Corporate Law Case Digest: Tan V.

SEC
(1992)
G.R. No. 95696 March 3, 1992
Lessons Applicable:

 Nature of Certificate of Stock (Corporate Law)

 Rights to Certificate of Stock for Fully Paid Shares (Corporate Law)

FACTS:
 October 1, 1979: Visayan Educational Supply Corp.
 As incorporator, Alfonso S. Tan had 400 shares of the capital stock at the par value of P100/share,
evidenced by Certificate of Stock No. 2
 elected as President until 1982
 Board of Directors as director until April 19, 1983
 January 31, 1981: incorporators Antonia Y. Young and Teresita Y. Ong, withdrew by assigning to the
corp. their shares, represented by certificate of stock No. 4 and 5, they were paid 40% corporate stock-in-
trade
 Certificate of stock No. 2 was cancelled by the corporate secretary and Patricia Aguilar by virtue of
Resolution No. 1981 which was passed and approved while he was still a member of the BOD
 Due to the withdrawal of the 2 incorporators and in order to complete the membership of the 5 directors of
the board, he sold 50 shares out of his 400 shares of capital stock to his brother Angel S. Tan
 Another incorporator, Alfredo B. Uy, also sold 50 of his 400 shares of capital stock to Teodora S. Tan
 March 27, 1981: Angel Tan was elected director and on March 27, 1981
 Certificate of Stock No. 2 was cancelled and the Certificates Nos. 6 in the name of Angel S. Tan and 8 in
the name of Alfonso S. Tan, Mr. Buzon were issued and delivered (stock split), signed by the newly
elected fifth member of the Board, Angel S. Tan as VP, upon instruction of Alfonso S. Tan who was then
the president
 Alfonso S. Tan was given back Stock Certificate No. 2 for him to endorse and he deliberately withheld it
for reasons of his own - so as if no delivery
 Certificate of Stock No. 8 was delivered to Tan Su Ching
 January 29, 1983: Tan Su Ching was elected as President, Tan as VP but did not sign the minutes
 February 27, 1983: dislodged from his position as president, he withdrew from the corporation paid with
stock-in-trade corresponding to 33.3% par value of P35,000.00
 April 19, 1983: Board meeting cancelled Stock Certificate Nos. 2 and 8 and minutes submitted to SEC
 December 3, 1983: Alfonso S. Tan filed the SEC case questioning for the first time, the cancellation
of Stock Certificates Nos. 2 and 8
 No transfer, however, shall be valid, except as between the parties, until the transfer is recorded to 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 or certificates and the number of shares transferred.
 SEC. 63. Certificate of stock and transfer of shares. — The capital stock and stock and corporations shall
be divided into shares for which certificates signed by the president and vice president, countersigned by
the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in
accordance with the by-laws. Shares of stocks so issued are personal property and may be transferred by
delivery of the certificate or certificates 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 recorded in 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 or certificates and the number of shares
transferred.
No shares of stocks against which the corporation holds any unpaid claim shall be transferable in the
books of the corporations.
 SEC: held cancellation of the shares of stock - void
 SEC en banc: overturned - nullity of the sale of 350 shares represented under stock certification No. 8,
pursuant to the "in pari delicto" doctrine.
ISSUE: W/N transfer is valid w/o delivery

HELD: YES. Affirmed.

 Alfonso S. Tan devised the scheme of not returning the cancelled Stock Certificate No. 2 which was
returned to him for his endorsement, to skim off the largesse of the corporation as shown by the trading of
his Stock Certificate No. 8 for goods of the corporation valued at P2M when the par value of the same was
only worth P35K
 He also used this scheme to renege on his indebtedness to respondent Tan Su Ching in the amount of P1
million
 valid transfer even if no delivery
 certificate of stock is not a negotiable instrument
 Although it is sometimes regarded as quasi-negotiable, in the sense that it may be transferred by
endorsement, coupled with delivery, it is well-settled that it is non-negotiable, because the holder thereof
takes it without prejudice to such rights or defenses as the registered owner/s or transferror's creditor may
have under the law, except insofar as such rights or defenses are subject to the limitations imposed by the
principles governing estoppel.
 negotiable instrument
 either indorsement + delivery or delivery = holder in due course = better right than real owner
 certificate of stock = owner better right
 transfer
 valid between parties
 recorded in the books - to bind others including the corporation
 NOTE: Although there are 4 types of transactions, only transfer is recorded in the stocks and transfer
books.
 paper representative or tangible evidence of the stock itself and of the various interests therein
 not necessary to render one a stockholder in corporation
 since stocks were already cancelled and reported to the respondent Commission, there was no necessity to
endorse
 All the acts required for the transferee to exercise its rights over the acquired stocks were attendant and
even the corporation was protected from other parties, considering that said transfer was earlier recorded
or registered in the corporate stock and transfer book
*Rights to Certificate of Stock for Fully Paid Shares? What is the doctrine? Have to check.
Corporate Law Case Digest: De Los Santos V.
Republic (1955)
G.R. No. L-4818 February 28, 1955
Lessons Applicable: Nature of Certificate of Stock (Corporate Law)

FACTS:
 600,000 shares of stock of the Lepanto Consolidated Mining Co., Inc., (Lepanto), a corporation duly
organized and existing under the laws of the Philippines
 Originally, 1/2 shares of stock were claimed by Apolinario de los Santos, and the other half by Isabelo
Astraquillo. During the pendency of this case, the Astraquillo has allegedly conveyed and assigned his
interest in and to de los Santos.
 Vicente Madrigal 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
 contend that De los Santos bought:
 55,000 shares from Juan Campos
 300,000 shares from Carl Hess
 800,000 shares from Carl Hess for the benefit of Astraquillo
 delivered to stock broker Leonardo Recio stock certificate No. 2279 55,000 shares to see Mr. DeWitt,
who, probably, would be interested in purchasing the shares
 DeWitt retained the shares reasoning that it was blocked by the US and receipt was burned at Recio's
dwelling
 By virtue of vesting P-12, dated February 18, 1945, title to the 1,600,000 shares of stock in dispute was,
however, vested in the Alien Property Custodian of the U. S.
 Plaintiffs filed their respective claims with the Property Custodian
 Defendant Attorney General of the U. S., successor to the Administrator contends, substantially, that, prior
to the outbreak of the war in the Pacific, shares of stock were bought by Vicente Madrigal, in trust for, and
for the benefit of, the Mitsui Bussan Kaisha a corporation organized in accordance with the laws of Japan,
the true owner thereof, with branch office in the Philippines
 March, 1942: Madrigal delivered stock certificates, with his blank indorsement thereon, to the Mitsuis,
which kept said certificates, in the files of its office in Manila, until the liberation of the latter by the
American forces early in 1945; that the Mitsuis had never sold, or otherwise disposed of, said shares of
stock; and that the stock certificates aforementioned must have been stolen or looted, therefore, during the
emergency resulting from said liberation.
 CFI: favored plaintiffs
 Defendants Appealed
 Hess, during that period, operate as broker, for being American, he was under Japanese surveillance, and
that Hess had made, during the occupation, no transaction involving mining shares, except when he sold
12,000 shares of the Benguet Consolidated, inherited from his mother, sometime in 1943.
ISSUE: W/N the plaintiffs are entitled to the shares

HELD: NO. REVERSED

 burden of proof is upon the plaintiffs
 Section 35 of the Corporation Law reads:
The capital 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 endorsed 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. (Emphasis supplied.)
 Certificates of stock are not negotiable instruments (post, Par. 102), consequently, a transferee under a
forged assignment acquires no title which can be asserted against the true owner, unless his own
negligence has been such as to create an estoppel against him (Clarke on Corporations, Sec. Ed. p. 415). If
the owner of the certificate has endorsed it in blank, and it is stolen from him, no title is acquired by an
innocent purchaser for value
 Neither the absence of blame on the part of the officers of the company in allowing an unauthorized
transfer of stock, nor the good faith of the purchaser of stolen property, will avail as an answer to the
demand of the true owner
 The doctrine that a bona fide purchaser of shares under a forged or unauthorized transfer acquires no title
as against the true owner does not apply where the circumstances are such as to estop the latter from
asserting his title. . . .
 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
 negligence which will work an estoppel of this kind must be a proximate cause of the purchase or
advancement of money by the holder of the property, and must enter into the transaction itself
 the negligence must be in or immediately connected with the transfer itself
 to establish this estoppel it must appear that the true owner had conferred upon the person who has
diverted the security the indicia of ownership, or an apparent title or authority to transfer the title
 So the owner is not guilty of negligence in merely entrusting another with the possession of his certificate
of stock, if he does not, by assignment or otherwise, clothe him with the apparent title.
 Nor is he deprived of his title or his remedy against the corporation because he intrusts a third person with
the key of a box in which the certificate are kept, where the latter takes them from the box and by forging
the owner's name to a power of attorney procures their transfer on the corporate books.
 Nor is the mere indorsement of an assignment and power of attorney in blank on a certificate of stock,
which is afterwards lost or stolen, such negligence as will estop the owner from asserting his title
as against a bona fide purchaser from the finder or thief, or from holding the corporation liable for
allowing a transfer on its books, where the loss or theft of the certificate was not due to any negligence on
the part of the owner
 stock pledged to a bank is endorsed in blank by the owner does not estop him from asserting title thereto
as against a bona fide purchaser for value who derives his title from one who stole the certificate from the
pledgee. And this has also been held to be true though the thief was an officer of the pledgee, since his act
in wrongfully appropriating the certificate cannot be regarded as a misappropriation by the bank to whose
custody the certificate was intrusted by the owner, even though the bank may be liable to the pledgor
 Hence, as the undisputed principal or beneficiary of the registered owner (Madrigal), the Mitsuis may
claim his rights, which cannot be exercised by the plaintiffs, not only because their alleged title is
not derived either from madrigal or from the Mitsuis, but, also, because it is in derogation, of said rights.
madrigal and the Mitsuis are notprivies to the alleged sales by Campos and Hess to the plaintiffs, contrary
to the latter's pretense.
Ponce vs. Alsons Cement Corporation
[GR 139802, 10 December 2002]

Facts: On 25 January 1996, Vicente C. Ponce, filed a complaint with the SEC for mandamus and
damages against Alsons Cement Corporation and its corporate secretary Francisco M. Giron, Jr. In
his complaint, Ponce alleged, among others, that "the late Fausto G. Gaid was an incorporator of
Victory Cement Corporation (VCC), having subscribed to and fully paid 239,500 shares of said
corporation; that on 8 February 1968, Ponce and Fausto Gaid executed a "Deed of Undertaking" and
"Indorsement" whereby the latter acknowledges that the former is the owner of said shares and he
was therefore assigning/endorsing the same to Ponce; that on 10 April 1968, VCC was renamed Floro
Cement Corporation (FCC); that on 22 October 1990, FCC was renamed Alsons Cement Corporation
(ACC); that from the time of incorporation of VCC up to the present, no certificates of stock
corresponding to the 239,500 subscribed and fully paid shares of Gaid were issued in the name of
Fausto G. Gaid and/or Ponce; and that despite repeated demands, ACC and Giron refused and
continue to refuse without any justifiable reason to issue to Ponce the certificates of stocks
corresponding to the 239,500 shares of Gaid, in violation of Ponce's right to secure the corresponding
certificate of stock in his name. ACC and Giron moved to dismiss. SEC Hearing Officer Enrique L.
Flores, Jr. granted the motion to dismiss in an Order dated 29 February 1996. Ponce appealed the
Order of dismissal.

On 6 January 1997, the Commission En Banc reversed the appealed Order and directed the Hearing
Officer to proceed with the case. In ruling that a transfer or assignment of stocks need not be registered
first before it can take cognizance of the case to enforce Ponce's rights as a stockholder, the
Commission En Banc cited the Supreme Court's ruling in Abejo vs. De la Cruz, 149 SCRA 654 (1987).
Their motion for reconsideration having been denied, ACC and Giron appealed the decision of the
SEC En Banc and the resolution denying their motion for reconsideration to the Court of Appeals. In
its decision, the Court of Appeals held that in the absence of any allegation that the transfer of the
shares between Gaid and Ponce was registered in the stock and transfer book of ACC, Ponce failed
to state a cause of action. Thus, said the appellate court, "the complaint for mandamus should be
dismissed for failure to state a cause of action." Ponce's motion for reconsideration was denied in a
resolution dated 10 August 1999. Ponce filed the petition for review on certiorari.

Issue: Whether Ponce can require the corporate secretary, Giron, to register Gaid’s shares in his
name.

Held: Fausto Gaid was an original subscriber of ACC's 239,500 shares. From the Amended Articles
of Incorporation approved on 9 April 1995, each share had a par value of P1.00 per share. Ponce had
not made a previous request upon the corporate secretary of ACC, Francisco M. Giron Jr., to record
the alleged transfer of stocks. Pursuant to Section 63 of the Corporation Code, a transfer of shares of
stock not recorded in the stock and transfer book of the corporation is non-existent as far as the
corporation is concerned. As between the corporation on the one hand, and its shareholders and third
persons on the other, the corporation looks only to its books for the purpose of determining who its
shareholders are. It is only when the transfer has been recorded in the stock and transfer book that a
corporation may rightfully regard the transferee as one of its stockholders. From this time, the
consequent obligation on the part of the corporation to recognize such rights as it is mandated by law
to recognize arises. Hence, without such recording, the transferee may not be regarded by the
corporation as one among its stockholders and the corporation may legally refuse the issuance of
stock certificates in the name of the transferee even when there has been compliance with the
requirements of Section 64 of the Corporation Code. The stock and transfer book is the basis for
ascertaining the persons entitled to the rights and subject to the liabilities of a stockholder. Where a
transferee is not yet recognized as a stockholder, the corporation is under no specific legal duty to
issue stock certificates in the transferee's name. A petition for mandamus fails to state a cause of
action where it appears that the petitioner is not the registered stockholder and there is no allegation
that he holds any power of attorney from the registered stockholder, from whom he obtained the stocks,
to make the transfer. The deed of undertaking with indorsement presented by Ponce does not
establish, on its face, his right to demand for the registration of the transfer and the issuance of
certificates of stocks. Under the provisions of our statute touching the transfer of stock, the mere
indorsement of stock certificates does not in itself give to the indorsee such a right to have a transfer
of the shares of stock on the books of the company as will entitle him to the writ of mandamus to
compel the company and its officers to make such transfer at his demand, because, under such
circumstances the duty, the legal obligation, is not so clear and indisputable as to justify the issuance
of the writ. As a general rule, as between the corporation on the one hand, and its shareholders and
third persons on the other, the corporation looks only to its books for the purpose of determining who
its shareholders are, so that a mere indorsee of a stock certificate, claiming to be the owner, will not
necessarily be recognized as such by the corporation and its officers, in the absence of express
instructions of the registered owner to make such transfer to the indorsee, or a power of attorney
authorizing such transfer. Thus, absent an allegation that the transfer of shares is recorded in the stock
and transfer book of ACC, there appears no basis for a clear and indisputable duty or clear legal
obligation that can be imposed upon the corporate secretary, so as to justify the issuance of the writ
of mandamus to compel him to perform the transfer of the shares to Ponce.
Corporate Law Case Digest: Makati Sports
Club Inc V. Cecile Cheng (2010)
G.R. No. 178523 June 16, 2010
Lessons Applicable: Certificate of stock = merely tangible evidence of stock(Corporate Law)

FACTS:
 October 20, 1994: Makati Sports Club Inc (MSCI) BOD adopted a resolution authorizing the
sale of 19 unissued shares at a floor price of P400,000 and P450,000 per share for Class A
and B, respectively.
 Cheng was a Treasurer and Director of Makati Sports Club in 1995
 July 7, 1995: Hodreal expressed his interest to buy a share, for this purpose he sent the letter
requesting to be wait listed
 November 1995: McFoods acquiried shares of Makati Sports Club at P1,800,000 through
Urban Bank
 December 15, 1995: Stock cert. was issued to McFoods
 December 27, 1995: McFoods advised its offer to resell
 November 24, 1995: Hodreal paid McFoods P1,400,000
 December 27, 1995: Hodreal again paid P1,400,000
 February 7, 1996: Cheng advised sale by McFoods to Hodreal of the share evidenced by a
certificate
 new certificate was issued
 1997: investigation showed that Cheng profited from the transaction because of her
knowledge
 MSCI sought judgment that would order respondents to pay the sum of P1,000,000.00,
representing the amount allegedly defrauded, together with interest and damages
 CA affirmed RTC: dismissed
ISSUE: W/N MSCI was defrauded by Cheng's collaboration with Mc Foods

HELD: NO. petition is DENIED

 no evidence on record that the Membership Committee acted on Hodreal's letter
 SEC. 29. (a) The Membership Committee shall process applications for membership;
ascertain that the requirements for stock ownership, including citizenship, are complied with;
submit to the Board its recommended on applicants for inclusion in the Waiting List; take
charge of auction sales of shares of stock; and exercise such other powers and perform such
other functions as may be authorized by the Board.
 Membership Committee failed to question the alleged irregularities attending Mc Foods’
purchase
 purchase price of P1,800,000.00 is P1,400,000.00 more than the floor price - NOT
detrimental
 Upon payment and the execution of the Deed of Absolute Sale, it had the right to demand the
delivery of the stock certificate in its name.
 The right of a transferee to have stocks transferred to its name is an inherent right flowing
from its ownership of the stocks
 certificate of stock
 paper representative or tangible evidence of the stock itself and of the various interests
therein
 not a stock in the corporation but is merely evidence of the holder’s interest and status in the
corporation, his ownership of the share represented thereby
 MSCI failed to repurchase Mc Foods’ Class "A" share within the 30 day pre-emptive period
 no proof that Cheng personally profited
Corporate Law Case Digest: Bachrach Motor
Co V. Lacson Ledesma (1937)
G.R. No. L-42462 August 31, 1937
Lessons Applicable: Quasi-negotiable Character of Certificate of Stock (Corporate Law)

FACTS:

 June 30, 1927: CFI favored Bachrach Motor Co., Inc (Bachrach) against Mariano Lacson
Ledesma
 Ledesma mortgaged to the Philippine National Bank (PNB) Talisay-Silay Milling Co., Inc
shares
 September 29, 1928: PNB brought an action against Ledesma and his wife Concepcion Diaz
for the recovery of a mortgage credit
 January 2, 1929: PNB amended its complaint by including the Bachrach Motor Co., Inc., as
party defendant because they claim to have rights to some of the subject matters of this
complaint
 January 30, 1929: Bachrach field a gen. denial
 CFI: favored PNB
 December 20, 1929: Bachrach brought an action in the CFI against the Talisay-Silay Milling
Co., Inc., to recover P13,850 against the bonus or dividend w/c, by virtue of the resolution of
December 22, 1923, Central Talisay-Silay Milling Co., Inc., had declared in favor of
Ledesma as one of the owners of the hacienda which had been mortgaged to the PNB to
secure the obligation of the Talisay-Silay Milling Co., Inc. in favor of said bank
 CFI: favored Bachrach
ISSUE: W/N shares of stock are personal property and therefore can be subject to pledge or chattel mortgage

HELD: YES. AFIRMED

 section 4 of the Chattel Mortgage Law, in so far as it provides that a chattel mortgage shall
not be valid against any person except the mortgagor, his executors or administrators, unless
the possession of the property is delivered to and retained by the mortgagee or unless the
mortgage is recorded in the office of the register of deeds of the province in which the
mortgagor resides.
 pledge of the 6,300 stock dividends is valid against the Bachrach because the certificate was
delivered to the creditor bank, notwithstanding the fact that the contract does not appear in a
public instrument
 Certificates of stock or of stock dividends, under the Corporation Law, are quasi negotiable
instruments in the sense that they may be given in pledge or mortgage to secure an obligation
 certificates of stock, while not negotiable in the sense of the law merchant, like bills and
notes, are so framed and dealt with as to be transferable, when property endorsed, by mere
delivery, and as they frequently convey, by estoppel against the corporation or against prior
holders, as good a title to the transferee as if they were negotiable, and inasmuch as a large
commercial use is made of such certificates as collateral security, and it is to the public
interest that such use should be simplify and facilitated by placing them as nearly as possible
on the plane of commercial paper, they are often spoken of and treated as quasi negotiable,
that is as having some of the attributes and partaking of the character of negotiable
instruments, in passing from hand to hand, especially where they are accompanied by an
assignment and power of attorney, executed in blank, to transfer them to anyone who may
obtain possession as holders, even though such assignment and power are under seal.
G.R. No. 74306 March 16, 1992

ENRIQUE RAZON, petitioner,

vs.
INTERMEDIATE APPELLATE COURT and VICENTE B. CHUIDIAN, in his capacity as Administrator
of the Estate of the Deceased JUAN T. CHUIDIAN, respondents.

FACTS:
E. Razon, Inc. was organized by Enrique Razon. Some of its nominal incorporators withdrew, thus Razon
distributed their shares to some of his friends, which included Juan T. Chuidian, to whom he transferred
1,500 shares of stock. It was agreed between the two that Chuidian was only given the option to buy the
said shares, but Razon would be the owner. A stock certificate was issued by the Corporation in the
name of Chuidian, covering the 1,500 shares of stock. The said transfer was also recorded in the
corporate books of the Corporation. The said certificate, however, was held by Razon, who delivered it to
the Philippine Bank of Commerce. Chuidian thereafter died, and his administrator filed an action to
recover the certificate of shares of stock from Razon, representing Chuidian’s shareholdings in the
Corporation. The CFI declared Razon as the owner of the said shares. The IAC however reversed, and
ruled that Chuidian was the owner of the said shares of stock as evidence by the certificate, and as
recorded in the corporate books.

ISSUE:
WON Chuidian is the owner of the contested shares of stock as evidenced by the certificate and the
record in the corporate books.

RULING:
Yes. Razon’s oral testimony alleging the existence of an agreement between the two parties cannot
prevail over what appear in the certificate of shares of stock and the corporate books. The law is clear
that in order for a transfer of stock certificates to be effective as between the parties, the certificate must
be properly indorsed and that the title to such certificate of stock is vested in the transferee by the delivery
of the duly indorsed certificate of stock. Since the certificate of stock covering the questioned 1,500
shares of stock registered in the name of the late Chuidian was never indorsed to Razon, the inevitable
conclusion is that the questioned shares of stock belong to Chuidian. The indorsement of the certificate of
shares of stock is a mandatory requirement of law for an effective transfer of a certificate of stock.
BITONG V. CA (G.R. NO. 123553)
Facts:
Petitioner Bitong allegedly acting for the benefit of Mr. & Ms. Co. filed a
derivative suit before the SEC against respondent spouses Apostol, who were
officers in said corporation, to hold them liable for fraud and mismanagement
in directing its affairs. Respondent spouses moved to dismiss on the ground
that petitioner had no legal standing to bring the suit as she was merely a
holder-in-trust of shares of JAKA Investments which continued to be the true
stockholder of Mr. & Ms. Petitioner contends that she was a holder of proper
stock certificates and that the transfer was recorded. She further contends that
even in the absence of the actual certificate, mere recording will suffice for her
to exercise all stockholder rights, including the right to file a derivative suit in
the name of the corporation. The SEC Hearing Panel dismissed the suit. On
appeal, the SEC En Banc found for petitioner. CA reversed the SEC En Banc
decision.
Issue:
Whether or not petitioner is the true holder of stock certificates to be able
institute a derivative suit.
Ruling: NO.
Sec 63 of the Corporation Code envisions a formal certificate of stock which
can be issued only upon compliance with certain requisites. First, the
certificates must be signed by the president or vice-president, countersigned by
the secretary or assistant secretary, and sealed with the seal of the corporation.
A mere typewritten statement advising a stockholder of the extent of his
ownership in a corporation without qualification and/or authentication cannot
be considered as a formal certificate of stock. Second, delivery of the certificate
is an essential element of its issuance. Hence, there is no issuance of a stock
certificate where it is never detached from the stock books although blanks
therein are properly filled up if the person whose name is inserted therein has
no control over the books of the company. Third, the par value, as to par value
shares, or the full subscription as to no par value shares, must first be fully
paid. Fourth, the original certificate must be surrendered where the person
requesting the issuance of a certificate is a transferee from a stockholder.
The certificate of stock itself once issued is a continuing affirmation or
representation that the stock described therein is valid and genuine and is at
least prima facie evidence that it was legally issued in the absence of evidence
to the contrary. However, this presumption may be rebutted. Aside from
petitioner’s own admissions, several corporate documents disclose that the true
party-in-interest is not petitioner but JAKA. It should be emphasized that
JAKA executed, a deed of sale over 1,000 Mr. & Ms. shares in favor of
respondent Eugenio D. Apostol. On the same day, respondent Apostol signed
a declaration of trust stating that she was the registered owner of 1,000 Mr. &
Ms. shares covered by a Certificate of Stock. And, there is nothing in the
records which shows that JAKA had revoked the trust it reposed on respondent
Eugenia D. Apostol. Neither was there any evidence that the principal had
requested her to assign and transfer the shares of stock to petitioner. In fine,
the records are unclear on how petitioner allegedly acquired the shares of stock
of JAKA.
Thus, for a valid transfer of stocks, the requirements are as follows: (a) There
must be delivery of the stock certificate; (b) The certificate must be endorsed
by the owner or his attorney-in-fact or other persons legally authorized to make
the transfer; and, (c) to be valid against third parties, the transfer must be
recorded in the books of the corporation. At most, in the instant case, petitioner
has satisfied only the third requirement. Compliance with the first two
requisites has not been clearly and sufficiently shown.
*The basis of a stockholder’s suit is always one in equity. However, it cannot
prosper without first complying with the legal requisites for its institution.
The most important of these is the bona fide ownership by a stockholder of a
stock in his own right at the time of the transaction complained of which
invests him with standing to institute a derivative action for the benefit of the
corporation.
Rural Bank of Lipa City vs CA Case Digest

The Rural Bank of Lipa City Inc., etc. vs. Court of Appeals

[GR 124535, 28 September 2001]

Facts: Reynaldo Villanueva, Sr., a stockholder of the Rural Bank of Lipa City, executed a Deed of
Assignment, wherein he assigned his shares, as well as those of 8 other shareholders under his control
with a total of 10,467 shares, in favor of the stockholders of the Bank represented by its directors
Bernardo Bautista, Jaime Custodio and Octavio Katigbak. Sometime thereafter, Reynaldo Villanueva, Sr.
and his wife, Avelina, executed an Agreement wherein they acknowledged their indebtedness to the
Bank in the amount of P4,000,000.00, and stipulated that said debt will be paid out of the proceeds of
the sale of their real property described in the Agreement. At a meeting of the Board of Directors of the
Bank on 15 November 1993, the Villanueva spouses assured the Board that their debt would be paid on
or before December 31 of that same year; otherwise, the Bank would be entitled to liquidate their
shareholdings, including those under their control. In such an event, should the proceeds of the sale of
said shares fail to satisfy in full the obligation, the unpaid balance shall be secured by other collateral
sufficient therefor. When the Villanueva spouses failed to settle their obligation to the Bank on the due
date, the Board sent them a letter demanding: (1) the surrender of all the stock certificates issued to
them; and (2) the delivery of sufficient collateral to secure the balance of their debt amounting to
P3,346,898.54.

The Villanuevas ignored the bank's demands, whereupon their shares of stock were converted into
Treasury Stocks. Later, the Villanuevas, through their counsel, questioned the legality of the conversion
of their shares. On 15 January 1994, the stockholders of the Bank met to elect the new directors and set
of officers for the year 1994. The Villanuevas were not notified of said meeting. In a letter dated 19
January 1994, Atty. Amado Ignacio, counsel for the Villanueva spouses, questioned the legality of the
said stockholders' meeting and the validity of all the proceedings therein. In reply, the new set of
officers of the Bank informed Atty. Ignacio that the Villanuevas were no longer entitled to notice of the
said meeting since they had relinquished their rights as stockholders in favor of the Bank. Consequently,
the Villanueva spouses filed with the Securities and Exchange Commission (SEC), a petition for
annulment of the stockholders' meeting and election of directors and officers on 15 January 1994, with
damages and prayer for preliminary injunction (SEC Case 02-94-4683_. Joining them as co-petitioners
were Catalino Villanueva, Andres Gonzales, Aurora Lacerna, Celso Laygo, Edgardo Reyes, Alejandro
Tonogan, and Elena Usi. Named respondents were the newly-elected officers and directors of the Rural
Bank, namely: Bernardo Bautista, Jaime Custodio, Octavio Katigbak, Francisco Custodio and Juanita
Bautista. On 6 April 1994, the Villanuevas' application for the issuance of a writ of preliminary injunction
was denied by the SEC Hearing Officer on the ground of lack of sufficient basis for the issuance thereof.

However, a motion for reconsideration was granted on 16 December 1994, upon finding that since the
Villanuevas' have not disposed of their shares, whether voluntarily or involuntarily, they were still
stockholders entitled to notice of the annual stockholders' meeting was sustained by the SEC.
Accordingly, a writ of preliminary injunction was issued enjoining Bautista, et. al. from acting as directors
and officers of the bank. Thereafter, Bautista, et al. filed an urgent motion to quash the writ of
preliminary injunction, challenging the propriety of the said writ considering that they had not yet
received a copy of the order granting the application for the writ of preliminary injunction. With the
impending 1995 annual stockholders' meeting only 9 days away, the Villanuevas filed an Omnibus
Motion praying that the said meeting and election of officers scheduled on 14 January 1995 be
suspended or held in abeyance, and that the 1993 Board of Directors be allowed, in the meantime, to
act as such. 1 day before the scheduled stockholders meeting, the SEC Hearing Officer granted the
Omnibus Motion by issuing a temporary restraining order preventing Bautista, et al. from holding the
stockholders meeting and electing the board of directors and officers of the Bank. A petition for
Certiorari and Annulment with Damages was filed by the Rural Bank, its directors and officers before the
SEC en banc. On 7 June 1995, the SEC en banc denied the petition for certiorari. A subsequent motion
for reconsideration was likewise denied by the SEC en banc in a Resolution dated 29 September 1995. A
petition for review was filed before the Court of Appeals (CA-GR SP 38861), assailing the Order dated 7
June 1995 and the Resolution dated 29 September 1995 of the SEC en banc in SEC EB 440. The appellate
court upheld the ruling of the SEC. Bautista, et al.'s motion for reconsideration was likewise denied by
the Court of Appeals in an Order dated 29 March 1996. The bank, Bautista, et al. filed the instant
petition for review.

Issue: Whether there was valid transfer of the shares to the Bank.

Held: For a valid transfer of stocks, there must be strict compliance with the mode of transfer prescribed
by law. The requirements are: (a) There must be delivery of the stock certificate: (b) The certificate must
be endorsed by the owner or his attorney-in-fact or other persons legally authorized to make the
transfer; and (c) To be valid against third parties, the transfer must be recorded in the books of the
corporation. As it is, compliance with any of these requisites has not been clearly and sufficiently shown.
Still, while the assignment may be valid and binding on the bank, et al. and the Villanuevas, it does not
necessarily make the transfer effective. Consequently, the bank et al., as mere assignees, cannot enjoy
the status of a stockholder, cannot vote nor be voted for, and will not be entitled to dividends, insofar as
the assigned shares are concerned. Parenthetically, the Villanuevas cannot, as yet, be deprived of their
rights as stockholders, until and unless the issue of ownership and transfer of the shares in question is
resolved with finality.
MR Holdings Ltd. vs. Sheriff Bajar Case Digest
MR Holdings Ltd. vs. Sheriff Bajar
[GR 138104, April 11, 2002]

Facts: Under a "Principal Loan Agreement" and "Complementary Loan Agreement," both dated 4
November 1992, Asian Development Bank (ADB), a multilateral development finance institution,
agreed to extend to Marcopper Mining Corporation (Marcopper) a loan in the aggregate amount of
US$40,000,000.00 to finance the latter's mining project at Sta. Cruz, Marinduque. The principal loan
of US$15,000,000.00 was sourced from ADB's ordinary capital resources, while the complementary
loan of US$25,000,000.00 was funded by the Bank of Nova Scotia, a participating finance institution.
On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign corporation which owns 40% of
Marcopper, executed a "Support and Standby Credit Agreement" whereby the latter. agreed to provide
Marcopper with cash flow support for the payment of its obligations to ADB. To secure the loan,
Marcopper executed in favor of ADB a "Deed of Real Estate and Chattel Mortgage" dated 11
November 1992, covering substantially all of its (Marcopper's) properties and assets in Marinduque.

It was registered with the Register of Deeds on 12 November 1992. When Marcopper defaulted in the
payment of its loan obligation, Placer Dome, in fulfillment of its undertaking under the "Support and
Standby Credit Agreement," and presumably to preserve its international credit standing, agreed to
have its subsidiary corporation, MR Holding, Ltd., assumed Marcopper's obligation to ADB in the
amount of US$18,453,450.02. Consequently, in an "Assignment Agreement" dated 20 March 1997
ADB assigned to MR Holdings all its rights, interests and obligations under the principal and
complementary loan agreements, ("Deed of Real Estate and Chattel Mortgage," and "Support and
Standby Credit Agreement"). On 8 December 1997, Marcopper likewise executed a "Deed of
Assignment" in favor of MR Holdings. Under its provisions, Marcopper assigns, transfers, cedes and
conveys to MR Holdings, its assigns and/or successors-in-interest all of its (Marcopper's) properties,
mining equipment and facilities. Meanwhile, it appeared that on 7 May 1997, Solidbank Corporation
(Solidbank) obtained a Partial Judgment against Marcopper from the RTC, Branch 26, Manila, in Civil
Case 96-80083, ordering Marcopper to pay Solidbank he amount if PHP 52,970,756.89, plus interest
and charges until fully paid; to pay an amount equivalent to 10% of above-stated amount as attorney's
fees; and to pay the costs of suit. Upon Solidbank's motion, the RTC of Manila issued a writ of
execution pending appeal directing Carlos P. Bajar, sheriff, to require Marcopper "to pay the sums of
money to satisfy the Partial Judgment." Thereafter, Bajar issued two notices of levy on Marcopper's
personal and real properties, and over all its stocks of scrap iron and unserviceable mining equipment.
Together with sheriff Ferdinand M. Jandusay of the RTC, Branch 94, Boac, Marinduque, Bajar issued
two notices setting the public auction sale of the levied properties on 27 August 1998 at the Marcopper
mine site. Having learned of the scheduled auction sale, MR Holdings served an "Affidavit of Third-
Party Claim" upon the sheriffs on 26 August 1998, asserting its ownership over all Marcopper's mining
properties, equipment and facilities by virtue of the "Deed of Assignment." Upon the denial of its
"Affidavit of Third-Party Claim" by the RTC of Manila, MR Holdings commenced with the RTC of Boac,
Marinduque, presided by Judge Leonardo P. Ansaldo, a complaint for reivindication of properties, etc.,
with prayer for preliminary injunction and temporary restraining order against Solidbank, Marcopper,
and sheriffs Bajar and Jandusay (Civil Case 98-13).

In an Order dated 6 October 1998, Judge Ansaldo denied MR Holdings' application for a writ of
preliminary injunction on the ground that (a) MR Holdings has no legal capacity to sue, it being a
foreign corporation doing business in the Philippines without license; (b) an injunction will amount "to
staying the execution of a final judgment by a court of co-equal and concurrent jurisdiction;" and (c)
the validity of the "Assignment Agreement" and the "Deed of Assignment" has been "put into serious
question by the timing of their execution and registration." Unsatisfied, MR Holdings elevated the
matter to the Court of Appeals on a Petition for Certiorari, Prohibition and Mandamus (CA-GR SP
49226). On 8 January 1999, the Court of Appeals rendered a Decision affirming the trial court's
decision. MR Holdings filed the Petition for Review on Certiorari.
Issue: Whether MR Holdings' participation under the "Assignment Agreement" and the "Deed of
Assignment" constitutes “doing business.”

Held: Batas Pambansa 68, otherwise known as "The Corporation Code of the Philippines," is silent
as to what constitutes doing" or "transacting" business in the Philippines. Fortunately, jurisprudence
has supplied the deficiency and has held that the term "implies a continuity of commercial dealings
and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise
of some of the functions normally incident to, and in progressive prosecution of, the purpose and object
for which the corporation was organized." The traditional case law definition has metamorphosed into
a statutory definition, having been adopted with some qualifications in various pieces of legislation in
Philippine jurisdiction, such as Republic Act 7042 (Foreign Investment Act of 1991), and Republic Act
5455. There are other statutes defining the term "doing business," and as may be observed, one
common denominator among them all is the concept of "continuity." The expression "doing business"
should not be given such a strict and literal construction as to make it apply to any corporate dealing
whatever. At this early stage and with MR Holdings' acts or transactions limited to the assignment
contracts, it cannot be said that it had performed acts intended to continue the business for which it
was organized. Herein, at this early stage and with MR Holdings' acts or transactions limited to the
assignment contracts, it cannot be said that it had performed acts intended to continue the business
for which it was organized. It may not be amiss to point out that the purpose or business for which MR
Holdings was organized is not discernible in the records. No effort was exerted by the Court of Appeals
to establish the nexus between MR Holdings' business and the acts supposed to constitute "doing
business." Thus, whether the assignment contracts were incidental to MR Holdings' business or were
continuation thereof is beyond determination. The Court of Appeals' holding that MR Holdings was
determined to be "doing business" in the Philippines is based mainly on conjectures and speculation.
In concluding that the "unmistakable intention" of MR Holdings is to continue Marcopper's business,
the Court of Appeals hangs on the wobbly premise that "there is no other way for petitioner to recover
its huge financial investments which it poured into Marcopper's rehabilitation without it (petitioner)
continuing Marcopper's business in the country." Absent overt acts of MR Holdings from which we
may directly infer its intention to continue Marcopper's business, the Supreme Court cannot give its
concurrence. Significantly, a view subscribed upon by many authorities is that the mere ownership by
a foreign corporation of a property in a certain state, unaccompanied by its active use in furtherance
of the business for which it was formed, is insufficient in itself to constitute doing business. Further,
long before MR Holdings assumed Marcopper's debt to ADB and became their assignee under the
two assignment contracts, there already existed a "Support and Standby Credit Agreement" between
ADB and Placer Dome whereby the latter bound itself to provide cash flow support for Marcopper's
payment of its obligations to ADB. Plainly, MR Holdings' payment of US$18,453,450.12 to ADB was
more of a fulfillment of an obligation under the "Support and Standby Credit Agreement" rather than
an investment. That MR Holdings had to step into the shoes of ADB as Marcopper's creditor was just
a necessary legal consequence of the transactions that transpired. Also, the "Support and Standby
Credit Agreement" was executed 4 years prior to Marcopper's insolvency, hence, the alleged "intention
of MR Holdings to continue Marcopper's business" could have no basis for at that time, Marcopper's
fate cannot yet be determined. In the final analysis, MR Holdings was engaged only in isolated acts or
transactions. Single or isolated acts, contracts, or transactions of foreign corporations are not regarded
as a doing or carrying on of business. Typical examples of these are the making of a single contract,
sale, sale with the taking of a note and mortgage in the state to secure payment therefor, purchase,
or note, or the mere commission of a tort. In these instances, there is no purpose to do any other
business within the country.
 BALTAZAR V. LINGAYEN GULF ELECTRIC POWER

SUMMARY. Minority Stockholders (Baltazar Group) of Lingayen Gulf Electric Power partially
paid the subscription but the corporation issued them certificates corresponding to shares
covered by the partial payments. Corporation wanted to deny voting rights to all subscribed
shares until total subscription is paid. SC held that though the partial payment of stocks does
not entitle subscriber to a certificate of stock, this doctrine is merely directory. In this case, it
was the practice of the corporation to issue certificates of stock and voting rights even to those
who have not fully paid their subscriptions. Therefore the court held that the company is
bound by its deemed agreement with the stockholder. This also applies to the application of
interest as well as payments previously made. Corporation may choose to apply payments to
subscription either as: (a) full payment for corresponding number of stock the par value of
which is covered by such payment; or (b) as payment pro-rata to each subscribed share. The
corporation chose the first option, and, having done so, it cannot unilaterally nullify the
certificates issued.
DOCTRINE. If a stockholder, in a stock corporation subscribes to a certain number of shares of
stock, and makes partial payments for which he is issued certificates of stock, he is entitled to
vote the latter, notwithstanding the fact that he has not paid the balance of his subscription
which has been called for payment or declared delinquent.
G.R. No. L-2808 August 31, 1951

JOSEFA SANTAMARIA, assisted by her husband, FRANCISCO SANTAMARIA, Jr., plaintiff-appellee,

vs.

THE HONGKONG AND SHANGHAI BANKING CORPORATION and R. W. TAPLIN, defendants-appellant.

BAUTISTA ANGELO, J.:

FACTS: Mrs. Josefa T. Santamaria bought 10,000 shares of the Batangas Minerals, Inc. (Batangas), through the
offices of Woo, Uy-Tioco & Naftaly (Woo), a stock brokerage firm and pay therefore P8,041.20 as shown by a
receipt. The buyer received Stock Certificate No. 517 issued in the name of Woo, Uy-Tioco & Naftaly and indorsed
in blank by this firm.

Thereafter, Mrs. Santamaria placed an order for the purchase of 10,000 shares of the Crown Mines, Inc. with R.J.
Campos & Co. (RJ Campos), a brokerage firm, and delivered Certificate No. 517 to the latter as security therefor
with the understanding that said certificate would be returned to her upon payment of the 10,000 shares. Her
name was later written in lead pencil on the upper right hand corner of the certificate.

Two days later, when Mrs. Santamaria went to pay for her order, she was informed that R.J. Campos was no longer
allowed to transact business due to a prohibition order from Securities and Exchange Commission and that her
Stock certificate was in the possession of the Hongkong and Shanghai Banking Corporation (Hongkong)

It came into the possession of the Hongkong because R.J. Campos had opened an overdraft account with this bank
and had executed a document of hypothecation. As per request of Hongkong, Batangas issued Certificate No. 715
in lieu of Certificate No. 517, in the name of Robert W. Taplin as trustee.

CFI ordered Hongkong to pay the plaintiff the sum of P8,041.20 plus the costs of suit. The case was certified to this
Court of Appeals.

ISSUES: 1) WON plaintiff-appellee was chargeable with negligence in the transaction which gave rise to this case. 2)
WON the defendants Bank obligated to inquire who was the real owner of the shares represented by the
certificate of stock, and could it be charged with negligence for having failed to do so?

1. YES.
Plaintiff did not take any precaution to protect herself against the possible misuse of the shares represented by the
certificate of stock. Plaintiff 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, as it was, to R.J. Campos hereby clothing the latter with apparent
title to the shares represented by said certificate including apparent authority to negotiate it by delivering it to said
company while it was indorsed in blank by the person or firm appearing on its face as the owner thereof. The
defendant Bank had no knowledge of the circumstances under which the certificate of stock was delivered to R.J.
Campos and had a perfect right to assume that R.J. Campos was lawfully in possession of the certificate in view of
the fact that it was a street certificate, and was in such form as would entitle any possessor thereof to a transfer of
the stock on the books of the corporation concerned.

It is a well-known rule that 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.

2. NO.

It should be noted that the certificate of stock in question was issued in the name of the brokerage firm-Woo, Uy-
Tioco & Naftaly and that it was duly indorsed in blank by said firm, and that said indorsement was guaranteed by
R.J. Campos which in turn indorsed it in blank. This certificate is what it is known as street certificate. Upon its face,
the holder was entitled to demand its transfer into his name from the issuing corporation. The Bank was not
obligated to look beyond the certificate to ascertain the ownership of the stock at the time it received the same
from R.J. Campos for it was given to the Bank pursuant to their letter of hypothecation. Even if said certificate had
been in the name of the plaintiff but indorsed in blank, the Bank would still have been justified in believing that R.J.
Campos had title thereto for the reason that it is a well-known practice that a certificate of stock, indorsed in
blank, is deemed quasi negotiable, and as such the transferee thereof is justified in believing that it belongs to the
holder and transferor.

The only evidence in the record to show that the certificate of stock in question may not have belonged to R.J.
Campos is the testimony of the plaintiff but even assuming for the sake of argument that what plaintiff has stated
is true, such an incident would merely show that plaintiff has an adverse claim to the ownership of said certificate
of stock, but that would not necessarily place the Bank in the position to inquire as to the real basis of her claim,
nor would it place the Bank in the obligation to recognize her claim and return to her the certificate outright. A
mere claim and of ownership does not establish the fact of ownership. The right of the plaintiff in such a case
would be against the transferor. In fact, this is the attitude plaintiff has adopted when she filed a charge for estafa
against Rafael J. Campos, which culminated in his prosecution and conviction, and it is only when she found him to
be insolvent that she decided to go against the Bank.

The Court has noticed that the defendant Bank was willing from the very beginning to compromise this case by
delivering to the plaintiff certificate of stock No. 715 that was issued to said Bank by the issuer corporation in lieu
of the original as alleged and prayed for in its amended answer to the complaint. The most that plaintiff could
claim is the return to her of the said certificate of stock. The Court is inclined to grant the formal tender made by
the defendant to the plaintiff of said certificate.
NEUGENE MARKETING INC., ET AL, PETITIONERS
V.
COURT OF APPEALS ET AL, RESPONDENTS 1
GR no. 112941 February 18, 1999
Purisima, J.
SV: 3 out of 5 shareholders of Neugene voted for the dissolution of the corporation. The dissolution was
acknowledged by the SEC. The 2 other stockholders questioned the dissolution alleging that at the time the
meeting for voting for the dissolution was held, the 3 did not own the requisite 2/3 of the outstanding capital stock
to validly vote for the dissolution since majority of their shares of stock has already been transferred to new
stockholders. SEC held that the dissolution is not valid but CA reversed the decision
SC: the dissolution is valid. The transfers were fraudulently made. The stocks after issuance by the corporation,
were endorsed in blank to the UY family (the beneficial owner of Neugene) for safekeeping. This was agreed upon
by the stockholders and the Uy Family. For the transfer to be valid it was agreed upon that the owners of stocks
intended to be transferred must give its approval first. It was also found by the court that there was no
consideration for the transfer of stocks.

1. Neugene was duly registered with the SEC to engage in the trading business for a term of 50 years
with the ff incorporators: Johnson Lee, Lok Chun Suen, Charles O. Sy, Eugenio Flores, Jr., Arsenio Yang
Jr.
2. The authorized capital stock of Neugene is PhP3Million divided into 30,000 shares with a par value of
100 pesos each. 600,000 has been subscribed by the ff
a. Johnson Lee: 600 shares P60,000
b. Lok Chun Suen: 1,200 shares P120,000
c. Charles O. Sy 1,800 Shares P180,000
d. Eugenio Flores, Jr. 2,100 shares P210,000
e. Arsenio Yang Jr. 300 shares P30,000
3. Out of the aforesaid subscription 150,000 had been paid by the ff:
a. Johnson Lee P15,000
b. Lok Chun Suen P30,000
c. Charles O. Sy P450,000
d. Eugenio Flores, Jr. P52,500
e. Arsenio Yang Jr. P7,500
4. The shareholdings were increased by 10% by virtue of stock dividend declaration in the amt of
60,000 pesos. Again it declared a stock dividend later amounting to P40,000 in proportion to the
shareholdings of the stockholders as of April 30, 1981.
5. Eugenio Flores Jr. transferred and conveyed hi entire shareholdings of 2450 shares to
a. Sonny Moreno 1,050 shares
b. Arsenio Yang Jr. 700 shares
c. Charles O. Sy 700 shares
6. So now, the stockholders appearing in the stock and transfer book are as follows
a. Johnson Lee 700
b. Lok Chun Suen 1,400
c. Sonny Moreno 1,050
d. Charles O. Sy 2,800
e. Arsenio Yang Jr. 1,050

1NEUGENE MARKETING INC., LEONCIO TAN, NICANOR MARTIN, SONNY MORENO, JOHNSON LEE and
SECURITIES AND EXCHANGE COMMISSION, petitioners,
vs.
COURT OF APPEALS, ARSENIO YANG, JR., CHARLES O. SY, LOK CHUN SUEN, BAN HUA U. FLORES, BAN HA U.
CHUA and ROGER REYES, respondents.
 7. Sy and Yang (total shares 5,250)sent notice to the directors for a board meeting. They also sent
notice for a special stockholder’s meeting on the same day, November 30, 1987 to consider the
dissolution of Neugene
8. Sy, Yang and Suen, the directors and stockholders then present voted for and approved a resolution
dissolving NEugene
9. SEC issued a certificate of dissolution
10. The petitioners, Johnson Lee, Sonny Moreno, Leoncio Tan and Nicanor Martin brought an action to
annul or set aside the SEC certificate on the dissolution of Neugene they alleged that:
a. They are the majority stockholders of Neugene owning 80% of its outstanding capital stock
b. That on July 1, 1987 Yang , Sy and Suen divested themselves of their stockholdings when
they endorsed their stock certificates in blank and delivered the same to the Uy Family, the
beneficial owners of NEugene.
c. The Uy Family agreed to award Neugene’s stock certificates to Johnny KH Uy who authorized
Lee to dispose of the same
d. Lee sold the said shares of stock to Leoncio Tan (2,100 out of 2,800 shares of Charles O. Sy
were assigned to him in addition to the 350 out of 1,050 shares of Yang) and Nicanor Martin
(1,400 shares of Suen were assigned to Martin)
e. That Yang and Sy who each had 700 shares, and Suen, who was no longer a stockholder
could no longer validly vote for the dissolution of Neugene, hence the proceedings and the
meetings were improperly called and are null and void
11. The respondents , SY, YANG and SUEN theorized that the alleged assignments of shares of stock in
favor of Tan and Martin were simulated and fraudulently effected as there were never an agreement
entered into by the Uy Family to award the NEugene shares of stock. They delivered the shares of
stock to the Uy Family for safe keeping and the said certificates were kept inside the confidential
vault of the Uy Family but were stolen by Johnny KH Uy and Magdalena Go-Uy without the
knowledge and authority of the Uy Family
a. That Sonny Moreno conspired with the fraudulent transfer of stocks when he recorded the
fraudulent assignments in the stock and transfer book
12. SEC nullified the certification on the dissolution of Neugene, ruling that the Sy and Yang no longer
hold the 2/3 of the outstanding capital stocks of NEugene at the time they presented the petition for
dissolution.
13. CA reversed and upheld the validity of the dissolution ruling that the stock certificates were not
validly transferred to Martin and Tan. That to constitute a valid transfer a stock certificate must be
delivered and its delivery must be coupled with an intention of constituting the person to whom the
stock is delivered the transferee. And in order that there is a valid transfer, the person to whom the
certificates are endorsed to must be a bona fide transferee for value
a. No receipt or transaction showing payment for the stocks.
b. The supposed partition and division of the properties of the Uy Family was a mere Xerox
copy whose original was never produced in court. It also contained erasures and/insertion
and it is written in Chinese with no translation submitted.
14. CA denied MR hence this petition

ISSUE: Whether or not the dissolution was valid (meaning that the stockholders who voted for it owned at least
2/3 of the outstanding capital stock) YES

 Entries in the Stock and Transfer book support the conclusion arrived at by the CA that Suen, SY and
Yang owned at least 2/3 of the outstanding capital stock on the day of the meetings
 It was shown that they owned 5,250 shares out of the 7,000 outstanding capital stock, constituting at
least 2/3
 SC agreed with the conclusion that the certificates of stock were stolen and therefore not validly
transferred and the transfers of stock relied upon by the petitioners were fraudulently recorded in
the STB of NEugene under the column “Certificates Cancelled” (this was relied upon by the
petitioners as evidence that the 3 did not own at least 2/3 of the outstanding capital stock)
 SEC overlooked certain facts of substance and value when it declared the dissolution as not valid
 o It misappreciated the true nature of the relationship between the stockholders and the Uy
Family. They had an understanding that subject shares of stock were, immediately upon
issuance, endorsed in blank by the shareholders and entruseed to the Uy Family for
safekeeping.
o Johnson Lee and Sonny Moreno knew this and were in bad faith in assigning the stock
certificates to Martin and Tan and in recording it in the STB
o As nominees of the UY family, Sy, Suen and Yang’s approval was necessary for the effectivity
of the transfer. In this case the transfer lacked the requisite approval
o No valuable consideration for the supposed transfer of stocks. The complete absence of a
cause or consideration renders the contract absolutely void and inexistent.

Petition Dismissed. CA decision Affirmed

Justin Benedict A. Moreto

Fua Cun v. Ricardo Summers in his capacity as Sheriff ex-oficio of the City of Manila, and
the CHINA BANKING CORPORATION

FACTS:

On August 26, 1920, one Chua Soco subscribed for 500 shares of stock of the defendant Banking
Corporation at a par value of P100 per share [P 50,000]. However, he only paid the sum of P 25,000 which
is 1/2 of the subscription price, in cash for which a receipt was issued.

On May 18, 1921, Chua Soco executed a promissory note in favor of the plaintiff Fua Cun for the sum of
P25,000 payable in ninety days and drawing interest at the rate of 1 per cent per month, securing the note
with a chattel mortgage on the shares of stock subscribed for by Chua Soco, who also endorsed the receipt
above mentioned and delivered it to the mortgagee.

The Fua Cun, the plaintiff, thereupon took the receipt to the manager of the defendant Bank and informed
him of the transaction with Chua Soco, but was told to await action upon the matter by the Board of Directors.

Meanwhile, Chua Soco appears to have become indebted to the China Banking Corporation in the sum of
P37,731.68 for dishonored acceptances of commercial paper and in an action brought against him to
recover this amount, Chua Soco's interest in the five hundred shares subscribed for was attached and the
receipt seized by the sheriff.

Fua Cun thereupon brought the present action maintaining that by virtue of the payment of the one-half of
the subscription price of the 500 shares Chua Soco in effect became the owner 250 shares and praying
that his, the plaintiff's, lien on said shares, by virtue of the chattel mortgage, be declared to hold priority
over the claim of the defendant Banking Corporation; that the defendants be ordered to deliver the receipt
in question to him; and that he be awarded the sum of P5,000 in damages for wrongful attachment.

The trial court rendered judgment in favor of the Fua Cun declaring that Chua Soco, through the payment
of the P25,000, acquired the right to two hundred and fifty shares fully paid up, upon which shares the
plaintiff holds a lien superior to that of the China Banking Corporation and ordering that the receipt be
returned to said plaintiff. From this judgment the defendants appeal.

ISSUE/S
1) Whether Chua Soco, through the payment of the P25,000, acquired the right to 250 shares
which were fully paid up. (main issue for corp)
2) Whether the plaintiff holds a lien superior to that of the defendant Banking Corporation and
ordering that the receipt be returned to said plaintiff. (main issue in the case)

HELD:

1) No.

The Court stated that the payment of half the subscription price does not make the holder of stock the
owner of half the subscribed shares. Plaintiff's rights consist in equity in 500 shares and upon payment of
the unpaid portion of the subscription price he becomes entitled to the issuance of certificate for the said
500 shares in his favor.

However, shares for which no certificate of stock has been issued may validly be mortgaged in whole (and
not just with respect to the portion paid-up) and the corporation receiving notice thereof is bound to respect
the security arrangement.

Equity in shares of stock may be assigned. The assignment becomes effective as between the parties and
as to third parties with notice. Equity in shares of stock may be a subject of a chattel mortgage but such will
operate as a conditional equitable assignment.
 2) Yes, the plaintiff has a superior lien over the bank.

The claim of the defendant Banking Corporation upon which it brought the action in which the writ of
attachment was issued, was for the non-payment of drafts accepted by Chua Soco and had no direct
connection with the shares of stock in question.

At common law a corporation has no lien upon the shares of stockholders for any indebtedness to the
corporation and our attention has not been called to any statute creating such lien here.

On the contrary, section 120 of the Corporation Act provides that "no bank organized under this Act shall
make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or
holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt
previously contracted in good faith, and stock so purchased or acquired shall, within six months from the
time of its purchase, be sold or disposed of at public or private sale, or, in default thereof, a receiver may
be appointed to close up the business of the bank in accordance with law."

The reasons for this doctrine are obvious; if banking corporations were given a lien on their own stock for
the indebtedness of the stockholders, the prohibition against granting loans or discounts upon the security
of the stock would become largely ineffective.
210 CHUA GUAN v. SAMAHANG MAGSASAKA

62 PHIL 473 (1935)

TOPIC: Collateral Transfers

PONENTE: Butte, J. AUTHOR: Franch Galanza

FACTS

1. On June 18, 1931, Gonzalo H. Co Toco, the owner of 5,894 shares of the capital stock of Samahang Magsasaka
Inc. represented by 9 certificates having a par value of P5 per share mortgaged said shares to Chua Chiu to
guarantee the payment of a debt of P20,000 due on or before 19 June 1932.

2. The said certificates of stock were delivered with the mortgage to the mortgagee, Chua Chiu. The said mortgage
was duly registered in the office of the registered of deeds of Manila on 23 June 1931, and in the office of the said
corporation on 30 September 1931.

3. On 28 November 1931, Chua Chiu assigned all his right and interest in said mortgage to the Chua Guan and the
assignment in the office of the register of deeds in the City of Manila on 28 December 1931, and in the office of
the said corporation on 4 January 1932.

4. Co Toco defaulted in the payment of said debt at maturity and Chua Guan foreclosed said mortgage and
delivered the certificates of stock and copies of the mortgage and assignment to the sheriff of the City of Manila in
order to sell the said shares at public auction. The sheriff auctioned said shares on 22 December 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.

5. The plaintiff tendered the certificates of stock standing in the name of Co Toco to the proper officers of the
corporation for cancellation and demanded that they issue new certificates in the name of Chua Guan. The officers
(the individual defendants) refused and still refuse to issue said new shares in the name of Chua Guan.

6. An action for writ of mandamus was filed with the CFI Nueva Ecija, praying that the defendants transfer the said
5,894 shares of stock to the plaintiff by cancelling the old certificates and issuing new ones in their stead.

7. The parties entered into a stipulation in which the defendants admitted all of the allegations of the complaint
and the plaintiff admitted all of the special defenses in the answer of the defendants, and on this stipulation they
submitted the case for decision.

8. As special defense, the defendants refused to cancel said certificates (Co Toco’s) and to issue new ones in the
name of Chua Guan because prior to the date of the latter’s demand (4 February 1933), 9 attachments had been
issued and served and noted on the books of the corporation against Co Toco’s shares and Chua Guan objected to
having these attachments noted on the new certificates which he demanded.

9. The Supreme Court affirmed the judgment appealed from, holding that the attaching creditors are entitled to
priority over the defectively registered mortgage of the appellant.

ISSUE:

Whether or not 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:
YES. The attaching creditors are entitled to priority over the defectively registered mortgage of the appellant.

RATIO:

1. Section 4 of Act No. 1508 provides two ways for executing a valid chattel mortgage which shall be effective
against third persons:

a. The possession of the property mortgage must be delivered to and retained by the mortgagee

b. Without such delivery, the mortgage must be recorded in the proper office or offices of the register or
registers of deeds.

2. As to the proper place of registration of such a mortgage. - Section 4 provides that in such a case the mortgage
resides at the time of making the same or, if he is a non-resident, in the province in which the property is situated;
and it also provides that if the property is situated in a different province from that in which the mortgagor resides
the mortgage shall be recorded both in the province of the mortgagor's residence and in the province where the
property is situated.

3. With respect to a chattel mortgage of shares of stock of a corporation - Registration in the province of the
owner's domicile should be sufficient, those who lend on such security would be confronted with the practical
difficulty of being compelled not only to search the records of every province in which the mortgagor might have
been domiciled but also every province in which a chattel mortgage by any former owner of such shares might be
registered. It was not the intention of the legislature to put this almost prohibitive impediment upon the
hypothecation of shares of stock in view of the great volume of business that is done on the faith of the pledge of
shares of stock as collateral.

4. It is a general rule that for purposes of execution, attachment and garnishment, it is not the domicile of the
owner of a certificate but the domicile of the corporation which is decisive.

5. The only safe way to accomplish the hypothecation of share of stock of a Philippine corporation is for the
creditor to insist on the assignment and delivery of the certificate and to obtain the transfer of the legal title to him
on the books of the corporation by the cancellation of the certificate and the issuance of a new one to him.

6. To the debtor, this may be unsatisfactory because it leaves the creditor as the ostensible owner of the shares
and the debtor is forced to rely upon the honesty and solvency of the creditor. The mere possession and retention
of the debtor's certificate by the creditor gives some security to the creditor against an attempted voluntary
transfer by the debtor, provided the by-laws of the corporation expressly enact that transfers may be made only
upon the surrender of the certificate.

6. Section 35 of the Corporation Law (Act No. 1459) - shares of stock "may be transferred by delivery of the
certificate endorsed by the owner or his attorney in fact or other person legally authorized to make the transfer."
The use of the verb "may" does not exclude the possibility that a transfer may be made in a different manner, thus
leaving the creditor in an insecure position even though he has the certificate in his possession. Moreover, the
shares still standing in the name of the debtor on the books of the corporation will be liable to seizure by
attachment or levy on execution at the instance of other creditors

7. Loans upon stock securities should be facilitated in order to foster economic development. The transfer by
endorsement and delivery of a certificate with intention to pledge the shares covered thereby should be sufficient
to give legal effect to that intention and to consummate the juristic act without necessity for registration.

CASE LAW/ DOCTRINE:

1. It is a general rule that for purposes of execution, attachment and garnishment, it is not the domicile of
the owner of a certificate but the domicile of the corporation which is decisive.

2. Loans upon stock securities should be facilitated in order to foster economic development. The transfer
by endorsement and delivery of a certificate with intention to pledge the shares covered thereby should be
sufficient to give legal effect to that intention and to consummate the juristic act without necessity for registration.
Uson v. Diosomito
G.R. No. L-42135 , June 17, 1935
Effect of Registration/Non Registration of Transfers in the STB

FACTS

On January 18, 1932, an attachment was levied on the seventy-five shares of stock in North Electric Co.,
owned by defendant Diosmito. This attachment was based on a pending civil action at the CFI of Cavite
(civil action 2525) filed against defendant by petitioner Toribia Uson base on unpaid debts to Uson by
defendant. On June 23, 1932, Uson won and obtained judgment against the defendant for the sum of
P2,300. To satisfy the said judgment, the sheriff sold Diosmito’s 75 shares of stock in North Electric Co.,
Inc., at the public auction. The plaintiff Toribia Uson was the highest bidder and said shares were
adjudicated to her.

However, in the present action, a certain 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 as evidence.

It is undisputed that Diosmito was really the original owner of the 75 stocks. He sold these stocks to an
Emeterio Barcelon on February 3, 1931 (before attachment). But Barcelon did not present these certificates
to the corporation for registration until the 16th of September, 1932 (after attachment), when they were
cancelled and a new certificate was issued in favor of him. Thereafter, Barcelon transferred the same of
the defendant H.P.L. Jollye to whom a new certificate was issued on February 13, 1933.

It will be seen, therefore, that the transfer of said shares by Vicente Diosomito, the judgment debtor in the
civil action No. 2525, to Barcelon was not registered and noted on the books of the corporation until
September 16, 1932, which was some nine months after the attachment had been levied on said shares in
civil case No. 2525 as above stated.

ISSUE

Whether a bona fide transfer of the shares of a corporation, not registered or noted on the books 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. - YES

HELD:

Section 35 of the Corporation Law is as follows:

SEC. 35. 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 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.

(NO NEED TO READ THIS JJ LANG ITO!!) Appellant cites decisions from a number of states of the
American Union which hold that an unregistered transfer is valid as against the lien of a subsequent
attachment sued out by a creditor of the assignor, whether such creditor has notice of the transfer or not.
These decisions are founded upon the theory that the attachment reaches only such title or interest as the
defendant may have in the property at the time of the levy. And if all title and interest had previously passed
by assignment from the debtor to a third person, the attaching creditor obtains nothing by the levy; that the
owner of shares of stock has the common law right to dispose of the same as personal property.
The various theories on these can be divided into three categories:

(1) That no transfer of shares is valid for any purpose unless registered on the books of the
corporation2
(2) No transfer shall be valid except as between the parties until the transfer is duly registered 3
(3) The theory stated above namely, an unregistered transfer is valid as against the lien of a
subsequent attachment sued out by a creditor of the assignor, whether such creditor has notice of
the transfer or not4

However we would follow the rule in Supreme Courts of Massachusetts and of Wisconsin which states:
All transfers of shares should be entered, as here required, on the books of the corporation. And it
is equally clear to us that all transfers of shares not so entered are invalid as to attaching
or execution creditors of the assignors, as well as to the corporation and to subsequent purchasers
in good faith, and indeed, as to all persons interested, except the parties to such transfers. All
transfers not so entered on the books of the corporation are absolutely void; not
because they are without notice or fraudulent in law or fact, but because they are
made so void by statute.

This court still adheres to the principle that its function is jus dicere non jus dare.5 The language of the
legislature is plain to the effect is limited and restricted by the express provision that "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, 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

2 based on Colorado and the District of Columbia cases

3 State of Arizona, California, the Territory of Hawaii, Idaho, Iowa, Nevada, New Mexico, North Dakota, Oklahoma,
South Dakota, Washington, Wisconsin cases
4 Prevailing rule in US
5 To declare the law, not to make the law.
 .R. No. L-49003 July 28, 1944
ANTONIO ESCAÑO, plaintiff-appellee,
vs.
FILIPINAS MINING CORPORATION, ET Al., defendants.
STANDARD INVESTMENT OF THE PHILIPPINES, appellant.

Facts: On March 8, 1937, the plaintiff-appellee obtained judgment against Silverio Salvosa whereby the latter was
ordered to transfer and deliver to the former 116 active shares and an undetermined number of shares in escrow of
the Filipinas Mining Corporation and to pay the sum of P500 as damages, with the proviso that the escrow shares
shall be transferred and delivered to the plaintiff only after they shall have been released by the company. A writ of
garnishment was served by the sheriff of Manila upon the Filipinas Mining Corporation to satisfy the said judgment;
and Filipinas Mining Corporation advised the sheriff of Manila that according to its books the judgment debtor
Silverio Salvosa was the registered owner of 1,000 active shares and about 21,339 unissued shares held in escrow by
the said corporation. The sheriff sold the 1,000 active shares at public auction.

It appears that Silverio Salvosa sold to Jose P. Bengzon all his right, title, and interest in and to 18,580 shares of stock
of the Filipinas Mining Corporation held in escrow which the said Salvosa was entitled to receive, and which
Bengzon in turn subsequently sold and transferred to Standard Investment of the Philippines. Neither Salvosa's sale
to Bengzon nor Bengzon's sale to the Standard Investment of the Philippines was notified to and recorded in the
books of the Filipinas Mining Corporation more than three years after the escrow shares in question were attached
by garnishment served on the Filipinas Mining Corporation as hereinbefore set forth.

On January 24, 1941, the defendant Filipinas Mining Corporation issued in favor of the defendant Standard
Investment of the Philippines certificate of stock for the 18,580 shares formerly held in escrow by Silverio Salvosa
and which had been adversely by the present plaintiff-appellee on the one hand and the Standard Investment of the
Philippines on the other, the first by virtue of garnishment proceedings and the second by virtue of the sale made to
it by Jose P. Bengzon as aforesaid.

Issue: Whether or not the issuance by the Filipinas Mining Corporation of the said 18,580 shares of its stock to the
Standard Investment of the Philippines was valid as against the attaching judgment creditor of the original owner.

Ruling: No. The transfer of duly issued shares of stock is not valid as against third parties and the corporation until it
is noted upon the books of the corporation. The reasons for the registration are (1) to enable the corporation to
know at all times who its actual stockholders are, because mutual rights and obligations exist between the
corporation and its stockholders; (2) to afford to the corporation an opportunity to object or refuse its consent to
the transfer in case it has any claim against the stock sought to be transferred, or for any other valid reason; and (3)
to avoid fictitious or fraudulent transfers.

Moreover, it seems illogical and unreasonable to hold that inactive or unissued shares still held by the corporation in
escrow pending receipt of authorization from the Government to issue them, may be negotiated or transferred
unrestrictedly and more freely than active or issued shares evidenced by certificates of stock.

We are, therefore, of the opinion and so hold that section 35 of the Corporation Law, which requires the
registration of transfers of shares stock upon the books of the corporation as a condition precedent to their validity
against the corporation and third parties, is also applicable to unissued shares held by the corporation in escrow.
Corporate Law Case Digest: Nava V. Peers
Marketing Corp. (2006)
G.R. No. L-28120 November 25, 1976

Lessons Applicable: Stock and Transfer Book (Corporate Law)

FACTS:

 Teofilo Po as an incorporator subscribed to 80 shares of Peers Marketing Corporation at P100 PV and paid
25%. No certificate of stock was issued to him or to any incorporator, subscriber or stockholder.
 April 2, 1966: Po sold to Ricardo A. Nava for P2,000 20 of 80 shares
 Nava requested to register the sale in the books of the corporation.
 denied - Po has not paid fully the amount of his subscription
 Po was delinquent of the balance due so the corporation claimed on his entire subscription of which
included 20 shares sold to Nava.
 December 21, 1966: Nava filed this mandamus to register 20 shares in Nava's name in the corporation's
transfer book.
 CFI: court dismissed the petition
 Nava appealed on the basis that
 Section 37: "no certificate of stock shall be issued to a subscriber as fully paid up until the full par
value thereof, or the full subscription in case of no par stock, has been paid by him to the corporation"
ISSUE: W/N officers of Peers Marketing Corporation can be compelled by mandamus to enter in its stock and
transfer book the sale made

HELD: NO. dismissal affirmed.

 no provision of the by-laws of the corporation covers that situation

 SEC. 35. 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 share of stock against which the corporation holds any unpaid claim shall be transferable on the

books of the corporation.

 SEC. 36. (re voting trust agreement) ...

The certificates of stock so transferred shall be surrendered and cancelled, and new certificates

therefor issued to such person or persons, or corporation, as such trustee or trustees, in which new

certificates it shall appear that they are issued pursuant to said agreement.

 A stock subscription is a subsisting liability from the time the subscription is made. The subscriber is as
much bound to pay his subscription as he would be to pay any other debt. The right of the corporation to
demand payment is no less incontestable.
 no clear legal duty on the part of the officers of the corporation to register the 20 shares in Nava's name
- no cause of action for mandamus.
 Baltazar case: partial payment = entitled to vote the said shares
 although he has not paid the balance of his subscription and a call or demand had been made for the
payment of the par value of the delinquent shares
 Without stock certificate, which is the evidence of ownership of corporate stock, the assignment of
corporate shares is effective only between the parties to the transaction
 delivery of the stock certificate, which represents the shares to be alienated , is essential for the
protection of both the corporation and its stockholders