Razon vs. IAC and Chuidian FACTS: Vicente Chuidian (administrator of the estate of his deceased father) filed a complaint for the delivery of the certificates of stocks representing the 1,500 share holdings of his deceased father, Juan Chuidian, in the E. Razon, Inc. (organized for the purpose of bidding for the arrastre services in South Harbor, Manila). In the answer, Razon alleged that he owned the shares and the same remained in his possession. It was alleged that the late Juan Chuidan did not pay any amount whatsoever for the 1,500 shares in question. CHUIDIAN’s EVIDENCE: On April 23, 1966, stock certificate No. 003 for 1,5000 shares of stock of defendant corporation was issued in the name of Juan Chuidian (Juan). Razon had not questioned (not until the demand was made) Juan’s ownership of the shares and had not brought any action to have the certificate of stock over the said shares cancelled. RAZON’s EVIDENCE (In the answer and in his oral Testimony): After organizing E. Razon, Inc., Razondistributed shares, previously placed in the names of the withdrawing nominal incorporators, to some friends including Juan. The shares of stock were registered in the name of Juan only as nominal stockholder and with the agreement that the said shares were owned and held by the Razon (as he was the one who paid for all the subscription). Juan was given the option to buy the same but did not do so. CFI (RTC) declared that Enrique Razon is the owner of the said shares. IAC (CA) reversed and ruled that Juan Chuidian is the owner. IAC excluded the testimony of Razon under the dead man’s statute rule (DMS) under Section 20 (a) Rule 130 of the Rules of Court, although such testimony was not objected to during trial. ISSUE: WON Razon’s testimony is within the prohibition under DMS Rule. HELD: No. The case was not filed against the administrator of the estate, nor was it filed upon claims against the estate. The purpose of DMS Rule is that “if persons having a claim against the estate of the deceased or his properties were allowed to testify as to the supposed statements made by him (deceased person), many would be tempted to falsely impute statements to deceased persons as the latter can no longer deny or refute them, thus unjustly subjecting their properties or rights to false or unscrupulous claims or demands. The purpose of the law is to 'guard against the temptation to give false testimony in regard to the transaction in question on the part of the surviving party.” However, the rule is only applicable to “a case against the administrator or its representative of an estate upon a claim against the estate of the deceased person.”
In this stance, the case was filed by the administrator of the estate of the late Juan Chuidian to recover shares Juan allegedly owned (IOW, it is the estate which instituted the action or initiated the attack). Hence, the testimony of the petitioner is not within the prohibition of the rule. Records also show that Razon’s testimony was not objected to. It was subjected to crossexamination. Granting that it is within the prohibition under DMS, Chuidian is deemed to have waived the rule. The court cannot disregard evidence which would ordinarily be incompetent under the rules but has been rendered admissible by the failure of a party to object thereto.
SC’s DECISION: Juan was the owner of the shares. Razon’s testimony, though admitted, is not sufficient to prove his ownership. Records show that during his lifetime Juan was elected member of the Board of Directors which clearly shows that he was a stockholder of the corporation. From the point of view of the corporation, Juan was the owner. For Razon to claim ownership, he must show that the shares were transferred to him. Corporation Code provides that in order for a transfer of stock certificate to be effective, the certificate must be properly indorsed and that title to such certificate of stock is vested in the transferee by the delivery of the duly indorsed certificate of stock. However, since the certificate of stock covering the questioned 1,5000 shares of stock registered in the name of the late Juan Chuidian was never indorsed to the Razon, the inevitable conclusion is that the questioned shares of stock belong to Juan. Indorsement of the certificate of stock is a mandatory requirement of law for an effective transfer of a certificate of stock and Razon’s asseveration that he did not require an indorsement in view of his intimate friendship with the late Juan Chuidian cannot overcome the failure to follow the procedure required by law or the proper conduct of business even among friends. There is also preponderance of evidence that would show that the shares were given to Juan for value. Juan was the legal counsel who handled the legal affairs of the corporation and the shares were payment for his legal services to the corporation.
