Bayla v. Silang Traffic Co. 73 Phil.

455
Facts: Petitioner (subscriber) entered into an agreement with respondent (seller) regarding the
purchase of fifteen (15) shares of capital stock by the former from the latter for the sum of P1,
500.00. Said agreement has with it certain terms and conditions, among which are cases where
the subscriber shall fail to pay the installments or to perform the conditions or if said shares shall
be attached or levied upon by creditors of the subscriber, said shares are to be automatically
reverted to the seller and the payments already made are to be forfeited in favor of the seller.
On or before July 31, 1937, petitioners failed to pay the installment due that day resulting for the
automatic forfeiture of the payments they already made. On the other hand, on August1, 1937,
the respondent corporation issued a resolution was authorizing the refund of the installments
already paid by their subscribers. Said resolution was issued by respondent for the purpose of
terminating the pending civil case involving the validity of the shares in question which was
subsequently dismissed. Based on the said resolution, the petitioners instituted an action for the
recovery of the sum of money which they have paid severally to the corporation. The corporation
set up a defense stating that said resolution was no longer applicable to the petitioners since their
shares was already reverted in favor of the seller due to their failure to pay on the due date long
before the resolution was issued. Moreover, another resolution was issued by the corporation on
August 22, 2937 revoking and cancelling the earlier resolution. The trial court issued an order
against the petitioners; and on appeal, the CA affirmed the decision of the trial court with some
modifications as to the cancellation of the petitioners subscription which was reversed by said
appellate court. Hence, an appeal by both parties for certiorari.
Issues: 1. WON the said contract is a subscription or a sale of stock
2. WON under the contract between the parties the failure of the purchaser to pay any of
the quarterly installments on the purchase price automatically give rise to the forfeitures of the
amount already paid and the reversions of the shares to the corporation.
3. WON the resolution of August 1, 1937 is valid.
Held: Judgment against the defendant.
Whether a particular contract is a subscription or a sale of stock is a matter of construction and
depends upon its terms and the intention of the parties. It should be noted that the agreement
entered into by the parties in this case is entitled Agreement for Installment Sales of Shares in
the Silang Traffic Company, Inc. It also appears that in the civil case which was earlier
dismissed, the CFI mentioned the right of the corporation to sell the shares of stock to the person
named in the resolution, including the petitioner, was impugned by the petitioners in the said
case, who claimed a preferred right to buy said shares. This shows that said contract is simply a
contract of purchase and sale. A purchase is an independent agreement between individual and
the corporation to buy shares of stock from it at a stipulated price; different from that of a

subscription which is a mutual agreement of the subscribers to take and pay for the stock of the
corporation.
With regards to the second issue, the provision regarding interest on deferred payments would
not have been inserted if it had been the intention of the parties to provide for automatic
forfeiture and cancellation of the contract. Moreover, the contract did not specifically provide
that the failure of the purchaser to pay any installments would give rise to forfeiture and
cancellation without the necessity of any demand from the seller. Under article 1100 of the Civil
Code (Now art. 1169 of the NCC) persons obliged to deliver or do something are not in default
until the moment the creditor demands of them, judicially or extrajudicially, the fulfillment of
their obligation, unless the law expressly provides that demand is no longer necessary in order
that default may arise, or if the time of delivery or service is a controlling motive for the
establishment of contract.
As to the third issue, the resolution which was made for the good of the corporation and for the
termination of the civil case benefited other petitioners. It would be an unjust discrimination to
deny the same benefit to the herein petitioners.