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