LIM TAY, PETITIONER

V.
COURT OF APPEALS, GO FAY AND CO. INC., SY GUIOK
ALFONSO LIM, RESPONDENTS

AND THE

ESTATE

OF

GR no. 126891 August 5, 1998

Panganiban, J.

SV: Guiok and Lim pledged their shares of stock with GO Fay and co as security for the loans they
obtained from Lim Tay. It was agreed upon that if the 2 defaulted, Lim Tay can foreclose the pledge and
sell the shares through public or private sale. They both failed to pay. Instead of selling the shares, Lim
Tay filed a petition for Mandamus before the SEC praying for an order that the corp. sec of Go Fay be
directed to register the transfer and issue new shares in his name.
SC: SEC has no jurisdiction since the ownership of the shares is still at issue. Lim Tay as pledgee did
not automatically become the owners of the shares. It was clear that there must be a foreclosure sale
If the 2 defaulted which he did not conduct. His possession of the certificates also did not ripen into
ownership since his possession was not as an owner but as a mere pledgee.

1. Sy Guiok and Alfonso Lim both secured a loan in the amount of 40,000 each from Lim
Tay, payable in 6 months. To secure these loans, both executed a contract of pledge,
Sy Guiok pledged 300 shares of stock in the Go Fay and Co. while Lim pledged 300
shares of stock of the same company.
2. In the agreement, there was a stipulation that if the 2 defaulted in their obligation,
Lim Tay may foreclose the pledge and sell the shares of stock at a public or private
sale.
3. The 2 endorsed their respective shares of stock in blank and delivered them to Lim
tay
4. Guiok and Lim failed to pay which prompted Lim Tay to file a petition for mandamus
against Go Fay and co. praying for an order directing the corp. sec. of Go Fay to
register the stock transfers and issue new certificates in favor of Lim Tay.
a. The company answered saying that there is no state of action against them
and that Lim Tay is not a stockholder, hence no intracorporate relationship.
b. Guiok and the intestate estate of Alfonso Lim (he died) answered by saying
that there was no public or private auction of the stocks hence the company
should not be forced to transfer the shares. One of their defenses is that the
Commission has no jurisdiction over the case.
5. SEC hearing officer dismissed the complaint ruling that although they had
jurisdiction, Lim Tay failed to prove the legal basis for the secretary to be compelled
to register the transfer and issue new stocks. SEC dismissed his appeal ruling it had
no jurisdiction since the ownership of the stocks is the issue in his complaint and no
cause of action since ownership of the shares has not been established yet.
6. CA agreed with the SEC.
7. Hence this petition for review on Certiorari
ISSUES
1. WON SEC had jurisdiction. NO

If the ownership of the shares is not clearly established and is still unresolved at the
time mandamus is filed, the jurisdiction lies with the regular courts
Lim tay was merely authorized to foreclose the pledge upon maturity of the loans,
not to own them. Foreclosure is not automatic, it must be done in a public or private
sale. Being a mere pledgee does not entitle him ownership over the shares.

2. WON petition for mandamus should be granted. NO

in order that a writ of mandamus may issue it is essential that the person petitioning
for the same has a clear legal right to the thing demanded and that it is the
imperative duty of the respondent to perform the act required
at the time the action was filed Lim tay does not have any ownership rights over the
shares. Mandamus will not issue to establish a legal right but only to enforce one that
is already clearly established
pursuant to the agreement, Lim Tay can foreclose the pledged shares in case the 2
defaulted but there is no showing that he made any attempt to foreclose or sell the
shares through public or private auction.
He was arguing that the shares became his because of prescription. The court does
not agree, the period for prescription will only begin at the time the 2 have already
paid their loans and can demand the return of the certificates. In this case, the loan
still exists, prescription should not begin to run on the action to demand the return of
the thing pledged.
He was also arguing that pursuant to article 1132 of civil code, which provides that
the ownership of movables prescribes through uninterrupted possession for 4 years
in good faith, he became the owner of the shares. The court does not agree and ruled
that possession should be in the concept of an owner, in this case he was in
possession fo the certificates as pledgee. His possession can never ripen into
ownership by prescription
There was also no novation of the contract which led him to acquiring the shares. The
delivery of the certificates and his receipt of the dividends from the certificates were
all pursuant to rules on pledge. And Guiok and Lim have not yet instituted an action
to recover the certificates because the loans still subsist. Novation is not presumed
No Dacion en pago, this is a kind of novation of the original contract. Absence an
explicit agreement, Lim Tay cannot presume Dacion en Pago.

Petition DENIED. CA decision AFFIRMED

Justin Benedict A. Moreto