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De Los Santos, et al.

vs McGrath, US Attorney General

SUMMARY: De Los Santos allegedly bought shares of Lepanto from Campos and Hess. War broke out,
and he claimed such shares from the Custodian after liberation. However, his claim was denied, as the
certificates were in the name of Madrigal, a trustee for the benefit of the Mitsuis, a Japanese
corporation. The Court found an insufficiency of evidence in favor of de los Santos that such valid sales
were effected to his benefit. However, even assuming they took place, the Court ruled that such did not
vest title upon de los Santos merely because he held certificates of stock; such certificates are non-
negotiable instruments, and are thus only valid between parties to a transfer if not recorded in the
books of the corporation. In the record, such stocks were still in the name of Madrigal, as trustee for the
Mitsuis, who had not on record disposed of any such shares. As a consequence, de los Santos cannot
claim to be the valid owner of the shares based on an unrecorded transfer.


 De los Santos bought 500,000 shares of Lepanto Consolidated Mining, Co. (Lepanto) from Juan
Campos in Manila
- He bought 300,000 shares from Carl Hess
- He bought 800,000 more from Hess, for the account and benefit of Astraquillo
 A vesting order (P-12) was issued, vesting title to the 1,600,000 shares in the Alien Property
Custodian of the US (Custodian) as Japanese property
- Plaintiffs filed their respective claims with the Custodian
- Vested Property Claims Committee made a determination allowing said claims
 Upon personal review, the Philippine Alien Property Administrator (Administrator) reversed the
determination and decreed that title to the shares shall remain in the name of the Administrator
- Defendant US Attorney General is the successor of the Administrator

ISSUE: W/N plaintiffs had validly purchased the stock – NO

1. Defendant: prior to the outbreak of the war in the Pacific, the shares were bought by Vicente
Madrigal, in trust for, and for the benefit of, the Mitsui Bussan Kaisha (Mitsuis), a Japanese
a. Madrigal delivered the stock certificates with his blank indorsement to the Mitsuis, which
kept the certificates until the liberation of Manila by the American Forces
b. The Mitsuis had never disposed of the shares, and the stock certificates must have been
stolen or looted during the emergency from the liberation

2. Court: The only evidence on the alleged sale of the shares to the plaintiffs is the testimony of de
los Santos, claiming to be the sole owner.
a. Campos and Hess, the alleged vendors, died during the war and liberation; their deaths
seriously impair the weight of plaintiff’s testimony.
b. A receipt representing a sale of some shares on behalf of Astraquillo to a certain Atty.
DeWitt was allegedly lost in a house fire while it was in the holder’s wallet which he forgot
to bring with him on that fateful day.
c. As a consequence, the Court was deprived of all means to check with reasonable certainty
the truth of any controverted portions of de los Santos’ testimony.

3. Even if Campos and Hess did sell, the result would be the same.
a. The shares of stock were registered, in the records of Lepanto, in the name of Madrigal, who
was a mere trustee for the benefit of the Mitsuis.
b. The record show that Madrigal had never disposed of the shares.
c. Rule: while a share of stock may be transferred by an endorsement of the certificate,
coupled with its delivery, it shall not be valid, except as between the parties, until it is
entered into the books of the corporation.
d. Since no such entry in the name of the plaintiffs was made, the alleged transfer was not
valid, except between themselves; it does not bind either Madrigal or the Mitsuis, not being
parties to the transfer.
e. Certificates of stock, under Philippine law, or not negotiable instruments; a transferee under
a forged assignment acquires no title against the true owner, unless the latter’s own
negligence estops him.

4. In any case, at the time of the alleged sales, plaintiffs were aware of sufficient facts to put them
on notice of the need of inquiring into the regularity of the transaction.
a. The certificates were in the name of Madrigal. The alleged sellers were not the registered
b. Being presumed to know the law as experienced stock traders, plaintiffs must have been
conscious of such infirmities in title.
c. The sales were admittedly hostile to the Japanese, who had prohibited it, and plaintiffs had
actual knowledge of such facts; they therefore assumed those risks, and cannot now claim
against the registered stockholder as purchasers in good faith.

DISPOSITIVE: Petition denied.