Case Digest

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G.R. No. L-42091             November 2, 1935
GONZALO CHUA GUAN, plaintiff-appellant, 
SAMAHANG MAGSASAKA, INC., and SIMPLICIO OCAMPO, ADRIANO G. SOTTO, and EMILIO VERGARA, as president, secretary and treasurer respectively of the same, defendants-appellees.

1. Gonzalo Toco, the owner of the 5,894 shares of capital stock mortgaged these shares to Chua Chiu to guarantee the payment of debt of 20,000. -These shares were represented by 9 certificates; having a par value of P5 per share -The said shares were delivered by the mortgagor to the mortgagee, Chua Chiu -The mortgage was duly registered in the office of the registered of deeds of Manila and in the office of the corporation 2. Toco defaulted in the payment of said debt at maturity thus, Chua Guan foreclosed said mortgage. - He delivered the certificates of stock and copies of the mortgage and assignment to the sheriff of the City of Manila to sell the shares at a public auction. 3. Plaintiff tendered the certificates of stock standing in the name of Co Toco to the proper officers of the corporation for cancellation and demanded that they issue new certificates in the name of Chua Guan but the company refused. Held:

1. Registration of chattel mortgage in the office of corporation not necessary and had no legal effect. 2. Difficulty on the practical application of the Chattel Mortgage law to shares of stock of a corporation - Equity in shares of stock is of such an intangible character. -This form of mortgage is ill suited to the pledging of shares of stock and has been rarely used elsewhere. -In fact, it has been doubted whether shares of stock in a corporation are chattels in the sense in which that word is used in chattel mortgage statutes (see Fua Cun vs. Summers and China Banking Corporation). 3. To execute a valid chattel mortgage effective against third persons: a. First, the possession of the property mortgaged must be delivered to and retained by the mortgagee b. Second,...
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