ENRIQUE RAZON v. IAC and VICENTE CHUIDIAN [Administrator of Juan Chuidian's estate] + CHUIDIAN v. IAC, RAZON, and E.

RAZON, INC. 1992 / Gutierrez, Jr. / Relative incompetencies > Dead Man's Statute The main issue in these consolidated petitions is the ownership of 1,500 shares of stock in E. Razon, Inc. covered by Stock Certificate No. 003 issued on April 23, 1966 and registered under the name of Juan Chuidian. FACTS 1962 - Enrique Razon organized E. Razon, Inc. (Purpose: bidding for arrastre services in South Harbor, MLA) 1966 - Stock Certificate No. 003 for 1,500 shares of stock of E. Razon was issued in Juan Chuidian's name. Juan and Vicente Chuidian were elected as E. Razon's, Inc. directors and they were compensated as such. From 1966 to 1971, Enrique Razon had not questioned Juan Chuidian's ownership of the shares, nor did Enrique bring any action to have the certificate of stock over the shares cancelled. On the possession of the certificate of stock Vicente Chuidian's allegation: The certificate of stock was in the possession of Enrique Razon, who refused to deliver the shares to Vicente Chuidian, until the same was surrendered by Enrique Razon and deposited in a Philippine Bank of Commerce safety box. IMPORTANT: THIS WAS THE ORAL TESTIMONY OF ENRIQUE RAZON WHICH WAS EXCLUDED BY IAC o The stock certificate was personally delivered by Juan Chuidian to the corporate secretary of Atty. De Leon [an associate of the Chuidian Law Office). The delivery was made because it was Enrique who paid for all the subscription on the shares. The agreement was that Enrique Razon was the owner of the shares and he would have possession thereof until such time that he was paid therefor by the other nominal incorporators or stockholders. o Since then, Enrique Razon was in possession of the stock certificate. By agreement of the parties, it was delivered for deposit with the bank under the joint custody of the parties. Vicente Chuidian filed a complaint against Razon, E. Razon, Inc., et al. These were included in his prayer: An order to have the defendants deliver stock certificate representing Juan Chuidian's share in E. Razon's Inc. Issuance of an order restraining the defendants from disposing of said shares Issuance of a writ of preliminary attachment against defendants properties having possession of the shares Receivership of the properties of E. Razon's Inc. The defendants, in their answer alleged the following: All shares of stock in the name of stockholders of record were fully paid by Razon Saids shares are subject to the agreement between the defendants and incorporators The shares were actually owned by and remained in the possession of Razon Neither Juan nor his son Vicente paid any amount for the shares in question The Razons allege that after organizing the corporation, Enrique Razon distributed shares previously placed in the names of the withdrawing nominal incorporators to some friends, including Juan Chuidian. CFI - Enrique Razon owns the shares of stock. IAC - Juan Chuidian (deceased father of Vicente Chuidian) owns the shares of stock. The dead man's statute rule is applicable in this case o IAC excluded Enrique Razon's testimony (see above) IAC rulings on the parties' respective MRs o Razon's MR (asking for reversal of IAC decision) DENIED o Chuidian's MR (asking for delivery of all cash and stock dividends and all the pre-emptive rights accruing to the 1,500 shares of stock) DENIED. Razon says that contrary to IAC's ruling, the dead man's statute is NOT applicable. Chuidian did not object to his oral testimony regarding the oral agreement between him and Juan Chuidian that the ownership of the shares of stock was actually vested in Razon, unless Juan opted to pay the same Razon was subjected to a rigid cross examination regarding such testimony

ISSUES & HOLDING WON Razon's testimony is within the prohibition of the dead man's statute. NO. The case was not filed against the administrator of the estate, nor was it filed upon claims against the estate. [The case was filed by the administrator Vicente Chuidian to recover the shares of stock.] Therefore, Razon's testimony is ADMISSIBLE. WON Razon's oral testimony as regards the true nature of his agreement with the late Juan Chuidian is sufficient to prove his ownership over the said 1,500 shares of stock. NO. Who is the owner of the shares of stock? Juan Chuidian. He gets the cash and stock dividends plus preemptive rights (as prayed for in the MR at IAC). EVIDENCE-RELATED: THE DEAD MAN'S STATUTE Section 20(a) Rule 130 of the Rules of Court Sec. 20. Disqualification by reason of interest or relationship The following persons cannot testify as to matters in which they are interested directly or indirectly, as herein enumerated. (a) Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an executor or administrator or other representative of a deceased person, or against a person of unsound mind, upon a claim or demand against the estate of such deceased person or against such person of unsound mind, cannot testify as to any matter of fact accruing before the death of such deceased person or before such person became of unsound mind. Section 23, Rule 130, of the Revised Rules on Evidence SEC. 23. Disqualification by reason of death or insanity of adverse party. Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an executor or administrator or other representative of a deceased person, or against a person of unsound mind, upon a claim or demand against the estate of such deceased person or against such person of unsound mind, cannot testify as to any matter of fact occurring before the death of such deceased person or before such person became of unsound mind.(20a) Purpose of the rule If persons having a claim against the estate of the deceased or his properties were allowed to testify as to the supposed statements made by him (deceased person), many would be tempted to falsely impute statements to deceased persons as the latter can no longer deny or refute them, thus unjustly subjecting their properties or rights to false or unscrupulous claims or demands. The purpose of the law is to guard against the temptation to give false testimony in regard to the transaction in question on the part of the surviving party. When the rule is applicable It is applicable to a case against the administrator or its representative of an estate upon a claim against the estate of the deceased person. In this case The case was filed by the administrator Vicente Chuidian to recover shares allegedly owned by Juan Chuidian. Remember that the IAC excluded Enrique Razon's testimony. Chuidian never objected to Razon's testimony. Razon's testimony was subject to cross-examination by Vicente Chuidian's counsel. Granting that Razon's testimony is within the prohibition of the dead man's statute, Chuidian is deemed to have waived the rule. o Cruz v. CA - The court cannot disregard evidence which would ordinarily be incompetent under the rules but has been rendered admissible by the failure of a party to object thereto o Marella v. Reyes- Once admitted, the testimony is in the case for what it is worth and the judge has no power to disregard it for the sole reason that it could have been excluded, if it had been objected to, nor to strike it out on its own motion THE MAIN CASE (RE: OWNERSHIP OF THE SHARES OF STOCK) Relevant rules re: transfer of shares of stock Embassy Farms, Inc. v. Court of Appeals o 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 [BP 68, Sec. 3 (Corporation Code)] o However, no transfer shall be valid, except as between the parties until the transfer is properly recorded in the books of the corporation [Corporation Code, Sec. 63; Corporation Law, Sec. 35]

IN THIS CASE, from the point of view of the corporation, Chuidian was the owner of the shares of stock The shares are in Juan Chuidian's name in the corporation's books During his lifetime, Chuidian was elected as a board of directors member, which shows that he was a stockholder of E. Razon What the petitioner who claims ownership over the questioned shares of stock [Razon] must prove All the requirements for the effective transfer of shares of stock in accordance with the corporation's by laws, if any, were followed or The transfer was made in accordance with the provisions of law [Corporation Law] o 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 [Corp. Code, Sec. 35] IN THIS CASE, Razon failed in both instances Razon did not present any by-laws which could show that the 1,500 shares of stock were effectively transferred to him. Since the stock certificate was never indorsed to Razon, the conclusion is that the shares belong to Chuidian. o Razon's asseveration that he did not require an indorsement of the certificate of stock in view of his intimate friendship with Juan cannot overcome the failure to follow the procedure required by law or the proper conduct of business even among friends. The preponderance of evidence supports the appellate court's factual findings that the shares of stock were given to Juan Chuidian for value. Juan Chuidian was the legal counsel who handled the legal affairs of the corporation. The Supreme Court gave credence to Vicente's testimony that the shares of stock were given to Juan Chuidian in payment of his legal services. Re: Dividends and pre-emptive rights Chuidian finally gets what he wants, since the cash and stock dividends and all the pre-emptive rights are all incidents of stock ownership. These are the rights of stockholders: To have a certificate or other evidence of his status as stockholder issued to him To vote at meetings of the corporation To receive his proportionate share of the profits of the corporation To participate proportionately in the distribution of the corporate assets upon the dissolution or winding up DISPOSITION -- CHUIDIAN WINS. In Razon v. IAC - Petition DISMISSED; CA AFFIRMED In Chuidian v. IAC - Petition GRANTED; CA REVERSED & SET ASIDE o Modification: All cash and stock dividends as, well as all pre-emptive rights that have accrued and attached to the 1,500 shares in E. Razon, Inc., since 1966 are declared to belong to the estate of Juan Chuidian