Lessons Applicable: Quasi-negotiable Character of Certificate of Stock (Corporate Law)
FACTS:
- June 30, 1927: CFI favored Bachrach Motor Co., Inc (Bachrach) against Mariano Lacson Ledesma
- Ledesma mortgaged to the Philippine National Bank (PNB) Talisay-Silay Milling Co., Inc shares
- September 29, 1928: PNB brought an action against Ledesma and his wife Concepcion Diaz for the recovery of a mortgage credit
- January 2, 1929: PNB amended its complaint by including the Bachrach Motor Co., Inc., as party defendant because they claim to have rights to some of the subject matters of this complaint
- January 30, 1929: Bachrach field a gen. denial
- CFI: favored PNB
- December 20, 1929: Bachrach brought an action in the CFI against the Talisay-Silay Milling Co., Inc., to recover P13,850 against the bonus or dividend w/c, by virtue of the resolution of December 22, 1923, Central Talisay-Silay Milling Co., Inc., had declared in favor of Ledesma as one of the owners of the hacienda which had been mortgaged to the PNB to secure the obligation of the Talisay-Silay Milling Co., Inc. in favor of said bank
- CFI: favored Bachrach
ISSUE: W/N shares of stock are personal property and therefore can be subject to pledge or chattel mortgage
HELD: YES. AFIRMED
- section 4 of the Chattel Mortgage Law, in so far as it provides that a chattel mortgage shall not be valid against any person except the mortgagor, his executors or administrators, unless the possession of the property is delivered to and retained by the mortgagee or unless the mortgage is recorded in the office of the register of deeds of the province in which the mortgagor resides.
- pledge of the 6,300 stock dividends is valid against the Bachrach because the certificate was delivered to the creditor bank, notwithstanding the fact that the contract does not appear in a public instrument
- Certificates of stock or of stock dividends, under the Corporation Law, are quasi negotiable instruments in the sense that they may be given in pledge or mortgage to secure an obligation
- certificates of stock, while not negotiable in the sense of the law merchant, like bills and notes, are so framed and dealt with as to be transferable, when property endorsed, by mere delivery, and as they frequently convey, by estoppel against the corporation or against prior holders, as good a title to the transferee as if they were negotiable, and inasmuch as a large commercial use is made of such certificates as collateral security, and it is to the public interest that such use should be simplify and facilitated by placing them as nearly as possible on the plane of commercial paper, they are often spoken of and treated as quasi negotiable, that is as having some of the attributes and partaking of the character of negotiable instruments, in passing from hand to hand, especially where they are accompanied by an assignment and power of attorney, executed in blank, to transfer them to anyone who may obtain possession as holders, even though such assignment and power are under seal.