Monserrat v. Ceron (GR 37078, 27 September 1933) Facts: et!t!oner, Monserrat, "as pres!#ent an# mana$er o% t&e Man!

!'a (e''o" )a*!cab Compan+ ,nc., an# t&e o"ner o% 1,200 common s&ares o% stoc- o% t&e compan+. .e ass!$ne# t&e /s/%r/ct (r!$&t !n a propert+ o"ne# b+ anot&er %or a '!m!te# t!me or /nt!' #eat&) o% &a'% o% &!s common s&ares o% stoc- to Car'os Ceron (#e%en#ant). )&e ass!$nment !nc'/#e# t&e r!$&t to en0o+ t&e pro%!ts %rom t&e s&ares, pro&!b!t!n$ Ceron %rom se''!n$, mort$a$!n$, enc/mber!n$, or e*erc!s!n$ an+ act !mp'+!n$ abso'/te o"ners&!p. Ceron mort$a$e# some o% t&e s&ares o% stoc- o% Man!'a (e''o" )a*!cab, !nc'/#!n$ t&e 100 common s&ares ass!$ne# to &!m b+ Monserrat to 2#/ar#o Mat/te, res!#ent to 2rma, ,nc as pa+ment o% &!s #ebt. Mat/te "as not !n%orme# o% t&e #oc/ment t&at conta!ne# Ceron3s r!$&ts an# pro&!b!t!ons "!t& re$ar# to t&e 100 common s&ares o% stoc- %rom Monserrat. *Original case did not mention how the case was instituted in the CFI. )&e CF, Man!'a ren#ere# 0/#$ment !n %avor o% t&e p'a!nt!%% #ec'ar!n$ t&e p'a!nt!%% t&e o"ner o% t&e 100 s&ares o% stoc-4 an# #ec'ar!n$ t&e mort$a$e const!t/te# on t&e o"ners&!p o% t&e s&ares o% stoc- n/'' an# vo!# an# "!t&o/t %orce an# e%%ect, a't&o/$& t&e mort$a$e on t&e /s/%r/ct en0o+e# b+ t&e mort$a$e #ebtor Ceron !n t&e sa!# 100 s&ares o% stoc- !s &ereb+ #ec'are# va'!#4 "!t& costs a$a!nst t&e #e%en#ants. 2rma ,nc. an# t&e S&er!%% o% Man!'a, t&e #e%en#ants t&ere!n, appea'e# %rom t&e #ec!s!on. ,ss/e 5 R/'!n$: 6&et&er !t !s necessar+ to enter /pon t&e boo-s o% t&e corporat!on a mort$a$e const!t/te# on common s&ares o% stoc- !n or#er t&at s/c& mort$a$e ma+ be va'!# an# ma+ &ave %orce an# e%%ect as a$a!nst t&!r# persons. o Sect!on 37 o% t&e Corporat!on 8a" prov!#es t&e %o''o"!n$: )&e cap!ta' stoc- o% stoc- corporat!ons s&a'' be #!v!#e# !nto s&ares %or "&!c& cert!%!cates s!$ne# b+ t&e pres!#ent or t&e v!ce9pres!#ent, co/nter s!$ne# b+ t&e secretar+ or c'er- an# sea'e# "!t& t&e sea' o% t&e corporat!on, s&a'' be !ss/e# !n accor#ance "!t& t&e b+9'a"s. S&ares o% stoc- so !ss/e# are persona' propert+ an# ma+ be trans%erre# b+ #e'!ver+ o% t&e cert!%!cate !n#orse# b+ t&e o"ner or &!s attorne+ !n %act or ot&er person 'e$a''+ a/t&or!:e# to ma-e t&e trans%er. ;o trans%er, &o"ever, s&a'' be va'!#, e*cept as bet"een t&e part!es, /nt!' t&e trans%er !s entere# an# note# /pon t&e boo-s o% t&e corporat!on so as to s&o" t&e names o% t&e part!es to t&e transact!on, t&e #ate o% t&e trans%er t&e n/mber o% t&e cert!%!cate, an# t&e n/mber o% s&ares trans%erre#. o Sect!on 37 o% t&e Corporat!on 8a" #oes not re</!re an+ entr+ e*cept o% trans%ers o% s&ares o% stoc- !n or#er t&at s/c& trans%ers ma+ be va'!# as a$a!nst t&!r# persons. o )&e "or# trans%er !s #e%!ne# b+ t&e =>!cc!onar!o #e 'a ?ca#em!a #e 'a 8en$/a Caste''ana= as t&e act an# e%%ect o% trans%err!n$4 an# t&e verb as to ass!$n or "a!ve t&e r!$&t !n, or abso'/te o"ners&!p o%, a t&!n$ !n %avor o% anot&er, ma-!n$ &!m t&e o"ner t&ereo%. o Sect!on 3 o% ?ct ;o. 1708, as amen#e# b+ ?ct ;o. 2@91, #e%!nes t&e

p&rase (c&atte' mort$a$e) as: a con#!t!ona' sa'e o% persona' propert+ as sec/r!t+ %or t&e pa+ment o% a #ebtA t&e con#!t!on be!n$ t&at t&e sa'e s&a'' be avo!#e# /pon t&e se''er pa+!n$ to t&e p/rc&aser a s/m o% mone+ or #o!n$ some ot&er act name#. ,% t&e con#!t!on !s per%orme# accor#!n$ to !ts terms t&e mort$a$e an# sa'e !mme#!ate'+ become vo!#, an# t&e mort$a$e !s &ereb+ #!veste# o% &!s t!t'e. o )&e c&atte' mort$a$e !s not t&e trans%er re%erre# to !n sect!on 37 o% ?ct ;o. 1@79 common'+ -no"n as t&e Corporat!on 'a", "&!c& trans%er s&o/'# be entere# an# note# /pon t&e boo-s o% a corporat!on !n or#er to be va'!#, an# "&!c&, means t&e abso'/te an# /ncon#!t!ona' conve+ance o% t&e t!t'e an# o"ners&!p o% a s&are o% stoc-. o ,nasm/c& as a c&atte' mort$a$e o% t&e a%oresa!# t!t'e !s not a comp'ete an# abso'/te a'!enat!on o% t&e #om!n!on an# o"ners&!p t&ereo%, !ts entr+ an# notat!on /pon t&e boo-s o% t&e corporat!on !s not necessar+ re</!s!te to !ts va'!#!t+. 6&et&er or not t&e #e%en#ant ent!t+, 2rma, ,nc., &a# -no"'e#$e o% t&e #oc/ment t&at states t&at t&e trans%er o% t&e 100 s&ares o% common stoc-s %rom Monseratt to Ceron "as on'+ %or t&e /s/%r/ct o% t&e s&ares, an# t&at Ceron bo/n# &!mse'% not to a'!enate nor enc/mber t&em. o )&e ev!#ence s&o"s t&at "&en Mat/te "ent to t&e o%%!ce o% t&e Man!'a (e''o" )a*!cab Co., ,nc., to e*am!ne t&e Stoc- an# )rans%er Boo- o% t&e sa!# corporat!on, %or t&e p/rpose o% ascerta!n!n$ t&e act/a' stat/s o% Car'os G. CeronCs s&ares o% stoc-, Mat/te %o/n# not&!n$ b/t t&at t&e s&ares !n </est!on "ere recor#e# t&ere!n !n t&e name o% sa!# Car'os G. Ceron, %ree %rom a'' '!ens an# enc/mbrances. o )&e notat!on o% '!ens an# enc/mbrances "as p'ace# t&ere on'+ on Ma+ 7, 1931, t&e same #ate on "&!c& t&e 100 common s&ares "ere to &ave been so'# at p/b'!c a/ct!on, !n v!e" o% Car'os G. CeronCs #e%a/'t !n t&e pa+ment o% t&e 'oan sec/re# b+ t&em. o )&ere%ore, #e%en#ant ent!t+ 2rma, ,nc. as con#!t!ona' p/rc&aser o% t&e 100 s&ares o% stoc-, ac</!re#, !n $oo# %a!t&, Ceron3s r!$&t an# t!t'e to t&e s&ares o% stoc-. SC &o'#s t&at: s!nce sect!on 37 o% t&e Corporat!on 8a" #oes not re</!re t&e notat!on /pon t&e boo-s o% a corporat!on o% transact!ons re'at!n$ to !ts s&ares, e*cept t&e trans%er o% possess!on an# o"ners&!p t&ereo%, as a necessar+ re</!s!te to t&e va'!#!t+ o% s/c& trans%er, t&e notat!on /pon t&e a%oresa!# boo-s o% t&e corporat!on, o% a c&atte' mort$a$e const!t/te# on t&e s&ares o% stoc- !n </est!on !s not necessar+ to !ts va'!#!t+.