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    PADGETT vs. BABCOCK

    Uploaded by

    Ruth Tenajeros
    The document summarizes a case involving a restriction on the transfer of corporate shares. Padgett owned 44 shares of Babcock & Templeton, Inc. that were represented by certificates marked "nontransferable." Padgett wanted to sell his shares, but the company refused, citing the restriction. The court held that the restriction was illegal and an undue limitation on Padgett's ownership rights, as shareholders generally have the right to freely transfer their shares unless a valid restriction exists. Any attempt to restrict the transfer of shares without a valid basis is seen as an illegal restraint on trade. The ruling found in favor of Padgett and allowed him to freely transfer his shares.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    PADGETT vs. BABCOCK

    Uploaded by

    Ruth Tenajeros
    394 views1 page
    The document summarizes a case involving a restriction on the transfer of corporate shares. Padgett owned 44 shares of Babcock & Templeton, Inc. that were represented by certificates marked "nontransferable." Padgett wanted to sell his shares, but the company refused, citing the restriction. The court held that the restriction was illegal and an undue limitation on Padgett's ownership rights, as shareholders generally have the right to freely transfer their shares unless a valid restriction exists. Any attempt to restrict the transfer of shares without a valid basis is seen as an illegal restraint on trade. The ruling found in favor of Padgett and allowed him to freely transfer his shares.

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    11. PADGETT vs. BABCOCK.docx

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    The document summarizes a case involving a restriction on the transfer of corporate shares. Padgett owned 44 shares of Babcock & Templeton, Inc. that were represented by certificates marked "nontransferable." Padgett wanted to sell his shares, but the company refused, citing the restriction. The court held that the restriction was illegal and an undue limitation on Padgett's ownership rights, as shareholders generally have the right to freely transfer their shares unless a valid restriction exists. Any attempt to restrict the transfer of shares without a valid basis is seen as an illegal restraint on trade. The ruling found in favor of Padgett and allowed him to freely transfer his shares.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    394 views1 page

    PADGETT vs. BABCOCK

    Uploaded by

    Ruth Tenajeros
    The document summarizes a case involving a restriction on the transfer of corporate shares. Padgett owned 44 shares of Babcock & Templeton, Inc. that were represented by certificates marked "nontransferable." Padgett wanted to sell his shares, but the company refused, citing the restriction. The court held that the restriction was illegal and an undue limitation on Padgett's ownership rights, as shareholders generally have the right to freely transfer their shares unless a valid restriction exists. Any attempt to restrict the transfer of shares without a valid basis is seen as an illegal restraint on trade. The ruling found in favor of Padgett and allowed him to freely transfer his shares.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    11. Cyrus PADGETT v. BABCOCK & TEMPLETON, INC. and W.R.

    restrain of trade (in the absence of a valid lien upon its shares, and except when a
    BABCOCK valid restrictive regulations and agreements exist).
    G.R. No. 38684 | 21 December 1933
    -> Subject only to such restrictions, a stockholder cannot be controlled on or
    FACTS restrained from exercising his right to transfer by the corporation, its officers, or
    1. Padgett was an employee of Babcock & Templeton, Inc. (Babcock, Inc). During other stockholders (even though the sale is to a competitor of the company, to an
    the period that he rendered services to the company, Padgett bought 35 shares (P100 insolvent person, etc.)
    a share) of Babcock, Inc. at the suggestion of the president of said corporation.
    -> Hence, the restriction consisting in the word “nontransferable” appearing on the
    2. Padgett also received 9 shares by way of bonus during Christmas seasons. Thus, 12 certificates is illegal and should be eliminated.
    he became the owner of 44 shares for which 12 certificates were issued in his favor.
    The word “nontransferable” appears on each and every one of these
    certificates. RECALL: Fleischer vs. Botica Nolasco
    A clause in the by-laws of the corporation states that the owner of a share of stock
    3. Padgett, before severing his connections with Babcock, Inc., proposed to the could not sell it to another person except to the said corporation.
    president that Babcock, Inc. buy his 44 shares at par value plus interest, or that he be ISSUE: W/N the said restriction is valid.
    authorized to sell them to other persons.
    HELD: No. The only restraint imposed by the Corporation Code upon transfer of
    4. The said president offered to buy Padgett’s shares first at P85 each and then at shares is in Section 63: “ No transfer, however, shall be valid, except as between the
    P80. Padgett did not agree. parties, until the transfer is entered and noted upon the books of the corporation so
    as to show the names of the parties to the transaction, the date of the transfer, the
    5. The defendants admit that the 44 shares have become the property of Padgett. number of the certificate, and the number of shares transferred”
    They said that under the law Padgett has the right to have the restriction
    “nontransferable”, that appeared on the 12 certificates, eliminated. After that,
    Padgett may sell the said shares to anybody. But the company is not bound or
    obliged to buy said shares at par value.

    ISSUE
    W/N the resstriction consisting in the word “nontransferable” appearing on the
    certificates of shares is illegal.

    HELD
    Yes. It is illegal because it constitutes an undue limitation of the right of ownership
    and is in restraint of trade.

    General rule: Shares of corporate stock are regarded as property. Thus, the owner of
    such shares may dispose of them as he sees fit.

    Exception: Unless the (1) corporation has been dissolved, or (2) the right to dispose
    or transfer is properly restricted, or (3) the owner’s privilege of disposing of his
    shares has been hampered by his own action.

    Any restriction on a stockholder’s right to dispose of his shares must be construed


    strictly; and any attempt to restrain a transfer of shares is regarded as being in

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