FUA CUN V. SUMMERS AND CHINA BANKING CORPORATIONFACTS
Chua Soco subscribed for 500 shares of stock to China banking
Corp. paying the sum of P25,000 which is the one-half of the
subscription price in cash for which a receipt was issued.
Chua Soco executed a promissory note in favour of Fua Cun for
P25, 000 securing with a chattel mortagage on the formers shares of
stock in China Banking Corp. Chua Soco endorsed the aforementioned
receipt to Fua Cun and delivered it to the latter. Fua Cun took the
receipt to the manager of China Banking Corp. and informed him of
the transaction with Chua Soco, but was told to await action upon
the matter by the BOD.
In the meantime, Chua Soco appears to be indebted to China
Banking Corp. for the non-payment of drafts accepted by the former.
Chua Socos interest in the 500 shares subscribed for was attached
and the receipt seized by the sheriff. The attachment was levied
after China Banking Corp. learned that the receipt was endorsed to
Fua Cun.
Trial court rendered judgment in favour of Fua Cun.ISSUE: WON
Fua Cuns lien is superior that China Banking Corp.? YES!HELDEquity
in shares of stock may be assigned, the assignment becoming
effective as between the parties and as to third parties with
notice. Equity in shares of stock may be a subject of a chattel
mortgage but such will operate as a conditional equitable
assignment.
The claim of China Banking Corp. was for the non-payment of
drafts accepted by Chua Soco and had no direct connection with the
shares of stock in question. A corporation has no lien upon the
shares of stockholders for ay indebtedness to the corporation.
If banking institutions were given a lien on their own stock for
the indebtedness of the stockholders, the prohibition against
granting loans or discounts upon the security of the stock would
become largely ineffective.
Moreover, the attachment was levied after China Banking Corp.
had received notice of the assignment of Chua Socos interests to
Fua Cun and was therefore subject to the rights of the latter.
Hence, as against these rights, China Banking Corp. holds no
lien.
