THE BACHRACH MOTOR CO., INC., plaintiff-appellant, vs.
MARIANO LACSON
LEDESMA, TALISAY-SILAY MILLING CO., INC., and THE PHILIPPINE NATIONAL
BANK, defendant-appellees.
G.R. No. L-42462, August 31, 1937
FACTS
Bachrach Motor Co., Inc. won several civil cases against Mariano Lacson Ledesma. In the
promulgation of judgment from said cases, the sheriff attached Ledesma's stock shares from
Talisay-Silay Milling Co., Inc. to which it included the pledged preferred shares in favor of
Philippine National Bank, because Ledesma has pending debt to the latter. After seeing this
conflict, PNB filed a civil case for the recovery of credit against Ledesma with his spouse, and
included later Bachrach as party defendant. PNB won. Bachrach appealed, until it reached the
Supreme Court with the contention that: 1) The Certificate of Shares entered in favor of PNB is
different, and 2) The pledge could not legally exist because the certificate was not the shares
themselves
ISSUE
Whether or not the shares of stock can be a subject of chattel mortgage? (YES)
RULING
1. The contention is unfounded because it appears that the stock dividends in question were
pledged to the bank prior to the garnishment and because certificate No. 772 was in the
possession of said bank from February 27, 1930. The reasons upon which this court base its
opinion in declaring that the stock dividends were pledge beforehand to the Philippine National
Bank will be stated in the discussion of the following assignment of error.
2. 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.
The question is settled in this wise by the weight of American authorities and it is the modern
doctrine of general acceptance by the courts.
In view, however, of the fact that certificates of stock, while not negotiable in the sense of the
law merchant, like bills and notes, are so framed and dealt with as to be transferable, when
property endorsed, by mere delivery, and as they frequently convey, by estoppel against the
corporation or against prior holders, as good a title to the transferee as if they were negotiable,
and inasmuch as a large commercial use is made of such certificates as collateral security, and it
is to the public interest that such use should be simplify and facilitated by placing them as nearly
as possible on the plane of commercial paper, they are often spoken of and treated as quasi
negotiable, that is as having some of the attributes and partaking of the character of negotiable
instruments, in passing from hand to hand, especially where they are accompanied by an
assignment and power of attorney, executed in blank, to transfer them to anyone who may obtain
possession as holders, even though such assignment and power are under seal. (14 C. J., 665, sec
1034; South Bend First Nat. Bank vs. Lanier, 20 Law. ed., 172; Weniger vs. Success Min. Co.,
227 Fedd., 548; Scott vs. Pequonnock Nat. Bank, 15 Fed., 494.)
