205 Monserrat, plaintiff vs. Ceron, Erma Inc.
, shares of stock in order that such mortgage may be
appellant
FACTS
Monserrat, president and manager of the Manila
Yellow Taxicab Company Inc., owns 1,200 common
shares of stock of the company.
He assigned the usufruct of 600 of his common
shares of stock to Carlos Ceron. Rights and
prohibitions are as follows:
Right to enjoy the profits from the shares;
Prohibiting Ceron from selling, mortgaging,
encumbering, or exercising any act implying
absolute ownership.
Subsequently, Ceron mortgaged some of the shares
assigned to him Eduardo Matute, President to Erma,
Inc. as payment of his debt. The latter was not
informed of Cerons rights and prohibitions with regard
to the common shares of stock from Monserrat.
The CFI Manila favored plaintiff declaring the
following:
Plaintiff as the owner of the 600 shares of
stock; and
Mortgage constituted on the ownership of the
shares of stock null and void and without
force and effect, although the mortgage on
the usufruct enjoyed by the Ceron in the said
600 shares of stock is valid.
Defendants appealed.
ISSUE
Whether it is necessary to enter upon the books of the
corporation a mortgage constituted on common
valid and may have force and effect as against third
persons
HELD
No.
Section 35 of the Corporation Law provides that no
transfer shall be valid, except as between the parties,
until the transfer is entered and noted upon the books
of the corporation.
The word transfer is defined as the act and effect of
transferring; and the verb as to assign or waive the
right in, or absolute ownership of, a thing in favor of
another, making him the owner thereof. Section 3 of
Act No. 1508 defines the phrase chattel mortgage as
a conditional sale of personal property as security for
the payment of a debt.
Inasmuch as section 35 of the Corporation Law does
not require the notation upon the books of a
corporation of transactions relating to its shares,
except the transfer of the possession and ownership
thereof, as a necessary requisite to the validity of
such transfer, the notation upon the said books of the
corporation of a chattel mortgage constituted on such
shares is not necessary to its validity.
The chattel mortgage is not the transfer referred to by
the Corporation Law. In the case at bar, as a chattel
mortgage of the aforesaid title is not a complete and
absolute alienation of the dominion and ownership
thereof, its entry and notation upon the books of the
corporation is not necessary requisite to its validity.