Razon vs.

IAC
GR. No. 74306, March 16, 1992
Facts:
Vicente Chuidian, the administrator of Juan Chuidians estate asked Enrique Razon
et.al, to deliver to him the certificate of stocks in E. Razon, Inc. registered in the
name of Juan Chuidian. Juan Chuidian was the father of Vicente. Razon, et.al
however alleged that all the stocks of the corporation were fully paid by defendant
Razon, and by agreement, that the all stocks were owned by Razon, and in his
possession. Razon also alleged that neither Juan nor Vicente had paid any amount
for the said stocks.
On the basis of the 1,500 shares of stock, the late Juan T. Chuidian and after him,
Enrique R., were elected as directors of E. Razon, Inc. Both of them actually served
and were paid compensation as directors of E. Razon, Inc.
From the time the certificate of stock was issued on April 1966 up to April 1971,
Enrique Razon had not questioned the ownership by Juan T. Chuidian of the shares
of stock in question and had not brought any action to have the certificate of stock
over the said shares cancelled
The certificate of stock was in the possession of defendant Razon who refused to
deliver said shares to the plaintiff, until the same was surrendered by defendant
Razon and deposited in a safety box in Philippine Bank of Commerce
Based on the facts, the subject shares of stocks were delivered by the late Chuidian
to Enrique because it was the latter who paid for all the subscription on the shares
of stock in the defendant corporation and the understanding was that he (defendant
Razon) was the owner of the said shares of stock and was to have possession
thereof until such time as he was paid therefor by the other nominal
incorporators/stockholders. (so, based sa akong sabot sa katag kaau na facts,
or ako ra ang katag, nagsabot ni cla na si Enrique R. nalang sa ang
mubayad, pero sa name ra nila, pero ang true owner jud kay c Enrique R.,
and ma own lang nila if bayaran nila ang latter). All of this was based on
oral agreement lang.
There was an earlier case about this, and has something to do with the dead mans
statute, and the admissibility of the testimony of Enrique R. about the oral
agreement he had with the late Chuidian.
According to Enrique R., the "dead man's statute" rule is not applicable to the
instant case. Moreover, the private respondent, as plaintiff in the case did not object

to his oral testimony regarding the oral agreement between him and the deceased
Juan T. Chidian that the ownership of the shares of stock was actually vested in the
petitioner unless the deceased opted to pay the same; and that the petitioner was
subjected to a rigid cross examination regarding such testimony. RTC held that
Razon was the owner, but it was overturned by CA (kay gi exclude from
evidence ang katong testimony ni Enrique). Hence, this petition.
Issues:
Whether or not the dead mans statute applies in this case.
Whether or not the testimony of Enrique R. should be excluded from
evidence.
Ruling: NO.
The dead mans statute only applies when it is filed against the administrator or its
representative upon a claim against the estate of the deceased person. It is clear,
therefore, that the testimony of the petitioner is not within the prohibition of the
rule. The case was not filed against the administrator of the estate, nor was it filed
upon claims against the estate.
Furthermore, the records show that the private respondent never objected to the
testimony of the petitioner as regards the true nature of his transaction with the
late elder Chuidian. The petitioner's testimony was subject to cross-examination by
the private respondents' counsel. Hence, granting that the petitioner's testimony is
within the prohibition of Section 20 (a), Rule 130 of the Rules of Court, the private
respondent is deemed to have waived the rule. We ruled in the case of Cruz v. Court
of Appeals (192 SCRA 209 [1990]):
"It is also settled that 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
However, the court ruled ultimately that the testimony of Enrique R. based on their
oral agreement was not sufficient to prove his ownership over the said shares of
stocks. Under the Corporation Code, for there to be an effective transfer of the
shares of stocks, there must be delivery of the duly indorsed certificate of stock. In
the instant case, there is no dispute the questioned 1,5000 shares of stock of E.
Razon, Inc. are in the name of the late Juan Chuidian in the books of the
corporation. Moreover, the records show that during his lifetime Chuidian was
elected member of the Board of Directors of the corporation which clearly shows
that he was a stockholder of the corporation. (See Section 30, Corporation Code)
From the point of view of the corporation, therefore, Chuidian was the owner of the
1,500 shares of stock. In such a case, the petitioner who claims ownership over the
questioned shares of stock must show that the same were transferred to him by

proving that all the requirements for the effective transfer of shares of stock in
accordance with the corporation's by laws, if any, were followed.
The petitioner failed in both instances. The petitioner did not present any by-laws
which could show that the 1,500 shares of stock were effectively transferred to him.
In the absence of the corporation's bylaws or rules governing effective transfer of
shares of stock, the provisions of the Corporation Law are made applicable to the
instant case.
The law is clear that 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.
(Section 35, Corporation Code) Since the certificate of stock covering the
questioned 1,5000 shares of stock registered in the name of the late Juan Chuidian
was never indorsed to the petitioner, the inevitable conclusion is that the
questioned shares of stock belong to Chuidian. The petitioner's asseveration that he
did not require an indorsement of the certificate of stock in view of his intimate
friendship with the late Juan Chuidian can not overcome the failure to follow the
procedure required by law or the proper conduct of business even among friends. To
reiterate, indorsement of the certificate of stock is a mandatory requirement of law
for an effective transfer of a certificate of stock.
Moreover, the preponderance of evidence supports the appellate court's factual
findings that the shares of stock were given to Juan T. Chuidian for value. Juan T.
Chuidian was the legal counsel who handled the legal affairs of the corporation. We
give credence to the testimony of the private respondent that the shares of stock
were given to Juan T. Chuidian in payment of his legal services to the corporation.
Petitioner Razon failed to overcome this testimony.