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ALFREDO MONTELIBANO, ET AL. vs BACOLOD-MURCIA MILLING CO.

Alfredo Montelibano et al are sugar planters under identical milling contracts w/


BACOLOD-MURCIA MILLING CO.
Executed amendments to the milling contracts = granting further concessions to
the planters
Montelibano et al signed and executed the printed Amended Milling Contract 21
days after the amendments were made
Montelibano et al filed a case = Grounds:
1.
contending that three Negros sugar centrals had already granted
increased participation to their planters
2.
under paragraph 9 of the resolution Bacolod is obligated to grant
similar concessions to them

SEC = said the donation was void = Grounds:


1.
The corporation could not dispose of its assets by gifts
2.
acted beyond the scope of its powers
Therefore Stockholders revoked the donation on this ground
Estefania their mother NOW seeks to enforce these resolutions
The company contends that:
1.
the resolution and the contract executed pursuant thereto are ultra
vires
2.
if valid, the obligation to pay the amount given is not yet due and
demandable
Issue:
WON the said Board of Directors resolution was an ultra vires act?
Held: NO

Bacolod = resisted the claim --- Grounds:


1.
stipulations contained in the resolution were made without
consideration
2.
being in effect a donation that was ultra vires and beyond the powers
of the corporate directors
3.
therefore, null and void ab initio

1)

Trial court dismissed the complaint. Hence Appeal


Issue:
WON the resolution made by the board is an ultra vires act?
Held: NO
There can be no doubt that the directors of the appellee company had authority to
modify the proposed terms of the Amended Milling Contract for the purpose of
making its terms more acceptable to the other contracting parties.
NOTE = The test to be applied is whether the act in question is in direct and
immediate furtherance of the corporation's business, fairly incident to the
express powers and reasonably necessary to their exercise. If so, the
corporation has the power to do it; otherwise, not.
Whether or not a valid & binding Resolution passed by the Board will cause losses
or decrease the profits of the corporation may not be reviewed by the courts,
because the board is the business manager of the corporation, and so long as it
acts in good faith its orders.

MARIA CLARA PIROVANO ET AL vs THE DE LA RAMA STEAMSHIP CO.

Enrico Pirovano = President of the Dela Rama Corporation


= Under his management, the corporation grew into a multimillion company until his death
Esteban dela Rama = owned and controlled the stocks of the corporation
= distributed his shareholdings among his five daughters

2)

3)

corporation was given broad and unlimited powers to carry out the
purpose for which it was organized

Including the power to = (1) invest and deal with corporate


money not immediately required
(2) aid in any other manner to
any person,
association or
corporation of
which any
obligation is held
by this corporation

The donation undoubtedly comes within the scope of


this broad power
An ultra vires act in this case is merely voidable and may become
binding and enforceable when ratified by stockholders

within the scope of the Articles of Incorporation and not


illegal nor prejudicial to the creditors of the corporation

infirmity MAY BE cured by ratification and subsequent acts


of the corporation
The donation has already been perfected such that the corporation
could no longer rescind it.

embodied in a Board Resolution

Stockholders and even its creditors as the NDC have given


their concurrence.

Estefania accepted the donation = RECORDED in


corporation

Board of Directors approved Estefanias purchase of the


house in New York

Note = To allow the corporation to undo the resolution = contravenes with the
well-settled doctrine that the defense of ultra vires cannot be se up or
availed of in any completed transaction.

Dela rama steamship = has a bonded indebtedness for the debt to the National
Development Corp

LUNETA MOTOR COMPANY vs A.D. SANTOS, INC., ET AL.

The bonded indebtedness was = converted to non-voting preferred shares of the


company
*** therefore had the right to be represented by four out of nine members in
the Board of Directors

Nicolas Concepcion = executed a chattel mortgage over his CPC to Luneta Motor
= constituted a second mortgage on the same CPC w/ DBP

BOD = adopted the a resolution as Special Payment to Minor Heirs of the late
Enrico Pirovano
= the Company had insured the life of Mr. Pirovano for a 1M
= set aside P400,000 to the Pirovano children with the sum convertible into
shares of stock.
= Leonor de la Rama and Lourdes de la Rama motioned and approved the
resolution
Submitted to the stockholders at a meeting properly convened was duly approved
Lourdes de la Rama = learned that the voting strength of the De la Rama
daughters would be adversely affected
= ask for the cancellation and waiver of her pre-emptive
rights
Don Esteban = advised the corporate secretary that the resolution be nullified
BOD = adopted a new resolution changed the donation to merely a renunciation
of all the company's "right, title, and interest as beneficiary in and to the
proceeds of the abovementioned life insurance policies"
Estefania (as guardian of the children) = accepted the donation in their behalf
Husband of Lourdes de la Rama = questioned the donation w/ the SEC

Certificate was later sold to Francisco Benitez, Jr. = Resold to Rodi Taxicab
Company
*** with assumption of the mortgage in favor of the RFC
*** approved provisionally by the Commission
Case #1
Luneta Motor = foreclose the chattel mortgage
Case #2
While the case was pending RFC also instituted foreclosure proceedings
Sold at public auction in favor of Amador D.
Santos
Sale was approved by SEC but still Subject to
the mortgage lien in favor of petitioner
CFI ruled that = chattel mortgage should be sold at public auction
= AGAIN sold at public auction in favor of Luneta Motor
= Applied for the approval of the sale from SEC
In the meantime = Amador D. Santos sold and transferred to A.D. Santos Inc
A.D Santos = OPPOSED the application = grounds:
** Luneta Motors AOI = was not authorized to purchase and/or engage in
the taxicab business or operate as a
common carrier
SEC upheld the opposition made by AD Santos. Hence Appeal

Issue:
WON Luneta Motor may acquire by purchase a certificate of public convenience
and operate as a common carrier by land?
Held: NO
Purpose of AOI does not allow them to do so

PURPOSE = may operate and otherwise deal in automobiles and


automobile accessories
= engage in the transportation of persons by water

does not mean that it may engage in the business of land


transportation = entirely different line of business

THEREFORE = Not allowed to purchase that CPC

because such acquisition would be without purpose and would


have no necessary connection with petitioner's legitimate
business

REPUBLIC OF THE PHILIPPINES vs ACOJE MINING COMPANY, INC.

Acoje Mining Company, Inc = requesting the opening of a post, telegraph and
money order offices at its mining camp
Director of Posts = agreed BUT subjected to some condition
*** whatever pecuniary loss may be suffered by the Bureau of Posts by reason of
any act of negligence on the part of the employee of the company IN
CHARGE OF THE POST
= suggested that a resolution be made to that effect be
made

= in consideration of the waiver by Crisologo over a certain


property which the GSIS agreed to sell the Ong Spouses
Since at that time, the treasurer of Mover Enterprises was not available = Atty
Benares ask Santos to sign
The check was conditioned that upon approval by the GSIS of the compromise
agreement = check will be encashed accordingly
No approval was made = MADE ANOTHER CHECK
Check was dishonored for insufficiency of funds = Filed a criminal complaint for
violation of Batas Pambansa Blg. 22
against Atty. Oscar Z.
Benares and plaintiff Ricardo S. Santos, Jr
Trial court dismissed Crisologos complaint = Grounds: consignation is NOT
APPLICABLE to this case
CA reversed and set aside said judgment of dismissal. Hence appeal = Grounds:
*** Mover Enterprises, Inc. is the accommodation party in this case not Atty
Benares and Ricardo Santos
Issue:
WON Corporation may be held liable on the accommodation instrument?
Held: NO
1.
The rule on accommodation party in negotiable instruments law DOES
NOT APPLY TO CORPORATION as accommodation parties

Reason = issue or indorsement of negotiable paper by a


corporation without consideration and for the
accommodation of another is ultra vires

Acoje Minings BOD = made the said resolution


2.
Hilario M. Sanchez = Became the postmaster went on a 3 day leave but never
returned
They informed the officials of the Manila Post Office accounts were checked
and a shortage was found
Several demands made upon the company for the payment of the shortage

GR: Pres and VP = NO POWER to execute for mere accommodation


for their individual debts or transactions arising from or in relation to
matters in which the corporation has no legitimate concern.
Exception = only if specifically authorized to do so

since it is not involved in any aspect of the corporate business


or operations THEREFORE cannot thus be enforced against
the corporation

the inescapable conclusion in law and in logic is that the


signatories thereof shall be personally liable therefor

Failed to pay hence filed a case


Company in its answer denied liability = Grounds:

1.
2.

FRED M. HARDEN vs BENGUET CONSOLIDATED MINING COMPANY

resolution of the board of directors is ultra vires


Assuming they are liable = limited to being mere guarantor

Court = ordered Acoje to pay. Hence appeal

Benguet Consolidated Mining and Balatoc Mining Co. = organized for the purpose
of engaging in the mining of gold in the Philippines

Issue:
WON the acts of BOD is ultra vires?

Balatoc were unable to supply the means for profitable operation = board ordered
a suspension of all work

Held: NO
The contention has no factual or legal basis

Balatoc called for a meeting = to establish a committee to find investors


( APPROVED BY SH )

opening of a post office branch at the mining camp = because of a


request submitted by it to promote the convenience and benefit of its
employees

company had signified its willingness to comply with the


requirement imposed by the Director of Post by ADOPTING A
BOARD RESOLUTION
The least that can be said is that it cannot now go back on its
plighted word on the ground of estoppel.
*** 'full responsibility for all cash received by the Postmaster.' =
Included in the RESOLUTION

Not Ultra Vires

corporate acts that may be performed outside of the scope of the


powers expressly conferred if they are necessary to promote the
interest or welfare of the corporation.

a corporation may become a surety where the particular


transaction is reasonably necessary or proper to the conduct of
its business

a corporation may become a surety where the particular transaction is


reasonably necessary or proper to the conduct of its business

ERNESTINA CRISOLOGO-JOSE vs COURT OF APPEALS

Mover Enterprises, Inc = VP Ricardo S. Santos, Jr


Benares

----------- President Atty.

Atty. Benares = Accommodated Ong spouses for a check drawn payable to


Ernestina Crisologo-Jose

The said committee = approached Bean ( Pres and GM of Benguet )


= to secure the necessary capital for the development of
the Balatoc properties
Benguet and Balatoc = executed a contract which provides that:
1.
Benguet was to Construc a milling plant AND Erect a power plant
2.
Benguet would receive 600k shares of Balatoc
Benguet began to perform his side of the contract = Business and Stock valuation
flourished
When success of the development had become apparent = Harden filed a suit
against Benguet to annul the certificate issued to them
*** Contending that = it is unlawful for the Benguet Company to hold any interest
in a mining corporation
The trial court dismissed the complaint, Hence this petition.
Issue:
WON it is unlawful for Benguet to hold any interest in another mining corporation?
Held: YES
1.
section 75 of the Act Congress of July 1, 1902 prohibits any such
member of a mining corporation to hold more than 15% outstanding
capital stock of another mining corporation

SEC. 190 (A) of the Corporation Law states that = If the


violation is committed by a corporation = corporation shall
be dissolved by quo warranto proceedings

enforced only by a criminal prosecution or by an action of


quo warranto

2.

THEREFORE Until thus assailed in a direct proceeding, the


contract by which the interest was acquired will be treated
as valid as between the parties

Benguet Company has committed no civil wrong against the plaintiffs

directors of the Balatoc Company and Harden = active


inducers of the commission of that wrong

The contract IS unlawful in fact = has been performed on


both sides

NOTE:

Though the arrangement of the mining companies is prohibited by law, the


shareholders cannot maintain an action to annul the contract by which such
prohibited interest was acquired

Even where corporate contracts are illegal per se, when only public or
government policy is at stake and no private wrong is committed, the courts
will leave the parties as they are in accordance with their original contractual
expectations.

The only contracts that the courts will touch are contracts which are
void for being illegal per se.

IRINEO G. CARLOS vs MINDORO SUGAR CO., ET AL


Mindoro Sugar Company
= principal purposes: acquire and exercise the franchise granted by Act No.
2720 to George Fairchild
= to substitute and acquire all the rights and obligations of the Mindoro
Company
Philippine Trust = Principal purpose = to engage in the trust business.
BOD of of Philippine Trust adopted a resolution authorizing its president to:
1.
purchase at par the bonds of Mindoro Sugar AND to resell them, with
or without the guarantee of said trust corporation
2.
guarantee to the PNB the payment of the indebtedness to said bank by
the Mindoro Sugar
Mindoro Sugar executed in favor of the Philippine Trust the deed of trust =
transferring all of its property to it in consideration of the bonds it had issued
Philippine Trust Company sold 13 bonds to Ramon Diaz
Philippine Trust paid the appellant the stipulated interest from the date of their
maturity then it stopped payment
** REASON =They did not deem itself bound to pay such interest or to redeem
the obligation because the guarantee given for the bonds
was illegal and void.
Issue:
WON PTCs power to guarantee constitute an ultra vires act?
Held: NO
1.
Based on facts and circumstances

primarily organized as a trust corporation with full power to


acquire bonds

being thus authorized to acquire the bonds = it was given


implied power to guarantee them in order to place
them upon the market under better, more
advantageous conditions, and thereby secure the
profit derived from their sale

It is not ultra vires for a corporation to enter into contracts


of guaranty or suretyship = IF it was for the legitimate
furtherance of its purposes and business

EVEN if in the course of business = guaranty may subject


the corporation to liabilities in excess of the limit of
indebtedness which it is authorized to incur
2.

Rule: When a contract is not on its face necessarily beyond the


scope of the power of the corporation by which it was made, it
will, in the absence of proof to the contrary, be presumed to be
valid

PHILIPPINE NATIONAL BANK vs COURT OF APPEALS

Philippine American General Insurance Co., Inc. executed a bond w/ Rita Gueco
Tapnio in favor of PNB
*** to guarantee the payment of Tapnios Account
Philamgen paid the said amount to PNB and seek indemnity from Tapnio

Tapnio refused to pay = alleging that he was not liable to the bank because due to
the negligence of the PNB the contract of lease w/ Tuazon was rescinded
1.
Tapnio mortgage his standing crops and sugar quota to PNB.
2.
Tapnio agreed to leased the sugar quota in excess of his need = to
Tuazon which was approved by the branch and vice president of the
PNB in the amount of P2.80 per picul
3.
Then PNBs BOD disapproved the lease STATING THAT the amount
should be P3.00 per picul w/c is the Market value of the sugar
4.
Tuazon ask for reconsideration to the board which was not acted
by the board, so the lease was not consummated
Trial Court rendered decision in favor or Tapnio. Files w/ CA but was dismissed.
Hence this petition
Issue:
WON PNB should be liable for tort?
Held: YES
1.
Ritas failure to utilize her sugar quota was due to the disapproval of the
lease by the BOD of PNB

PNB had the ultimate authority of approving or disapproving the


proposed lease since the quota was mortgaged to the bank

Art. 21 of Civil Code states, any person who willfully causes loss or
injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the
damage.
2.

corporation is civilly liable in the same manner as natural persons for


torts

liability of a principal for a tort committed by an agent are the same


whether the principal be a natural person or artificial person

liable for every tort which he expressly directs or authorizes

Rule: A corporation is liable whenever a tortuous act is


committed by an officer or agent under express direction or
authority from the stockholders or members acting as a body,
or generally, from the directors as the governing body

Supplementary Notes:

not every tortuous act committed by an officer can be ascribed to the


corporation

Only when the corporation has EXPRESSLY DIRECTED the


commission of such tortuous act, would the damages resulting
there from be ascribable to the corporation
manifested either by:
a)
adopting a resolution to such effect
b)
taken advantage of such a tortuous act the corporation,
through its board, expresslyor impliedly ratifies such an act
or is estopped from impugning such an act

Q: What is a derivative suit?


A: Since, the act of the board is essentially that of the corporation and therefore
corporate assets cannot escape enforcement of the award of damage to the tort
victim. As a remedy, the stockholders may institute a derivative suit against the
responsible board members and officers for the damages suffered by the
corporation as a result of the tort suit
THE PEOPLE OF THE PHILIPPINE ISLANDS vs TAN BOON KONG
Tan Boon Kong
** manager of the Visayan General Supply Co
** as corporation object to the payment of internal-revenue taxes upon its sales
during the four quarters of 1924
BIR = filed a criminal case against him= Grounds:
** voluntarily, illegally, and criminally REFUSES TO PAY 1 per cent of said
undeclared sales
Tan Boon Kong filed a demurrer to evidence
Trial Court sustained said motion = Ground:
the offense charged must be regarded as committed by the corporation and
not its officials
Hence Appeal.
Issue:
WON the defendant as manager may be held criminally liable?
Held: YES
1.
a corporation can act only through its officers and agents

Rule: where the business itself involves a violation of the law,


All those who participate in it are liable

Being the manager = he made a false return for purposes of


taxation

THEREFORE = being the author of the illegal act must be held


liable

Supplemental Notes on Criminal Liabilities of Corporation

to proceed criminally against a corporation = necessary that express


provisions of law be enacted providing that a corporation may be
proceeded against criminally and brought to court
But since a corporation is a legal fiction that cannot be handcuffed and
brought to court = any violation of law by any of the actors of the
corporation in the conduct of its business SHALL BE HELD LIABLE
*** Rule: where the business itself involves a violation of the
law, All those who participate in it are liable
*** People vs Tan Bon Kong

To apply the doctrine of separate juridical personality = ABUSED as a


SHIELD
Limitation in Holding the Officers Liable
*** where the corporation was directly required by law to do an act in a
given manner, and the same law makes the person who fails
to perform the act in the prescribed manner expressly liable
criminally
*** Sia vs CA

JOSE O. SIA vs THE PEOPLE OF THE PHILIPPINES


Jose Sia = General Manager of the Metal Manufacturing Company of the
Philippines, Inc
Metal Company = in need of raw materials to be imported from abroad
Jose Sia applied w/ Continental Bank for Letter of Credit to import steel sheets
from Japan
According to the Continental Bank = delivery of the steel sheets was only
permitted upon the execution of the trust receipt
According to Sia = steel sheets were already delivered and were even converted
to equipment before the trust receipt was signed by him
Debt became due but Sia failed to pay despite demands of Continental Bank.
Trial Court ruled in favor of Continental Bank. Hence Appeal
Issue:
WON petitioner Sia may be liable for the crime charged, having acted only for and
in behalf of his company?
Held: NO
1.
Reliance of the lower court to the judgment in Tan Bon Kong is wrong.

crimes committed by a corporation, the responsible officers


thereof would personally bear the criminal liability.
2.

the act alleged to be a crime is not in the performance of an act


directly ordained by law to be performed by the corporation

offense may arise = from the peculiar terms and condition


agreed upon by the parties to the transaction, not by direct
provision of the law

The partys intention must be ascertained in such a situation to


determine if criminal liability was intended to result

The absence of a provision of the law even in the RPC


making Sia criminally liable as the president of his
company created a doubt that must be ruled in his favor

Q: Why can the corporation be held liable for tortuous acts done by its agent but
not for criminal acts done outside its authority?
A: Crime is not within the corporate contemplation while negligence is. Negligence
could be part of every transaction. It is an integral part of corporate transactions.
For as long as people comprise the corporation, it is within the contemplation of
every corporate act.

ABS-CBN BROADCASTING CORPORATION vs CA

ABS-CBN = requested Viva Production, Inc. to allow ABS-CBN to air at least 14


films produced by Viva.
Del Rosario = Representative of Viva
= proposed a film package which will allow ABS-CBN to air 104 Viva
films for P60 million.
ABS CBN = proposed a counterproposal of 53 films for P35 million = OFFER
WAS REJECTED

Viva made an agreement with Republic Broadcasting Corporation (RBS ) =


which gave exclusive rights to RBS to air 104 Viva films including the 14 films
initially requested by ABS-CBN
ABS-CBN now filed a complaint for specific performance against Viva AND an
injunction against RBS to enjoin the latter from airing the films
Injunction was granted = RBS now filed a countersuit with a prayer for moral
damages = Grounds:
1.
its reputation was debased when they failed to air the shows that they
promised to their viewers
2.
relied on the ruling in People vs Manero and Mambulao Lumber vs
PNB
The trial court ruled in favor of Viva and RBS.
CA affirmed. Hence this petition.
Issue:
WON a corporation, like RBS, is entitled to an award of moral damages upon
grounds of debased reputation?
Held: NO
Moral damages are in the category of an award designed to compensate the
claimant for actual injury suffered. and not to impose a penalty on the wrongdoer
Statement in the case of People vs Manero and Mambulao Lumber vs PNB is a
mere obiter dictum hence it is not binding as a jurisprudence

an artificial person and having existence only in legal contemplation =


HAS NO feelings, emotions nor senses

therefore = CANNOT EXPERIENCE physical suffering and mental


anguish

RULE = No moral damages can be awarded to a corporation being


a juridical person

FILIPINAS BROADCASTING NETWORK, INC. vs AMEC-BCCM

Expos = radio documentary program aired every morning over DZRC-AM which
is owned by Filipinas Broadcasting Network, Inc. (FBNI)
Rima and Alegre = broadcasters
= exposed various alleged complaints against AMEC and its
administrator
AMEC and Angelita Ago = filed a case of defamation and claimed for damages
against FBNI, Rima and Alegre
1.
that AMEC is a reputable learning institution
2.
transmitted malicious imputations, and as such, destroyed their
reputation.
FBNI and the broad casters filed Answer alleging that
1.
the broadcasts against AMEC were fair and true
2.
plainly impelled by a sense of public duty to report the goings-on in
AMEC, an institution imbued with public interest.
Trial court rendered a Decision finding FBNI and Alegre liable for libel except Rima
= Grounds:
1.
broadcasts are libelous per se
2.
no factual basis = did not even verify their reports before airing them to
show good faith
3.
FBNI failed to exercise diligence in the selection and supervision of its
employees
4.
Rimas only participation is that he AGREED TO THE EXPOSE
Court of Appeals affirmed the trial courts judgment BUT INCLUDED Rima as
solidarily liable w/ FBNI and Alegre
Filed MR = Denied. Hence this petition.
Issue:
WON AMEC is entitled to moral damages?
Held: YES
AMECs claim for moral damages falls under item 7 of Article 2219 of the Civil
Code.

recovery of moral damages in cases of libel, slander or any other form


of defamation

The rule does not qualify whether the plaintiff is a natural or


juridical person

Therefore a corporation can validly and claim for moral damages

RULE: where the broadcast is libelous per se, the law implies
damages. = evidence of an honest mistake or the want of character or
reputation of the party libeled goes only in mitigation of damages

LIRAG TEXTILE MILLS, INC. vs SOCIAL SECURITY SYSTEM

Lirag Textile and SSS = entered into a Purchase Agreement


= SSS agreed to purchase from the said defendant
preferred shares
= WHICH MUST BE repurchased by Lirag

a)
b)

SSS paid and Lirag issued the preferred shares


Demanded and Lirag failed to redeem the preferred shares
SSS filed an action for specific performance and damages
Lirag 1. Denies the existence of any obligation on their part to redeem the
preferred stocks
2. Redemption of the shares purchased depended upon the financial
ability of said corporation
The lower court ruled that the purchase agreement was a debt instrument. Hence,
this petition.
Issue:
WON the Purchase Agreement is a debt instrument?
Held: YES
Its terms and conditions unmistakably show that the parties intended the
repurchase of the preferred shares

absolute obligation = (X) Depend upon the financial ability of


Lirag

if the intention was to be merely a stockholder = (X) Need to


execute the Purchase Agreement

The rights given by the Purchase Agreement to SSS are rights


not enjoyed by ordinary stockholders

They further agreed that failure to repurchase = renders the


entire obligation due and demandable and liable to pay
12% liquidated damages

TIRSO GARCIA vs LIM CHU SING

Lim Chu Sing executed a promissory note in favor of Mercantile Bank of China w/
the following conditions
1.
Pay in installments
2.
with the interest
3.
upon default = the unpaid balance and interest shall become due and
payable on demand
Defaulted Applied his shares of stock to compensate the indebtedness
Issue:
WON the application made by Mercantile Bank was proper?
Held: NO
share of stock is not an indebtedness to the owner nor evidence of
indebtedness = therefore, it is not a credit

Stockholders = not creditors of the corporation

Doctrine = the capital stock of a corporation is a trust fund to be used


more particularly for the security of creditors of the corporation

Lim Chu Sing not being a creditor of the Mercantile Bank of China
(although the latter is a creditor of the former ) there is no
sufficient ground to justify a compensation
NATIONAL EXCHANGE CO., INC. vs I. B. DEXTER

actual cash paid to the corporation


property actually received by it at a fair valuation equal to the
par value of the stock or bonds so issued.
if it is unlawful to issue stock otherwise than as stated it is self-evident
that such stipulation = ILLEGAL
ONLY obligates the subscriber to pay nothing for the shares except as
dividends may accrue upon the stock
(X) Dividend = (X) Liable discrimination in favor of the particular
subscriber = hence the stipulation is unlawful

RULE = Conditions attached to subcriptions, which, if valid, lessen the


capital of the company, are a fraud upon the grantor of the franchise, and
upon those who may become creditors of the corporation, and upon
unconditional stockholders.

LINGAYEN GULF ELECTRIC POWER COMPANY, INC. vs IRINEO BALTAZAR

Irineo Baltazar is a subscriber in Lingayen Corp = which is still has an unpaid


balance of P18500
Shareholders meeting = to call the balance of all unpaid subscribed capital stock
= Failure to pay = Revert the subscription to corp
BOD Meeting = set aside the stockholders resolution = not in a financial position to
absorb the unpaid balance of the subscribed capital stock
= decided to call 50 % of the unpaid subscription
Baltazar received notice of call = ignored the said demand. Hence this action.
Baltazar argues that =
1.
there was no valid call hence premature
2.
That granting that there was a valid call, he was released from the
obligation of the balance of his subscription by stockholders' resolution
No. 17 and No. 4
Issue:
WON there was a need for a valid call?
Held: NO and NO
1.
When the corporation becomes insolvent, with proceedings
instituted by creditors to wind up and distribute its assets, no call or
assessment is necessary before the institution of suits to collect
unpaid balance on subscription
2.

To released him from the obligation to pay for his unpaid subscription
= there must be unanimous consent of the stockholders of the
corporation

Rule: a valid and binding subscription for stock of a


corporation cannot be cancelled so as to release the
subscriber from liability without the consent of all the
stockholders or subscribers

EDWARD A. KELLER & CO., LTD. vs COB GROUP MARKETING, INC

Keller = appointed COB Group as exclusive distributor of its household products


= Keller sold on credit its products to COB Group Marketing
COB executed several securities on the products sold on credit.
COB group = were declared in default

I. B. Dexter subscribed to the corporate stock of C. S. Salmon & Co = Condition:


** That this is payable from the dividends declared until the full amount of this
subscription has been paid
Partial payment of which was made but nothing followed. ( Defaulted )
Filed a case against Dexter.
Trial Court ruled = Ordered Dexter to pay. Hence appeal
Issue:
WON the stipulation that the subscription is payable from the dividends declared
on the shares has the effect of relieving the subscriber from personal liability in an
action to recover the value of the shares?
Held: NO
The stipulation is invalid.

RULE: no corporation shall issue stock or bonds except in


exchange for

Keller filed a suit.


Issue:
WON the stockholders are liable?
Held: YES
it is settled that a stockholder is personally liable for the financial
obligations of a corporation to the extent of his unpaid subscription