.
Since the other family members were against the inclusion of the five outsiders, they
refused to take part in the election. Judge Torres and his five assignees then decided to
conduct the election among themselves considering that the 6 of them constitute a
quorum.

ISSUE: Whether or not the entries made in the stock and transfer book on March 8,
1987 by respondent Torres of an alleged transfer of nominal shares to Pabalan and Co.
cannot therefore be given any valid effect?

RULING:
No.
In the absence of (any) provision to the contrary, the corporate secretary is the custodian
of corporate records. Corollarily, he keeps the stock and transfer book and makes proper
and necessary entries therein.
Contrary to the generally accepted corporate practice, the stock and transfer book of
TORMIL was not kept by Ms. Maria Cristina T. Carlos, the corporate secretary but by
respondent Torres, the President and Chairman of the Board of Directors of TORMIL. In
contravention to the above cited provision, the stock and transfer book was not kept at
the principal office of the corporation either but at the place of respondent Torres.
These being the obtaining circumstances, any entries made in the stock and transfer
book on March 8, 1987 by respondent Torres of an alleged transfer of nominal shares to
Pabalan and Co. cannot therefore be given any valid effect. Where the entries made are
not valid, Pabalan and Co. cannot therefore be considered stockholders of record of
TORMIL. Because they are not stockholders, they cannot therefore be elected as
directors of TORMIL. To rule otherwise would not only encourage violation of clear
mandate of Sec. 74 of the Corporation Code that stock and transfer book shall be kept in
the principal office of the corporation but would likewise open the flood gates of
confusion in the corporation as to who has the proper custody of the stock and transfer
book and who are the real stockholders of records of a certain corporation as any holder
of the stock and transfer book, though not the corporate secretary, at pleasure would
make entries therein.