G.R. No. 133969, 26 January 2000


Jaime Dico used to be employed as the manager of Young Auto Supply, which was owned by the petitioner, Nemesio Garcia. In order to assist Dico in entertaining the clients, Garcia “lent” his Proprietary Ownership Certificate (POC) in Cebu Country Club so that Dico could enjoy the “signing privileges” of its members. Thereafter, Dico resigned from the Company and returned the POC. He then executed a Deed of Transfer covering the POC in favor of Garcia. The Club was furnished with a copy of the said deed but the transfer was not recorded in the books of the Club because Garcia failed to present proof of payment of the requisite capital gains tax. The Spouses Atinon, respondents, filed a collection case against Jaime Dico for the amount of P900,000.00. After the judgment became final and executory, the respondent sheriff proceeded with its execution and levied on the POC share of Dico in the Cebu Country Club, andscheduled it for public auction.

Claiming ownership over the POC, Garcia filed an action for injunction to enjoin respondents from proceeding with the auction. The RTC dismissed the complaint of Garcia for injunction for lack of merit, and on appeal, such was likewise affirmed by the CA. Garcia claimed the POC although in the name of Dico cannot be levied upon on execution to satisfy the judgment debt because even prior to the institution of the case for: (1) The spouses Atinon had knowledge that Dico already conveyed back the ownership of the subject, certificate to petitioner; (2) Dico executed a deed of transfer, dated 18 November 1992, covering the subject certificate in favor of petitioner and the Club was furnished with a copy thereof; and (3) Dico resigned as a proprietary member of the Club and his resignation was accepted by the board of directors at their meeting on 4 May 1993.


Whether or not petitioner Razon is the rightful owner of the shares. Whether a bona fide transfer of the shares of a corporation, not registered or noted in 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 or not.


NO, such is not valid. Sec. 63 of the Corporation Code reads:

— The capital stock of corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. 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 showing 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.

The transfer of the subject certificate made by Dico to petitioner was not valid as to the spouses Atinon, the judgment creditors, as the same still stood in the name of Dico, the judgment debtor, at the time of the levy on execution. In addition, as correctly ruled by the CA, the entry in the minutes of the meeting of the Club’s board of directors noting the resignation of Dico as proprietary member thereof does not constitute compliance with Section 63 of the Corporation Code. Said provision of law strictly requires the recording of the transfer in the books of the corporation, and not elsewhere, to be valid as against third parties.

Accordingly, the CA committed no reversible error in rendering the assailed decision.

*Case Digest by Krishianne Louise C. Labiano, JD – 4, Andres Bonifacio College, SY 2019 – 2020