201 Razon v IAC AUTHOR: De Leon

[G.R. No. DATE] G.R. No. 74306 March 16, 1992

TOPIC: Manner and Effectivity of Transfer
PONENTE: GUTIERREZ, JR., J.
FACTS:
Vicente Chuidian (administrator of the estate of his deceased father) filed a complaint for the delivery of the
certificates of stocks representing the 1,500 share holdings of his deceased father, Juan Chuidian, in the E. Razon,
Inc. (organized for the purpose of bidding for the arrastre services in South Harbor, Manila). In the answer, Razon
alleged that he owned the shares and the same remained in his possession. It was alleged that the late Juan Chuidan
did not pay any amount whatsoever for the 1,500 shares in question.

CHUIDIAN’s EVIDENCE: On April 23, 1966, stock certificate No. 003 for 1,5000 shares of stock of defendant
corporation was issued in the name of Juan Chuidian (Juan). Razon had not questioned (not until the demand was
made) Juan’s ownership of the shares and had not brought any action to have the certificate of stock over the said
shares cancelled.

RAZON’s EVIDENCE (In the answer and in his oral Testimony): After organizing E. Razon, Inc., Razon distributed
shares, previously placed in the names of the withdrawing nominal incorporators, to some friends including Juan.
The shares of stock were registered in the name of Juan only as nominal stockholder and with the agreement that
the said shares were owned and held by the Razon (as he was the one who paid for all the subscription). Juan was
given the option to buy the same but did not do so.

CFI (RTC) declared that Enrique Razon is the owner of the said shares. IAC (CA) reversed and ruled that Juan
Chuidian is the owner.

ISSUE(S): W/N Enrique Razon is the Owner of stocks

HELD:No

RATIO: In the case of Embassy Farms, Inc. v. Court of Appeals:

As provided under Section 3 of Corporation Code of the Philippines, shares of stock may be
transferred by delivery to the transferee of the certificate properly indorsed. Title may be vested in
the transferee by the delivery of the duly indorsed certificate of stock. However, no transfer shall be
valid, except as between the parties until the transfer is properly recorded in the books of the
corporation (Sec. 63, Corporation Code of the Philippines; Section 35 of the Corporation Law)

There is no dispute that the questioned 1,500 shares of stock of E. Razon, Inc. are in the name of the late Juan
Chuidian in the books of the corporation. The records show that during his lifetime Chuidian was ellected member
of the Board of Directors of the corporation which clearly shows that he was a stockholder of the corporation. From
the point of view of the corporation, therefore, Chuidian was the owner of the 1,500 shares of stock.

 The petitioner (Razon) who claims ownership over the questioned shares of stock must show that the same
were transferred to him by proving that all the requirements for the effective transfer of shares of stock in
accordance with the corporation's by laws, if any, were followed or in accordance with the provisions of law.
 The petitioner did not present any by-laws which could show that the 1,500 shares of stock were effectively
transferred to him. In the absence of the corporation's by-laws or rules governing effective transfer of
shares of stock, the provisions of the Corporation Law are made applicable to the instant case.
 The law is clear that in order for a transfer of stock certificate to be effective, the certificate must be
properly indorsed and that title to such certificate of stock is vested in the transferee by the delivery of
the duly indorsed certificate of stock. (Section 35, Corporation Code)
 Since the certificate of stock covering the questioned 1,500 shares of stock registered in the name of the late
Juan Chuidian was never indorsed to the petitioner, the inevitable conclusion is that the questioned shares
of stock belong to Chuidian.
 The petitioner's contention that he did not require an indorsement of the certificate of stock in view of his
 intimate friendship with the late Juan Chuidian can not overcome the failure to follow the procedure
required by law or the proper conduct of business even among friends.

Moreover, the preponderance of evidence supports the appellate court's factual findings that the shares of stock
were given to Juan T. Chuidian for value. Juan T. Chuidian was the legal counsel who handled the legal affairs of the
corporation. We give credence to the testimony of the private respondent that the shares of stock were given to
Juan T. Chuidian in payment of his legal services to the corporation. Petitioner Razon failed to overcome this
testimony.

CASE LAW/ DOCTRINE:

DISSENTING/CONCURRING OPINION(S):