Facts:
The plaintiff, the Bachrach Motor Co., Inc., on June 30, 1927, obtained judgment in civil case No. 31597 of the Court of First Instance of Manila against the defendant Mariano Lacson Ledesma, in the sum of P3,442.75, with interest thereon from March 30, 1927, with costs. That a writ of execution of said judgment was issued on August 20, 1927, and Jose Y. Orosa was appointed Special sheriff to execute it. That on October 4, 1927, said Jose Y. Orosa, as special sheriff, in compliance with the writ of execution in question, attached all right, title to and interest which the defendant Mariano Lacson Ledesma may have in "Any bonus, dividend, share of stock, money, or other property which that defendant is entitle to receive from the Talisay-Silay Milling Co., Inc., by virtue of the fact that such defendant has mortgage his land in favor of the Philippine National Bank to guarantee the indebtedness of the Talisay-Silay Milling Co., Inc., or which such defendant is entitled to receive from the Talisay-Silay Milling Co., Inc., on account of being a stockholder in the corporation or which he is entitled to receive from that corporation for any other cause or pretext whatsoever." That notice of said attachment was served not only upon the defendant Mariano Lacson Ledesma but also upon the herein defendant the Talisay-Silay Milling Co., Inc., which received a copy of the notice of attachment, as evidenced by the Annex A attached to this stipulation of facts. That on October 3, 1927, the herein plaintiff, the Bachrach Motor Co., Inc., obtained judgment in case No. 31821 of the Court of First Instance of Manila against the defendant Mariano Lacson Ledesma, in the sum of four thousand four hundred pesos and seventy-eight centavos with interest at 10 per cent per annum on the sum of P3,523.82 from April 30, 1927; in the sum of P14,171, 52 with interest at 10 per cent per annum on the sum of P13,290.89 from April 30, 1927; and in the sum of P1,150.72 with the legal interest of 6 per cent per annum thereon from May 25, 1927, and the costs. A copy of said judgment is attached to this stipulation of facts and marked Annex B. That a writ of execution of said judgment was issue, thereby causing the attachment, sale and adjudication to the plaintiff the Bachrach Motor Co., Inc., for the sum of P100, Philippine currency, of the defendant Mariano Lacson Ledesma's right of redemption over the following properties to wit: "Original certificate of title No. 1929 (Lot No. 1473 of the Cadastral Survey of Bacolod) containing an area of 2,647 square meters, more or less. It appears stipulated by the parties that, by virtue of the letters of the Philippine National Bank and having been so asked by Mariano Lacson Ledesma, certificate No. 772 covering the 6,300 stock dividends was delivered as security to Attorney Roman Lacson as representative of the bank, on February 27, 1930, in view of the fact that the original shares covered by certificate Nos. 145, 146 and 147 had been previously mortgaged to the same bank. On February 25, 1931, the Talisay-Silay Milling Co., Inc., in conformity with the letter of the Philippines National Bank of the 19th of said month, cancelled certificate No. 772 and in lieu thereof issued certificate No. 1155 in favor of said bank, which certificate includes the 6,300 stock dividends, among other shares. On the other hand, the garnishment obtained by the plaintiff, upon which it bases all its alleged preferred right was notified to the parties and became effective on August 11, 1930, more than five months after the delivery of certificate No. 772. The plaintiff, in its second assignment of error, maintains that the pledge is ineffective as against it because evidence of its date was not made to appear in a public instrument and concludes that its right to the 6,300 stock dividends is superior and preferred. It is admitted that the delivery of the certificate in question and the pledge thereof were not made to appear in a public instrument.
Issue:
WON the pledge of the 6300 stocks dividend is valid?
Ruling:
Yes, the pledge of the 6300 stocks dividend is valid.
The Court ruled that a contract of pledge or chattel mortgage should be deemed legally entered into and should produce all its effects and consequences, provided it appears to have been in some manner perfected and that the things pledged have been delivered, and in a contrary case, and even if the creditor has not received them or has not retained them in his custody, provided that the contract of pledge or chattel mortgage appears in a notarial document and is inscribed in the registry of deeds of the province.
In this case, the pledge of the 6,300 stock dividends is valid against the plaintiff for the reason that the certificate was delivered to the creditor bank, notwithstanding the fact that the contract does not appear in a public instrument.
The plaintiff further contends that the pledge could not legally exist because the certificate was not the shares themselves, making it understood that a certificate of stock or of stock dividends can not be the subject matter of the contract of pledge or of chattel mortgage. Neither is this contention tenable. Certificates of stock or of stock dividends, under the Corporation Law, are quasi negotiable instruments in the sense that they may be given in pledge or mortgage to secure an obligation.
Hence, the pledge of the 6300 stocks dividend is valid.
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