Republic v. Estate of Hans Menzi

REPUBLIC vs. ESTATE OF HANS MENZI

G.R. 152578

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FACTS OF THE CASE:

In 1957, Menzi purchased the entire interest in Bulletin from its founder and owner, Mr. Carson Taylor.  In 1961, Yap, owner of US Automotive, purchased Bulletin shares from Menzi and became one of the corporation’s major stockholders.

Several years later, on June 5, 1984, Atty. Amorsolo V. Mendoza (Atty. Mendoza), Vice President of US Automotive, executed a promissory note with his personal guarantee in favor of Menzi, promising to pay the latter the sum of P21,304,921.16 with interest at 18% per annum as consideration for Menzi’s sale of his 154 block on or before December 31, 1984.

Accordingly, on May 15, 1985, Atty. Montecillo received from US Automotive two (2) checks in the amounts of P21,304,778.24 andP3,664,421.85 in full payment of the agreed purchase price and interest for the sale of the 154 block. On the same day, Atty. Montecillo signed a company voucher acknowledging receipt of the payment for the shares, indicating on the dorsal portion thereof the certificate numbers of the 12 stock certificates covering the 154 block, the number of shares covered by each certificate and the date of issuance thereof. 

Atty. Montecillo also wrote on the lower portion of the promissory note executed by Atty. Mendoza the words “Paid May 15, 1985 (signed) M.G. Montecillo, Executor of the Estate of Hans M. Menzi.”

In 1957, Menzi purchased the entire interest in Bulletin from its founder and owner, Mr. Carson Taylor.  In 1961, Yap, owner of US Automotive, purchased Bulletin shares from Menzi and became one of the corporation’s major stockholders.

Several years later, on June 5, 1984, Atty. Amorsolo V. Mendoza (Atty. Mendoza), Vice President of US Automotive, executed a promissory note with his personal guarantee in favor of Menzi, promising to pay the latter the sum of P21,304,921.16 with interest at 18% per annum as consideration for Menzi’s sale of his 154 block on or before December 31, 1984.

Accordingly, on May 15, 1985, Atty. Montecillo received from US Automotive two (2) checks in the amounts of P21,304,778.24 andP3,664,421.85 in full payment of the agreed purchase price and interest for the sale of the 154 block. On the same day, Atty. Montecillo signed a company voucher acknowledging receipt of the payment for the shares, indicating on the dorsal portion thereof the certificate numbers of the 12 stock certificates covering the 154 block, the number of shares covered by each certificate and the date of issuance thereof. 

Atty. Montecillo also wrote on the lower portion of the promissory note executed by Atty. Mendoza the words “Paid May 15, 1985 (signed) M.G. Montecillo, Executor of the Estate of Hans M. Menzi.”

ISSUE

Whether the sale and transfer of Bulletin shares of stocks from Menzi to Yap is valid and legal.

RULING

Yes.  The Corporation Code acknowledges that the delivery of a duly indorsed stock certificate is sufficient to transfer ownership of shares of stock in stock corporations.  Such mode of transfer is valid between the parties.  In order to bind third persons, however, the transfer must be recorded in the books of the corporation. 

Clearly then, the absence of a deed of assignment is not a fatal flaw which renders the transfer invalid as the Republic posits.  In fact, as has been held in Rural Bank of Lipa City, Inc. v. Court of Appeals,  the execution of a deed of sale does not necessarily make the transfer effective.