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Uson v. Diosomito et al.


1) Diosomito, who owned 75 shares (of the North Electric Co., Inc.,), sold
said shares to Barcelon and delivered to the latter the corresponding stock

2) Uson sued Diosomito for a debt and that upon institution of said action an
attachment was duly issued and levied upon 75 shares (of the North Electric Co.,
Inc.,) which stood in Diosomito name on the books of the company when the
attachment was levied.

3) Barcelon only presented the certificates for registration 9 months after the
attachment had been levied.

4) Subsequently, Uson obtained judgment against the defendant Diosomito.

5) To satisfy said judgment, the sheriff sold said shares at public auction.

6) The plaintiff Toribia Uson was the highest bidder and said shares were
adjudicated to her. (See Exhibit K.)

7) In the present action, H. P. L. Jollye claims to be the owner of said 75

shares of the North Electric Co., Inc., and presents a certificate of stock issued to
him by the company on February 13, 1933.

ISSUE: Whether a bona fide transfer of the shares of a corporation, not

registered or noted on the book,; of the corporation, is valid as against a
subsequent lawful attachment of said shares, regardless of whether the attaching
creditor had actual notice of said transfer or not?

HELD: The transfer of the 75 shares in the North Electric Company.

Inc., made by the defendant Diosomito to the defendant Barcelon was not valid
as to the plaintiff-appellee, Toribia Uson, on January 18, 1932, the date on which
she obtained her attachment lien on said shares of stock which still stood in the
name of Diosomito, on the books of the corporation.

The right of the owner of the shares of stock of a Philippine corporation to

transfer the same by delivery of the certificate, whether it be regarded as
statutory or common law right, is limited and restricted by the express provision
"no transfer, however, shall be valid, except as between the parties, until the transfer is
entered and noted upon the books of the corporation."
Therefore, an attachment lien prevails over a prior unregistered bona fide
stock transfer.
Santa Maria v. HSBC (1951)
1) The certificate of stock in question was made out in the name of Woo,Uy-
Tioco & Naftaly (a stock brokerage firm) duly indorsed in blank by him and
delivered to Mrs. Santamaria for valuable consideration paid by the latter.
(Batangas Mineral shares)

2) Mrs. Santamaria delivered it, as it was, to R.J. Campos & Co. (another
brokerage firm) to comply with the latter's requirement that she deposit
something on account if she wanted to, buy shares of another corporation (with
the understanding that said certificate would be returned to her upon payment of
the 10,000 Crown Mines, Inc. shares).

3) C thereafter delivered to HSBC the said certificate duly indorsed to said

bank pursuant to a letter of hypothecation as modified by resolution in the
Minutes of Sept. 13, 1951, executed by C in favor of said bank. The said
certificate was delivered to the bank in the ordinary course of business, together
with many other securities, and at the time it was delivered the bank had no
knowledge that the shares represented by the certificate belonged to Mrs.
Santamaria for it was in the form of a street certificate transferable by mere

4) 2 days later- Mrs. Santamaria went to R. J. Campos & Co., Inc. to pay for
her order of 10,000 Crown Mines shares and to get back the said Certificate but
the manager informed her that R. J. Campos & Co., Inc. was no longer allowed
to transact business due to a prohibition order from the Securities and Exchange
Commission. She was also informed that her Stock certificate was in the
possession of HSBC.

5) Mrs. Santamaria sues HSBC for the recovery of said certificate.

HELD: Mrs. Santamaria is estopped from claiming further title to or

interest therein as against HSBC (a bona fide pledgee or transferee

Mrs. Santamaria could have asked the corporation that had issued said
certificate to cancel it and issue another in lieu thereof in her name to apprise the
holder that she was the owner of said certificate. This she failed to do, and
instead she delivered said certificate to R.J. Campos & Co. indorsed in blank,
thereby clothing the latter with apparent title to the shares represented by said
certificate including apparent authority to negotiate it. This was the proximate
cause of the damage suffered by her. She is, therefore, estopped from claiming
further title to or interest therein as against a bona fide pledgee or transferee

RATIO: A bona fide pledgee or transferee of a stock from the apparent

owner is not chargeable with knowledge of the limitations placed on it by the real
owner, or of any secret agreement relating to the use which might be made of the
stock by the holder (12 Fletcher, Corporations, section 5562, p. 521). "Where one
of two innocent parties must suffer by reason. of a wrongful or unauthorized act,
the loss must fall on the one who first trusted the wrongdoer and put in his hands
the means of inflicting such loss".

Delos Santos v. Atty. Gen. (1955)

If the transfer of a certificate indorsed in blank is made by a finder or a
thief, no title passes even to a bona fide purchaser.

(the stock certificate was indorsed by Madrigal)

(the books of the C was w/ the Govt)

(Sir: not because you have possession of the shares does this mean that you
have ownership of the shares).
1) This action involves the title to 1,600,000 shares of stock of the Lepanto
Consolidated Mining Co.

2) Originally, ½ of said shares of stock were claimed by plaintiff, Apolinario de

los Santos, and the other half, by his co-plaintiff Isabelo Astraquillo.

3) During the pendency of this case, the latter has allegedly conveyed and
assigned his interest in and to said half claimed by him to the former.

4) The shares of stock in question are covered by several stock certificates

issued in favor of Vicente Madrigal, who is registered in the books of the Lepanto
as owner of said stocks and whose indorsement in blank appears on the back of
said certificates, all of which are in plaintiffs' possession.

5) The said certificates, sometime in 1945 or 1946, lost under the conditions
set forth in subsequent pages.

6) Plaintiffs’ Version:

De los Santos bought 500,000 shares from Juan Campos, in Manila, early
in December 1942; that he bought 300,000 shares from Carl Hess, in the
same city, several days later; and that, before Christmas of 1942, be
bought 800,000 shares from Carl Hess, this time for the account and
benefit of Astraquillo.

7) Both alleged vendors (Campos and Hess) are already dead.

8) Plaintiffs instituted the present action to establish title to the

aforementioned shares of stock.
HELD 1: 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 showsand 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 of 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 indorsed 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.

"No shares of stock against which the corporation holds any unpaid claim shall
be transferable on the books of the corporation." (Italics supplied.)

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 came is "not valid," or, in the words of the Supreme Court of Wisconsin
(Re Murphy, 51 Wise. 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 nonnegotiable,
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.


1) Gonzalo H. Co Toco was the owner of 5,894 shares of the capital stock of
the said corporation represented by nine certificates.

2) Gonzalo H. Co Toco, a resident of Manila, mortgaged said 5,894 shares to

Chua Chiu to guarantee the payment of a debt

3) The said certificates of stock were delivered with the mortgage to the
mortgagee, Chua Chiu.

4) The said mortgage was duly registered in the office of the register of
deeds of Manila on June 23, 1931, and in the office of the said corporation on
September 30, 1931.

5) Subsequently, Chua Chiu assigned all his right and interest in said
mortgage to the plaintiff and the assignment was registered in the office of the
register of deeds in the City of Manila on December 28, 1931, and in the office of
the said corporation on January 4, 1932.

6) The debtor, Gonzalo H. Co Toco, having defaulted in the payment of said

debt at maturity, the plaintiff foreclosed said mortgage and delivered the
certificates of stock and copies of the mortgage and assignment to the sheriff in
order to sell the said shares at public auction.

7) The sheriff auctioned said 5,894 shares of stock on December 22, 1932,
and the plaintiff having been the highest bidder for the sum of P14,390, the
sheriff executed in his favor a certificate of sale of said shares.

8) The plaintiff tendered the certificates of stock standing in the name of

Gonzalo H. Co Toco to the proper officers of the corporation for cancellation and
demanded that they issue new certificates in the name of the plaintiff.

9) The said officers (the individual defendants) refused and still refuse to
issue said new shares in the name of the plaintiff.

10) The prayer is that a writ of mandamus be issued requiring the defendants
to transfer the said 5,894 shares of stock to the plaintiff by cancelling the old
certificates and issuing new ones in their stead.

11) C Defense:

that the defendants refuse to cancel the said certificates standing in the
name of Gonzalo H. Co Toco on the books .of the corporation and to issue new
ones in the name of the plaintiff because prior to the date when the plaintiff made
his demand, to wit, February 4, 1933, nine attachments had been issued and
served and noted on the books of the corporation against the shares of Gonzalo
H. Co Toco and the plaintiff objected to having these attachments noted on the
new certificates which he demanded.

12) It will be noted that the first eight of the said writs of attachment were
served on the corporation and noted on its records before the corporation
received notice from the mortgagee Chua Chiu of the mortgage of said shares
dated June 18, 1931.

13) No question is raised as to the validity of said mortgage or of said writs of

attachment and the sole question presented for decision is whether the said
mortgage takes priority over the said writs of attachment.


ISSUE: Did the registration of said chattel mortgage in the registry of chattel
mortgages in the office of the register of deeds of Manila, under date of July 23,
1931, give constructive notice to the said attaching creditors?

HELD: The attaching creditors are entitled to priority over the

defectively registered mortgage of the appellant

RATIO: The property in the shares maybe deemed to be situated in the

province in which the corporation has its principal office or place of business. If
this province is also the province of the owner's domicile, a single registration is
sufficient. If not, the chattel mortgage should be registered both at the owner's
domicile and in the province where the corporation has its principal office or
place of business. In this sense the property mortgaged is not the certificate but
the participation and share of the owner in the assets of the corporation.