Fr. Pablo M. Salengua

November 24, 1992 Fr. Pablo M. Salengua Diocese of Malaybalay 8700 Malaybalay, Bukidnon S i r : This refers to your letter of November 13, 1992 requesting information relative to the legal procedure for transfer of shares. As stated the Diocese of Malaybalay is a holder of 2,874 shares Rural Bank of Valencia, Inc. and 1,846 shares of Rural Bank of Kalilangan Inc. duly endorsed in blank by the previous stockholders. The diocese now wanted to transfer these shares to the Roman Catholic Bishop of Malaybalay, Inc.,but the management of said Rural Banks requires the Diocese to submit Deeds of Sale. The Diocese, however, believes that said documents are no longer needed since the stocks were already endorsed in blank. Hence, your present request for clarification. Section 63 of the Corporation Code of the Philippines, partly quoted hereunder, prescribes the manner by which shares of stock may be transferred. "SECTION 63. Certificate of stock and transfer of shares .....Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed 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 recorded in 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 or certificates and the number of shares transferred." No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation." (Emphasis supplied) It is clear from the foregoing provision that mere indorsement of the certificate of stock shall be sufficient to legally effect the transfer of title to a share of stock. To have a valid transfer of shares of stock, the following requirements must be complied with: 1. The certificate must be indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer; 2. There must be delivery of the stock certificate; and 3. To be valid against third parties, the transfer must be recorded in the books of the corporation. Authorities agreed that as between the shareholder and his vendee, a good title to the shares of stock may be conveyed by simple indorsement in blank and delivery of the certificate; that when the certificate representing the shares of stock has been indorsed in blank, the holder thereof has authority to fill in his own name as transferee and cause the transfer to be registered in the books of the corporation. (Agbayani, Commentaries and Jurisprudence on the Commercial Law of the Philippines, Vol 3, 1988 ed. p. 507-508, citing Navarro v. Suntay, (1952) 48 O.G. No. 125335, citing 12 Fletcher Cyclopedia of the Law on Private Corporation, 226-267; 287-288) The Supreme Court also held in the case of Santamaria v. The Hongkong & Shanghai Banking Corporation, G.R. No. L-2808, August 31, 1951, that "a certificate of stock indorsed in blank is deemed quasi-negotiable, and as such, the transferee thereof is justified in believing that it belongs to the holder and transferor". (Ibid, p. 495 citing G.R. No. L-2808, August 31, 1951) Accordingly, for as long as the certificate of stock is duly indorsed in accordance with the above provision of the Corporation Code, the same may be considered a valid transfer of the shares covered by the certificate of stock, even without executing a "deed of assignment" of the shares. A "deed of assignment s is necessary only when no certificate of stock has yet been issued or where the same is not in the possession of the transferor. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman