Sale of shares unrecorded in corporation's books
CASE DIGEST: 10 Phil. 286 [ G.R. No. 4237, March 05, 1908 ] SERAFIN UY
PIAOCO, PLAINTIFF AND APPELLANT, VS. JOSE MCMICKING, SHERIFF OF THE CITY OF
MANILA, ANTONIO R. BAYAN JU, YAP QUI CHIN, AND KHY PACK, DEFENDANTS AND
APPELLEES.
FACTS: A corporate stockholder sold his share to another, but the sale
has not yet been recorded in the books of the corporation.
ISSUE: Is the sale valid?
HELD: As between the seller and the buyer, the sale is perfectly valid
since the seller was the owner of the corporate shares. However, as between
the corporation and the buyer, the latter has acquired only an equitable title
which may eventually ripen into a legal title after he presents himself
to the corporation and performs the acts required by its charter or
by-laws, and which are needed to effectuate the transfer.
Similar questions have been discussed at length in many of the courts of last
resort in the United States, and the better doctrine is well stated in the
case of New York and New Haven K. R Co, vs. Schuyler (34 N. Y. 79): "Where the
stock of a corporation is, by the terms of its charter or by-laws,
transferable only on its books, the purchaser who receives a certificate, with
power of attorney, gets the entire title, legal and equitable, as between
himself and his seller, with all the rights the latter possessed; but as
between himself and the corporation he acquires only an equitable title, which
they are bound to recognize and permit to be ripened into a legal title, when
he presents himself, before any effective transfer on the books has been made,
to do the acts required by the charter or by-laws in order to make a transfer.
Until those acts be done he is not a stockholder, and has no claim to act as
such, but possesses, as between himself and the corporation, by virtue of the
certificate and power, the right to make himself, or whomsoever he chooses, a
stockholder by the prescribed transfer. The stock not having passed by the
delivery of the certificate and power of attorney, the legal title remains in
the seller so far as affects the company and subsequent bona fide purchasers
who take by transfer duly made on the books . The non-production and surrender
of the certificate at the time of the transfer is not fatal to the title of
the transferee. It is only essential to the safety of the corporation."
