Bachrach Motor Case Digest

Bachrach Motor v. Mariano Ledesma; Talisay Milling (Aug 1937) -­‐ Facts: -­‐ Bachrach brought this action to recover the amount of judgments. It appealed form the judgment declaring the right of PNB to the 6,300 stock dividends as a preferred one absolving PNB and Ledesma form the complaint. -­‐ It prayed that: o The transfer certificate of stock dividends of Talisay Milling of the PNB be declared null and void o That Talisay Milling be ordered to cancel the entry of the transfer of 6,300 stock dividends made by it on its books in favor of PNB o That Talisay Milling be order to pay Php 22K in case the 6300 stock dividends could not be sold or if the proceeds of the sale are insufficient. o That the defendants pay the cost of suit. Antecedent Facts: -­‐ Bachrach obtained judgment against Ledesma in the sum of 3K. -­‐ The special sheriff, in compliance with the writ of execution attached all right, title to and interest w/c Ledesma may have in any bonus, dividend, share of stock, money or property w/c Ledesma is entitled to receive from Talisay Milling. o This is by virtue of the fact that Ledesma mortgaged his land in favor of PNB to guarantee the indebtedness of Talisay Milling or w/c defendant is entitled to receive from Talisay on account of being a stockholder. o The notice of attachment was served to both Ledesma and Talisay. § Talisay even received a copy of the notice of attachment. -­‐ On Oct 3, 1927, Bachrach obtained judgment against Ledesma o Writ of execution caused attachment of Ledesma’s right of redemption over parcels of land. o On the day of issuance of the execution, real properties were mortgaged to PNB to secure payment to said bank by Ledesma of the sum of P624K § In the same instrument of mortgage, Ledesma mortgaged in favor of PNB shares owned by him in Talisay Millng. § Certificate covering 6,300 stock dividends were delivered as security to Atty. Roman as representative of bank PNB. o Talisay Milling granted a bonus or compensation to the owners of the real properties mortgaged to answer the debts contracted by it with PNB.

-­‐

§ Pursuant to this, Ledesma was allotted P19K. PNB brought an action against Ledesma and his wife for the recovery of mortgage credit. o PNB amended its complaint to include Bachrach Motor as a party because it claims to have some right to certain properties which PNB was also claiming. CFI Bacolod rendered judgment in favor of PNB. o Bachrach brought an action against Talisay to recover the bonus or dividends declared by the corporation against Mariano Ledesma as one of the owners of the hacienda w/c had been mortgaged to PNB to secure obligation of Talisay.

Issues: -­‐ WON pledge of stocks was ineffective against Bachrach because evidence of its date was not made to appear in a public instrument. -­‐ WON pledge could not legally exist because the certificate was not the shares themselves. o Certificate of stock cannot be the subject matter of the contracts of pledge or chattel mortgage. Held: -­‐ The pledge of stock dividends is valid against Bachrach Motor because the certificate was delivered to creditor bank PNB, notwithstanding the fact that the contract DOESN'T appear in a public instrument. o Civ. Code provides that: no pledge shall be effective against rd a 3 person unless evidence of its date appears in a public instrument. § But this provision has been modified by Chattel Mortgage Law (Sec 4) § A chattel mortgage shall not be valid against any person except the mortgagor, his executor/administrator UNLESS the possession of the property is delivered to and retained by the mortgagee OR unless the mortgage is recorded in the office of the Register of Deeds of the province in w/c the mortgagor resides. -­‐ Certificate 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. o Petitioner Bachrach contends that pledge couldn't legally exist because the certificate was not the shares themselves and that the stock certificate cannot be the subject matter of a contract of pledge or chattel mortgage.