CHEMPHIL EXPORT & IMPORT v. COURT OF APPEALS, JAIME Y.

GONZALES as assignee of BPI,

Facts:
Dynetics, Inc. and Antonio M. Garcia filed a complaint for declaratory relief and/or injunction against the PISO,
BPI, LBP, PCIB and RCBC (the consortium) with the RTC of Makati, Br. 45 seeking judicial declaration,
construction and interpretation of the validity of the surety and perpetually enjoin the consortium from claiming,
collecting, and enforcing any purported obligations which Dynetics and Garcia might have undertaken in said
agreement (the consortium case). The consortium filed their respective answers with counterclaims alleging
that the surety agreement applied for the issuance of a writ of preliminary attachment against Dynetics and
Garcia.

Trial court granted Security Banks (SBTC) prayer for writ of preliminary garnishment; thus, a notice of
garnishment covering Garcias shares in CIP/ Chemphil, including the disputed shares, was served on
Chemphil through its President and said notice was duly annotated in the stock and transfer books of
Chemphil.

RTC in Civil Case No. 8527 (the consortium case) denied the application of Dynetics and Garcia for
preliminary injunction and instead granted the consortium's prayer for a consolidated writ of preliminary
attachment. Hence, after the consortium had filed the required bond, a writ of attachment was issued and
various real and personal properties of Dynetics and Garcia were garnished, including the disputed shares.
This garnishment, however, was not annotated in Chemphil's stock and transfer book.

RTC: dismissed the complaint of Dynetics and Garcia as well as the counterclaims of the consortium. The
motions for reconsideration filed by the consortium were likewise denied.

During the pendency of the appeal Garcia and the consortium entered into a Compromise Agreement, which
was approved by the CA that resulted to Garcia being dropped as a party to the appeal.

Garcia under a Deed of Sale transferred to Ferro Chemicals, Inc the disputed shares and other properties. It
was agreed upon that part of the purchase price shall be paid by FCI directly to SBTC for whatever judgment
credits that may be adjudged in the latter's favor and against Antonio Garcia in the aforementioned SBTC
case.

FCI, through its President Antonio M. Garcia, issued a check in favor of SBTC, which the latter refused to
accept the check claiming that the amount was not sufficient to discharge the debt. The check was thus
consigned by Antonio Garcia and Dynetics with the Regional Trial Court as payment of their judgment debt in
the SBTC case.

FCI assigned its 4,119,614 shares in Chemphil, which included the disputed shares, to petitioner CEIC. The
shares were registered and recorded in the corporate books of Chemphil in CEIC's name and the
corresponding stock certificates were issued to it.

Meanwhile, Antonio Garcia, in the consortium case, failed to comply with the terms of the compromise
agreement he entered into with the consortium on 17 January 1989. As a result, the consortium filed a motion
for execution which was granted by the trial court. Among Garcia's properties that were levied upon on
execution were his 1,717,678 shares in Chemphil (the disputed shares) previously garnished on 19 July 1985.

The consortium acquired the disputed shares of stock at the public auction sale conducted by the sheriff for
PhP 85M. On the same day, a Certificate of Sale covering the disputed shares was issued to it. The consortium
filed a motion (dated 29 August 1989) to order the corporate secretary of Chemphil to enter in its stock and
transfer books the sheriff's certificate of sale dated 22 August 1989, and to issue new certificates of stock in the
name of the banks concerned. The trial court granted said motion. The consortium acquired the disputed
shares of stock in the public sale conducted by the sheriff for P85M.

CEIC filed a motion to intervene saying that it is the owner of the sharedgranted by the court, but limited only
to the incidents covered by the order. Consortium opposed to CEICs motiontheir attachment lien over the
shares must prevail over the private sale in favor of CEIC considering that the shares were garnished in the
consortiums favor. On December 1989 Trial court granted CEICs motion and denied consortiums.

Consortium and PCIB filed separate motions for reconsideration for the aforesaid order which was denied
(March 1990). Consortium appealed to the CA and PCIB separately filed to the same court petition for
certiorari, prohibition and mandamus with a prayer for the issuance of the writ of preliminary injunction, likewise
assailing the very same orders (dated December 1989 and March 1990).

CA: decision confirming the ownership of Consortium over disputed shares and dismissing PCIBs petition for
certiorari on the grounds that PCIB violated the rule against forum-shopping and that no grave abuse of
discretion was committed by the Trial court issuing the assailed orders. PCIB filed to the SC petition for review.

Issue: Whether or not the consortiums attachment lien over the disputed shares is null and void and not
binding due to failure to register the lien in the stock and transfer books of Chemphil
[Whether or not attachments of shares of stock included in the term "transfer" as provided in Sec. 63 of the
Corporation Code (NO)]

Held:
The attachment lien acquired by the consortium is valid and effective. Both the Revised Rules of Court and the
Corporation Code do not require annotation in the corporation's stock and transfer books for the attachment of
shares of stock to be valid and binding on the corporation and third party.
Section 74 of the Corporation Code which enumerates the instances where registration in the stock and
transfer books of a corporation provides:
Sec. 74. Books to be kept; stock transfer agent. xxx xxx xxx
Stock corporations must also keep a book to be known as the stock and transfer book, in which must be
kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid
and unpaid on all stock for which subscription has been made, and the date of payment of any settlement;
a statement of every alienation, sale or transfer of stock made the date thereof, and by and to whom made ;
and such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the
principal ofce of the corporation or in the ofce of its stock transfer agent and shall be open for inspection
by any director or stockholder of the corporation at reasonable hours on business days.
xxx xxx xxx
Section 63 of the same Code states:
SEC. 63. Certificate of stock and transfer of shares. The capital stock of stock 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 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.
The Supreme Court rules in the negative. As succinctly declared in the case of Monserrat v. Ceron, chattel
mortgage over shares of stock need not be registered in the corporation's stock and transfer book inasmuch as
chattel mortgage over shares of stock does not involve a "transfer of shares," and that only absolute transfers
of shares of stock are required to be recorded in the corporation's stock and transfer book in order to have
"force and effect as against third persons."
Although the Monserrat case refers to a chattel mortgage over shares of stock, the same may be applied to the
attachment of the disputed shares of stock in the present controversy since an attachment does not constitute
an absolute conveyance of property but is primarily used as a means "to seize the debtor's property in order to
secure the debt or claim of the creditor in the event that a judgment is rendered."
Shares of stock being personal property, may be the subject matter of pledge and chattel mortgage. Such
collateral transfers are however not covered by the registration requirement of Section 63, since our
Supreme Court has held that such provision applies only to absolute transfers thus, the registration in the
corporate books of pledges and chattel mortgages of share cannot have any legal effect.
 xxx xxx xxx
The requirement that the transfer shall be recorded in the books of the corporation to be valid as against
third persons has reference only to absolute transfers or absolute conveyance of the ownership or title to a
share.
CEIC's reliance on the Samahang Magsasaka case is misplaced. Nowhere in the said decision was it
categorically stated that annotation of the attachment in the corporate books is mandatory for its validity and for
the purpose of giving notice to third persons.