de Los Santos

De los Santos vs.
Mc Grath (95 Phil 577)
EN BANC
G.R. No. L-4818 February 28, 1955

APOLINARIO G. DE LOS SANTOS and ISABELO ASTRAQUILLO, plaintiffs-
appellees,
vs. J. HOWARD MCGRATH ATTORNEY GENERAL OF THE UNITED STATES,
SUCCESSOR TO THE PHILIPPINE ALIEN PROPERTY ADMINISTRATION OF THE
UNITED STATES, defendant-appellant.
REPUBLIC OF THE PHILIPPINES, intervenor-appellant.
CONCEPCION, J.:
FACTS: Plaintiff delos Santos alleges that he purchased 55,000 shares of Lepanto
Consolidated Mining Co., Inc. from Juan Campos, and later 200,000 shares from
Carl Hess and much later 800,000 still from Hess (for the account and benefit of
Astraquillo). Both of the supposed vendors now deceased.
By virtue of vesting order P-12, title to the 1,600,000 shares in dispute was,
however, vested in the Alien Property Custodian of the US. In due course, the
Vested Property Claims Committee of the Philippine Alien Property
Administration made a “determination” allowing said claims, which were
considered and hear jointly. But upon personal review of the Philippine Alien
Property Administrator, the “determination” was reversed and decreed that “title
to the shares in question shall remain in the name of the Philippine Alien Property
Administrator”.
Consequently, plaintiffs instituted the present action to establish title to the

aforementioned shares of stock.
Defendant Attorney General of the US contends that the shares were bought by
Vicente Madrigal, in trust and for the benefit, of the Mistsui Bussan, a branch
office of a Japanese company; and that Madrigal endorsed in blank and delivered
the shares to Mistsui for safe keeping; that Mitsui never sold or otherwise
disposed of the said shares; and that the stock certificates must have been stolen
or looted during the emergency from the liberation.
ISSUE: Whether the plaintiffs are the rightful owners of the shares.
HELD: NO. Even, however, if Juan Campos and Carl Hess had sold the shares of
stock in question, as testified to by De los Santos, the result, insofar as plaintiffs
are concerned, would be the same.
It is not disputed that said shares of stock were registered, in the records of the
Lepanto, in the name of Vicente Madrigal. Neither is it denied that the latter was,
as regards said shares of stock, a mere trustee for the benefit of the Mitsuis. The
record shows — and there is no evidence to the contrary — that Madrigal had
never disposed of said shares of stock in any manner whatsoever, except by
turning over the corresponding stock certificates, late in 1941, to the Mitsuis, the
beneficial and true owners thereof.
It has, moreover, been established, by the uncontradicted testimony of Kitajima

and Miwa, the managers of the Mitsuis in the Philippines, from 1941 to 1945, that
the Mitsuis had neither sold, conveyed, or alienated said shares of stock, nor
delivered the aforementioned stock certificates, to anybody during said period.
Section 35 of the Corporation Law reads:

The capital stock corporations shall be divided into shares for which certificates
signed by the president or the vice-president, countersigned by the secretary or
clerk and sealed with the seal of the corporation, shall be issued in accordance
with the by-laws. Shares of stock so issued are personal property and may be
transferred by delivery of the certificate endorsed by the owner or his attorney in
fact or other person legally authorized to make the transfer. No transfer, however,
shall be valid, except as between the parties, until the transfer is entered and
noted upon the books of the corporation so as to show the names of the parties
to the transaction, the date of the transfer, the number of the certificate, and the
number of shares transferred.
Pursuant to this provision, a share of stock may be transferred by endorsement

of the corresponding stock certificate, coupled with its delivery. However, the
transfer shall "not be valid, except as between the parties," until it is "entered and
noted upon the books of the corporation." no such entry in the name of the
plaintiffs herein having been made, it follows that the transfer allegedly effected
by Juan Campos and Carl Hess in their favor is "not valid, except as between"
themselves. It does not bind either Madrigal or the Mitsuis, who are not parties to
said alleged transaction. What is more, the same is "not valid," or, in the words of
the Supreme Court of Wisconsin which were quoted approval in Uson vs.
Diosomito (61 Phil., 535) — "absolutely void" and, hence, as good as non-
existent, insofar as Madrigal and the Mitsuis are concerned.
For this reason, although a stock certificate is sometimes regarded as quasi-

negotiable, in the sense that it may be transferred by endorsement, coupled with
delivery, it is well settled that the instrument is non-negotiable, because the
holder thereof takes it without prejudice to such rights or defenses as the
registered owner or creditor may have under the law, except insofar as such
rights or defenses are subject to the limitations imposed by the principles
governing estoppel.
Certificates of stock are not negotiable instruments (post, Par. 102),

consequently, a transferee under a forged assignment acquires no title which can
be asserted against the true owner, unless his own negligence has been such as
to create an estoppel against him (Clarke on Corporations, Sec. Ed. p. 415).
If the owner of the certificate has endorsed it in blank, and it is stolen from him,
no title is acquired by an innocent purchaser for value.
In the case at bar, neither Madrigal nor the Mitsuis had alienated shares of stock
in question. It is not even claimed that either had, through negligence, given —
occasion for an improper or irregular disposition of the corresponding stock
certificates.

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De los Santos vs.

Mc Grath (95 Phil 577)

G.R. No. L-4818 February 28, 1955

Consequently, plaintiffs instituted the present action to establish title to the

It has, moreover, been established, by the uncontradicted testimony of Kitajima

Section 35 of the Corporation Law reads:

Pursuant to this provision, a share of stock may be transferred by endorsement

For this reason, although a stock certificate is sometimes regarded as quasi-

Certificates of stock are not negotiable instruments (post, Par. 102),

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