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.