Uson v. Diosomito
REITERATIONFacts
1. The Antecedents: This case concerns the ownership of seventy-five shares of stock in the North Electric Company, Inc. The plaintiff-appellee, Toribia Uson, claims ownership of these shares by virtue of a purchase at a sheriff's sale. The shares were originally owned by defendant Vicente Diosomito, who sold them to Emeterio Barcelon on February 3, 1931, delivering the corresponding certificates. However, Barcelon did not register this transfer with the corporation until September 16, 1932. 2. Procedural History: Toribia Uson initiated a civil action for debt against Vicente Diosomito in the Court of First Instance of Cavite (Case No. 2525). An attachment was levied on Diosomito's property, including the seventy-five shares of North Electric Co., Inc., on January 18, 1932. Uson obtained a judgment against Diosomito on June 23, 1932, and subsequently, the sheriff sold the attached shares at public auction on March 20, 1933, with Uson being the highest bidder. In the present action, H.P.L. Jollye also claims ownership of these shares, presenting a certificate issued to him on February 13, 1933, after receiving them from Barcelon. 3. The Petition: The appellants, including Diosomito, Barcelon, Jollye, and North Electric Company, Inc., appeal the decision of the lower court. Their primary contention revolves around the validity of an unregistered transfer of shares against a subsequent lawful attachment. They argue that a bona fide transfer, even if unregistered, should be valid against a creditor's attachment lien. The Supreme Court, however, interprets Section 35 of the Corporation Law to mean that no transfer is valid, except between the parties, until it is entered and noted on the corporation's books, thus upholding the attachment lien obtained before the transfer was registered.
Issue(s)
Whether a bona fide transfer of shares of a corporation, not registered or noted on the books of the corporation, is valid as against a subsequent lawful attachment of said shares, regardless of whether the attaching creditor had actual notice of said transfer. Whether the transfer of 75 shares by Diosomito to Barcelon was valid as to the plaintiff-appellee, Toribia Uson, on January 18, 1932, the date of the attachment lien.
Ruling
The Supreme Court affirmed the decision of the Court of First Instance of Cavite, upholding the validity of the sheriff's sale to Toribia Uson. The Court ruled that the transfer of shares from Diosomito to Barcelon was not valid as against Uson's attachment lien because the transfer was not registered in the corporate books until after the attachment was levied.
Ratio Decidendi
On the validity of unregistered transfers against attachment: The Court held that Section 35 of the Corporation Law explicitly states that "No transfer, however, shall be valid, except as between the parties, until the transfer is entered and noted upon the books of the corporation." This provision is clear and unambiguous, limiting the validity of transfers. The Court rejected the argument that an unregistered transfer is valid against a subsequent attachment, citing decisions from American states that interpreted different statutory language. The Court emphasized its adherence to the principle of jus dicere non jus dare, meaning its function is to declare the law, not to make it. Therefore, the legislative intent of Section 35 must be strictly followed. On the validity of the transfer as to Toribia Uson: Applying the principle from Section 35, the transfer of the 75 shares by Diosomito to Barcelon was not valid as to the plaintiff-appellee, Toribia Uson, on January 18, 1932, the date when she obtained her attachment lien on said shares. At that time, the shares still stood in the name of Diosomito on the books of the corporation. The subsequent registration of the transfer on September 16, 1932, occurred after the attachment lien had already attached to the shares as the property of Diosomito. Consequently, Uson's right as an attaching creditor, who acted in good faith and without notice of the unregistered transfer, prevailed over the unregistered transfer.
Main Doctrine
A transfer of shares of stock in a corporation is not valid, except as between the parties, until the transfer is entered and noted upon the books of the corporation. Such unregistered transfer is invalid as against a subsequent lawful attachment of said shares by a creditor of the assignor, regardless of whether the attaching creditor had actual notice of the transfer.