FUA CUN V.

SUMMERS AND CHINA BANKING CORPORATION

44 PHIL 705
FACTS
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 than China Banking Corp.
HELD:
YES. Equity 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.