Case Summary (G.R. No. 74306)
Factual Antecedents
Enrique Razon organized E. Razon, Inc. in 1962 with several nominal incorporators. Business operations commenced in 1966. Stock Certificate No. 003 for 1,500 shares was registered in the name of Juan T. Chuidian, who served as director and received compensation. Razon admitted financing the subscriptions and alleged an oral agreement that he retained beneficial ownership, with Chuidian’s right to purchase. The certificate was held by Razon and eventually deposited under joint custody at Philippine Bank of Commerce.
Issue on Dead Man’s Statute
Razon contended that the appellate court misapplied Section 20(a), Rule 130 of the Rules of Court (the “dead man’s statute”), which bars parties from testifying to transactions with a deceased person. He argued his testimony concerning the oral agreement with Juan Chuidian should not have been excluded.
Admissibility of Petitioner’s Testimony
The Court held the dead man’s statute inapplicable because the action was not against the estate nor based on a claim against it. Moreover, Vicente Chuidian did not object to Razon’s testimony at trial, thereby waiving any statutory prohibition. Consistent with Cruz v. Court of Appeals, once evidence is admitted without timely objection, a court may not disregard it.
Fundamental Issue: Ownership of Shares
Under the Corporation Code, shares stand in the name of the registered holder in the corporate books. E. Razon, Inc.’s records and Chuidian’s election as director confirmed his status as registered shareholder. Razon, as claimant, bore the burden of proving a valid transfer to vest ownership in himself.
Requirements for Valid Transfer of Shares
Section 35 of the Corporation Code mandates that a transfer of shares requires a properly indorsed certificate delivered to the transferee and recorded in the corporate books. Absent by-laws governing transfers, these statutory procedures are mandatory, as reaffirmed in Embassy Farms, Inc. v. Court of Appeals.
Court’s Determination on Share Ownership
No indorsement of Stock Certificate No. 003 in favor of Razon was produced. Razon’s reliance on an oral arrangement—even among friends—could not substitute for the indorsement and recording required by law. The Court thus upheld the presumption of ownership in Chuidian and credited evidence that the shares were compensation for his legal services to the corporation.
Modifications on Dividend Rights (G.R.
Case Syllabus (G.R. No. 74306)
Antecedent Facts
- Consolidated petitions G.R. No. 74306 (Enrique Razon) and G.R. No. 74315 (Vicente B. Chuidian), resolved March 16, 1992.
- Dispute over ownership of 1,500 shares of stock in E. Razon, Inc., represented by Stock Certificate No. 003 issued April 23, 1966, registered in the name of Juan T. Chuidian.
- Trial Court (CFI Manila) declared Enrique Razon owner of the shares.
- Intermediate Appellate Court reversed, holding the shares belonged to Juan T. Chuidian (deceased father of Vicente B. Chuidian).
- Both parties moved for reconsideration—Razon to reinstate the trial court decision; Chuidian to recover dividends and pre-emptive rights—both motions denied.
- Original complaint (June 29, 1971; amended Nov. 16, 1971) by Vicente B. Chuidian, as administrator of Juan T. Chuidian’s estate, sought delivery of certificates, injunctive relief, preliminary attachment, and receivership.
- Defendants’ answer (June 18, 1973) alleged Razon had paid for all shares, that they were subject to incorporator agreements, and that neither Juan T. Chuidian nor his estate paid any subscription for the 1,500 shares.
- Evidence shows:
- E. Razon, Inc. organized in 1962 by Enrique Razon and six other incorporators.
- Stock Certificate No. 003 for 1,500 shares issued to Juan T. Chuidian on April 23, 1966.
- Chuidian (and later his estate) served as director and received compensation.
- Certificate remained in Razon’s possession until deposited under joint custody in Philippine Bank of Commerce.
- Razon’s position: shares were nominally in Chuidian’s name but actually owned by Razon, who paid the subscription and granted Chuidian an option to buy.
Issue
- Ownership of the 1,500 shares of E. Razon, Inc. covered by Stock Certificate No. 003.
- G.R. 74306: Whether the Intermediate Appellate Court misapplied the “dead man’s statute” (Sec. 20(a), Rule 130) in excluding Razon’s testimony concerning an oral agreement with the deceased.
- G.R. 74315: Whether all cash and stock dividends and pre-emptive rights on the 1,500 shares should be declared belonging