LEE E. WON alias RAMON LEE, plaintiff-appellant, vs.

WACK WACK GOLF and COUNTRY CLUB, INC., defendant-appellee

(G.R. No. L-10122; August 30, 1958)
FACTS: The defendant corporation issued membership certificate no. 201 to
Iwao Teruyama which on April 1944, was assigned to MT Reyes and on the
same year assigned to herein plaintiff-appellant. On April 26, 1955, the plaintiff
filed an action against the defendant alleging that shortly after its rehabilitation
after the war, plaintiff asked that the assignment be registered in the books of
the defendant and that the latter refused and still refuses to do so unlawfully.

Defendant filed a motion to dismiss on the ground that 11 years have elapsed
from the time of the assignment upto the time of the filing of the complaint,
beyond the 5 year period provided under Art. 1149 of the Civil Code. The trial
court dismissed the action and denied reconsideration.

ISSUE: WON plaintiff was bound to present and register the certificate assigned
to him within any definite or fixed period?

HELD: No. The defendant has not made herein any pretense to that effect; but
it contends that from the moment the certificate was assigned to the plaintiff,
the latter's right to have the assignment registered commenced to exist. This
contention is correct, but it would not follow that said right should be
exercised immediately or within a definite period. The existence of a
right is one thing, and the duration of said right is another.
On the other hand, it is stated in the appealed order of dismissal that the plaintiff
sought to register the assignment on April 13, 1955; whereas in plaintiff's brief it
is alleged that it was only in February, 1955, when the defendant refused to
recognize the plaintiff. If, as already observed, there is no fixed period for
registering an assignment , how can the complaint be considered as already
barred by the Statute of Limitations when it was filed on April 26, 1955, or barely
a few days (according to the lower court) and two months (according to the
plaintiff), after the demand for registration and its denial by the defendant.
Plaintiff's right was violated only sometime in 1955, and it could not accordingly
have asserted any cause of action against the defendant before that.

The defendant seems to believe that the plaintiff was compelled immediately to
register his assignment. Any such compulsion is obviously for the benefit of the
plaintiff, because it is only after registration that the transfer would be binding
against the defendant. But we are not here concerned with a situation where the
plaintiff claims anything against the defendant allegedly accruing under the
outstanding certificate in question between the date of the assignment to the
plaintiff and the date of the latter’s demand for registration and issuance of a
new certificate.
APOLINARIO G. DE LOS SANTOS and ISABELO ASTRAQUILLO, plaintiffs-
appellees,
vs.
J. HOWARD MCGRATH ATTORNEY GENERAL OF THE UNITED STATES,
SUCCESSOR TO THE PHILIPPINE ALIEN PROPERTY ADMINISTRATION OF THE
UNITED STATES, defendant-appellant.
REPUBLIC OF THE PHILIPPINES, intervenor-appellant (G.R.
No. L-4818; February 28, 1955)
FACTS: Plaintiff delos Santos alleges that he purchased 55,000 shares of
Lepanto Consolidated Mining Co., Inc. from Juan Campos, and later 200,000
shares from Carl Hess and much later 800,000 still from Hess (for the account
and benefit of Astraquillo). Both of the supposed vendors, now deceased.

By virtue of vesting order P-12, title to the 1,600,000 shares in dispute was,
however, vested in the Alien Property Custodian of the US. In due course, the
Vested Property Claims Committee of the Philippine Alien Property
Administration made a ―determination‖ allowing said claims, which were
considered and hear jointly. But upon personal review of the Philippine Alien
Property Administrator, the ―determination‖ was reversed and decreed that
―title to the shares in question shall remain in the name of the Philippine Alien
Property Administrator‖.

Consequently, plaintiffs instituted the present action to establish title to the

aforementioned shares of stock.

Defendant Attorney General of the US contends that the shares were bought by
Vicente Madrigal, in trust and for the benefit, of the Mistsui Bussan, abranch
office of a Japanese company; and that Madrigal endorsed in blank and
delivered the shares to Mistsui for safe keeping; that Mitsui never sold or
otherwise disposed of the said shares; and that the stock certificates must have
been stolen or looted during the emergency from the liberation.

ISSUE: WON plaintiffs are the rightful owners of the shares?

HELD: No. Even, however, if Juan Campos and Carl Hess had sold the shares
of stock in question, as testified to by De los Santos, the result, insofar as
plaintiffs are concerned, would be the same. It is not disputed that said shares
of stock were registered, in the records of the Lepanto, in the name of Vicente
Madrigal. Neither is it denied that the latter was, as regards said shares of
stock, a mere trustee for the benefit of the Mitsuis. The record shows — and
there is no evidence to the contrary — that Madrigal had never disposed of said
shares of stock in any manner whatsoever, except by turning over the
corresponding stock certificates, late in 1941, to the Mitsuis, the beneficial and
true owners thereof. It has, moreover, been established, by the uncontradicted
testimony of Kitajima and Miwa, the managers of the Mitsuis in the Philippines,
 from 1941 to 1945, that the Mitsuis had neither sold, conveyed, or alienated
said shares of stock, nor delivered the aforementioned stock certificates, to
anybody during said period. Section 35 of the Corporation Law reads:

The capital stock corporations shall be divided into shares for which
certificates signed by the president or the vice-president, countersigned by
the secretary or clerk and sealed with the seal of the corporation, shall be
issued in accordance with the by-laws. Shares of stock so issued are personal
property and may be transferred by delivery of the certificate endorsed by the
owner or his attorney in fact or other person legally authorized to make the
transfer. No transfer, however, shall be valid, except as between the
parties, until the transfer is entered and noted upon the books of the
corporation so as to show the names of the parties to the transaction, the
date of the transfer, the number of the certificate, and the number of shares
transferred.

Pursuant to this provision, a share of stock may be transferred by

endorsement of the corresponding stock certificate, coupled with its
delivery. However, the transfer shall "not be valid, except as between
the parties," until it is "entered and noted upon the books of the
corporation." no such entry in the name of the plaintiffs herein having been
made, it follows that the transfer allegedly effected by Juan Campos and Carl
Hess in their favor is "not valid, except as between" themselves. It does not bind
either Madrigal or the Mitsuis, who are not parties to said alleged transaction.
What is more, the same is "not valid," or, in the words of the Supreme Court of
Wisconsin (Re Murphy, 51 Wisc. 519, 8 N. W. 419) — which were quoted
approval in Uson vs. Diosomito (61 Phil., 535) — "absolutely void" and, hence, as
good as non-existent, insofar as Madrigal and the Mitsuis are concerned. For this
reason, although a stock certificate is sometimes regarded as quasi-
negotiable, in the sense that it may be transferred by endorsement,
coupled with delivery, it is well settled that the instrument is non-
negotiable, because the holder thereof takes it without prejudice to
such rights or defenses as the registered owner or creditor may have
under the law, except insofar as such rights or defenses are subject to
the limitations imposed by the principles governing estoppel.

Certificates of stock are not negotiable instruments (post, Par. 102),

consequently, a transferee under a forged assignment acquires no title which
can be asserted against the true owner, unless his own negligence has been
such as to create an estoppel against him (Clarke on Corporations, Sec. Ed. p.
415). If the owner of the certificate has endorsed it in blank, and it is stolen
from him, no title is acquired by an innocent purchaser for value (East
Birmingham Land Co. vs. Dennis, 85 Ala. 565, 2 L.R.A. 836; Sherwood vs.
mining co., 50 Calif. 412).
 In the case at bar, neither madrigal nor the Mitsuis had alienated shares of
stock in question. It is not even claimed that either had, through negligence,
given — occasion for an improper or irregular disposition of the corresponding
stock certificates.

FUA CUN (alias Tua Cun), plaintiff-appellee, vs.

RICARDO SUMMERS, in his capacity as Sheriff ex-oficio of the City of Manila,
and the CHINA BANKING CORPORATION, defendants-appellants (G.R. No. L-
19441; March 27, 1923)
FACTS: Chua Soco subscribed to 500 shares of defendant Bank paying 50% of
the subscription price and a corresponding receipt being issued therefor. Such
shares were mortgaged to plaintiff Fua Cun to secure a loan evidenced by a
promissory note, together with the receipt, which was endorsed and delivered to
plaintiff mortgagee. Plaintiff informed the manager of the Bank about the
transaction but was told to await action by the BOD In the meantime, Chua Soco
became indebted to the bank, and in the action for recovery of money, his 500
shares were attached.

Fua Cun thereupon instituted the present action maintaining that the payment of
50% of the subscription entitled Chua Soco to 250 shares and prayed that his
lien on the shares by virtue of the chattel mortgage be declared to have priority
over the claim of defendant Bank.

The trial court rendered judgment in favor of plaintiff.

ISSUE: (1) WON Chua Soco became entitled to 250 shares or the proportionate
share to his partial payment? (2) WON plaintiff had a superior claim over that of
the Bank?

HELD: (1) No. (2) Yes. Though the court below erred in holding that Chua Soco,
by paying one-half of the subscription price of five hundred shares, in effect
became the owner of two hundred and fifty shares, the judgment appealed from
is in the main correct.

The claim of the defendant Banking Corporation upon which it brought the action
in which the writ of attachment was issued, was for the non -payment of drafts
accepted by Chua Soco and had no direct connection with the shares of stock in
question. At common law a corporation has no lien upon the shares of
stockholders for any indebtedness to the corporation (Jones on Liens, 3d ed.,
sec. 375) and our attention has not been called to any statute creating such lien
here. On the contrary, section 120 of the Corporation Act provides that "no bank
organized under this Act shall make any loan or discount on the security of the
shares of its own capital stock, nor be the purchaser or holder of any such
shares, unless such security or purchase shall be necessary to prevent loss upon
a debt previously contracted in good faith, and stock so purchased or acquired
shall, within six months from the time of its purchase, be sold or disposed of at
public or private sale, or, in default thereof, a receiver may be appointed to close
up the business of the bank in accordance with law."

There can be no doubt that an equity in shares of stock may be assigned and
that the assignment is valid as between the parties and as to persons to whom
notice is brought home. Such an assignment exists here, though it was made for
the purpose of securing a debt. The endorsement to the plaintiff of the receipt
above mentioned reads:

For value received, I assign all my rights in these shares in favor of Mr. Tua
Cun.

Manila, P. I., May 18, 1921.

(Sgd.) CHUA SOCO

This endorsement was accompanied by the delivery of the receipt to the plaintiff
and further strengthened by the execution of the chattel mortgage, which
mortgage, at least, operated as a conditional equitable assignment.

As against the rights of the plaintiff the defendant bank had, as we have seen,
no lien unless by virtue of the attachment. But the attachment was levied after
the bank had received notice of the assignment of Chua Soco's interests to the
plaintiff and was therefore subject to the rights of the latter. It follows that as
against these rights the defendant bank holds no lien whatever.

As we have already stated, the court erred in holding the plaintiff as the owner
of two hundred and fifty shares of stock; "the plaintiff's rights consist in an
equity in five hundred shares and upon payment of the unpaid portion of the
subscription price he becomes entitled to the issuance of certificate for said five
hundred shares in his favor."

The judgment appealed from is modified accordingly, and in all other respects it
is affirmed, with the costs against the appellants Banking Corporation. So
ordered.

MIGUEL VELASCO, assignee of The Philippine Chemical Product Co.

(Ltd.), plaintiff-appellant,
vs.
JEAN M. POIZAT, defendant-appellee
(G.R. No. L-11528; March 15, 1918)
FACTS: Defendant Jean M. Poizat subscribed to 20 shares of stock of The
Philippine Chemical Product Co., of which 5 were paid. In an action instituted by
Miguel Velasco as assignee of the company, he seeks to recover the balance of
the subscription. The CFI rendered a judgment dismissing the complaint.
Hence, this appeal.
ISSUE: WON defendant is liable for the balance?

HELD: Yes. We think that Poizat is liable upon this subscription. A stock
subscription is a contract between the corporation on one side, and the
subscriber on the other, and courts will enforce it for or against either. It is a
rule, accepted by the Supreme Court of the United States, that a subscription
for shares of stock does not require an express promise to pay the
amount subscribed, as the law implies a promise to pay on the part of
the subscriber. (7 Ruling Case Law, sec. 191.) Section 36 of the Corporation
Law clearly recognizes that a stock subscription is subsisting liability from the
time the subscription is made, since it requires the subscriber to pay interest
quarterly from that date unless he is relieved from such liability by the by-laws
of the corporation. The subscriber is as much bound to pay the amount
of the share subscribed by him as he would be to pay any other debt,
and the right of the company to demand payment is no less
incontestable.

The provisions of the Corporation Law (Act No. 1459) has given recognition of
two remedies for the enforcement of stock subscriptions. The first and most
special remedy given by the statute consists in permitting the
corporation to put up the unpaid stock for sale and dispose of it for
the account of the delinquent subscriber. In this case the provisions of
section 38 to 48, inclusive of the Corporation Law are applicable and must be
followed. The other remedy is by action in court, concerning which we find
in section 49 the following provision:

―Nothing in this Act shall prevent the directors from collecting, by action in
any court of proper jurisdiction, the amount due on any unpaid subscription,
together with accrued interest and costs and expenses incurred.‖