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Fua Cun vs. Summers

Chua Soco subscribed to and paid half of the subscription price for 500 shares of stock in a bank. He executed a promissory note for the unpaid balance, secured by a chattel mortgage on the shares, in favor of Fua Cun. Chua then incurred debts to the bank and his shares were attached. Fua sued, claiming a lien on 250 shares. The Court ruled that paying half the subscription did not make Chua owner of half the shares. However, Chua did acquire rights to 250 shares through payment, and Fua's lien on those shares took priority over the bank's attachment, as the bank had notice of the assignment to Fua before attaching the shares.

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Rivera Meriem Grace Mendez
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340 views3 pages

Fua Cun vs. Summers

Chua Soco subscribed to and paid half of the subscription price for 500 shares of stock in a bank. He executed a promissory note for the unpaid balance, secured by a chattel mortgage on the shares, in favor of Fua Cun. Chua then incurred debts to the bank and his shares were attached. Fua sued, claiming a lien on 250 shares. The Court ruled that paying half the subscription did not make Chua owner of half the shares. However, Chua did acquire rights to 250 shares through payment, and Fua's lien on those shares took priority over the bank's attachment, as the bank had notice of the assignment to Fua before attaching the shares.

Uploaded by

Rivera Meriem Grace Mendez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Fua Cun vs.

Summers
Facts:
Chua Soco subscribed to 500 shares of stock in China Banking Corp. at a par value of
P100 per share. He paid for half of such subscription, in the amount of P25,000. A
receipt for the said payment was issued stating that a new certificate of shares of stock
shall be issued in the name of Chua once the balance of the subscription is paid, and
surrender of the receipt. Chua thereafter executed a promissory note in favor of Fua
Cun for the sum of P25,000, secured by a chattel mortgage on the shares of stock
owned by Chua in the Bank. Chua endorsed the receipt to Fua Cun, which the latter
brought to the Bank. The manager of the Bank was informed of the transaction between
Chua and Fua, but Fua was told to await the action of the Board upon the matter.
Thereafter, Chua incurred a P37,731 debt with the Bank due to dishonored acceptances
of commercial paper. His interest in the 500 shares of stock was levied upon by the
sheriff to satisfy such debt. Fua thus filed an action alleging that by he had a lien on 250
shares of stock due to the chattel mortgage thereon, which he said was owned by Chua
Soco. He sought to have the receipt delivered to him and that he be awarded damages.
Issue:
Whether Chua Soco, through the payment of the P25,000, acquired the right to 250
shares which were fully paid up.
Ruling:
No. The Court stated that the payment of half the subscription price does not make the
holder of stock the owner of half the subscribed shares. Plaintiff's rights consist in
equity in 500 shares and upon payment of the unpaid portion of the subscription price
he becomes entitled to the issuance of certificate for the said 500 shares in his favor.
However, shares for which no certificate of stock has been issued may validly be
mortgaged in whole (and not just with respect to the portion paid-up) and the
corporation receiving notice thereof is bound to respect the security arrangement.
Equity in shares of stock may be assigned. The assignment becomes 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.
Fua Cun vs. Summers
FACTS:
Chua Soco subscribed to 500 shares of stock in China Banking Corp. at a par value of
P100 per share. He paid for half of such subscription, in the amount of P25,000. A
receipt for the said payment was issued stating that a new certificate of shares of stock
shall be issued in the name of Chua once the balance of the subscription is paid, and
surrender of the receipt. Chua thereafter executed a promissory note in favor of Fua
Cun for the sum of P25,000, secured by a chattel mortgage on the shares of stock
owned by Chua in the Bank. Chua endorsed the receipt to Fua Cun, which the latter
brought to the Bank. The manager of the Bank was informed of the transaction between
Chua and Fua, but Fua was told to await the action of the Board upon the matter.
Thereafter, Chua incurred a P37,731 debt with the Bank due to dishonored acceptances
of commercial paper. His interest in the 500 shares of stock was levied upon by the
sheriff to satisfy such debt. Fua thus filed an action alleging that by he had a lien on 250
shares of stock due to the chattel mortgage thereon, which he said was owned by Chua
Soco. He sought to have the receipt delivered to him and that he be awarded damages.
ISSUE:
Whether Chua Soco, by paying ½ of the subscription price of the 500 shares of stock in
effect became the owner of 250 shares, and whether Fua has a lien on the said shares
superior to that of the bank.
RULING:
Chua Soco did NOT, by paying ½ of the subscription price of the 500 shares of stock, in
effect became the owner of 250 shares. The attachment on such 500 shares was due to
the non-payment of drafts accepted by Chua and had no direct connection with the
shares of stock in question. But, as against the rights of Fua, the Bank had no lien
unless by virtue of the attachment. But, such attachment was levied AFTER the Bank
had received notice of the assignment of Chua Soco‘s interests to Fua. It follows that as
against these rights the Bank holds no lien whatever. Thus, Chua Soco acquired the
right to 250 shares of stock through the P25,000 payment, upon which Fua holds a lien
superior to that of the Bank. The receipt evidencing the P25,000 payment must be
surrendered to Fua.
A banking corporation has no lien upon its own stock for the indebtedness of the
stockholders even when the by-laws provide that the shares shall be transferable only
upon the books of the corporation and that no such transfer shall be made if the holder
of the shares is indebted to the corporation. In the absence of special agreement to the
contrary, a subscriber for a certain number of shares of stock does not, upon payment
of one-half of the subscription price, become entitled to the issuance of certificates for
one-half the number of shares subscribed for; the subscriber's right consists only in an
equity entitling him to a certificate for the total number of shares subscribed for by him
upon payment of the remaining portion of the subscription price.

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