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Razon vs.

IAC, GR 74306, 16 March 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 Chuidians 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. Razons 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.

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