Halley v.

Printwell
G.R. No. 157549 May 30, 2011 Bersamin, J. Marin
petitioners Donnina C. Halley
respondents Printwell, Inc.
summary Printwell, Inc. sued Business Media Philippines, Inc. for its outstanding obligations owed to
it by the latter. It later on impleaded the incorporators of BMPI to the extent of their unpaid
subscriptions. Court held that under the trust fund doctrine, an incorporator may be
pursued by a corporation’s creditors to the extent of the unpaid amounts for his
subscription.

facts of the case

This case concerns the liability of the incorporators of Business Media Philippines, Inc. (BMPI) who are as
follows:

Subscriber No. of shares Total subscription Amount paid

Donnina C. Halley 35,000 P 350,000.00 P87,500.00
Roberto V. Cabrera, Jr. 18,000 P 180,000.00 P45,000.00
Albert T. Yu 18,000 P 180,000.00 P45,000.00
Zenaida V. Yu 2,000 P 20,000.00 P5,000.00
Rizalino C. Vineza 2,000 P 20,000.00 P5,000.00
TOTAL 75,000 P750,000.00 P187,500.00

Under its Articles of Incorporation BMPI had an authorized capital sotck of P3,000,000.00 divided into
300,000 shares worth P10.00 each. In furtherance of its business, BMPI contracted the services of Printwell (a
corporation that was engaged in the business of printing magazines) for the publication of its magazines. In
order to facilitate their business transaction, BMPI availed of Printwell’s services on credit as evidenced by
invoices and delivery receipts whose aggregate value totaled P316,342.76—of this amount, only P25,000 had
been paid at the time that this case was filed. Upon the failure of BMPI to promptly settle its indebtedness,
Printwell filed an action to collect the former’s outstanding liability. Subsequently, Printwell impleaded the
incorporators as well for the purpose of imputing liability to the extent of their unpaid subscriptions which are
as follows:

Name Unpaid Shares

Donnina C. Halley P 262,500.00
Roberto V. Cabrera, Jr. P135,000.00
Albert T. Yu P135,000.00
Zenaida V. Yu P15,000.00
Rizalino C. Viñeza P15,000.00
TOTAL P 562,500.00

For their defense, the incorporators averred that they had fully paid their subscriptions to the corporation
and presented receipts in order to substantiate their defense. This defense, if upheld by the court, would mean
that Printwell would have no recourse against the incorporators because the money that the latter sought to
collect was already in the possession of the corporation. Further, the incorporators claimed that not only did

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BMPI possess a legal personality distinct and separate from their own, they had decided to dissolve the same
anyway.

RTC = ruled against the incorporators and held that their allegation that they had fully paid their subscriptions
to BMPI was false due to irregularities and inconsistencies in the official receipts presented—mostly due to the
fact that receipt numbers did not follow the alleged chronological order of payment. In any case, even if they
had paid their subscriptions in full, the RTC ruled that they could not use the separate personality of BMPI to
evade liability. Thus, on the basis of their unpaid subscriptions, the RTC held them liable pro rata. In justifying
its ruling, the RTC reiterated the established doctrine that subscriptions to the capital stock of the corporation
constitute a fund to which creditors have a right to look for satisfaction of their claims.

CA = affirmed the RTC’s ruling and invoked the trust fund doctrine that allows corporate creditors to look to
the unpaid subscriptions for purposes of settling unpaid corporate debts (essentially the same as the RTC’s line
of reasoning; just gave it a label). According to the CA, the purpose of such doctrine is to safeguard the rights
of corporate creditors because in the event that subscriptions initially pledged are not fully paid by an
incorporator, then, assuming that the trust fund doctrine does not exist, a creditor would have no other means
of collecting on the corporation’s debt.

issue
WON the RTC violated the Constitutional and remedial law requirement that the judgment or final order of a
Court should state clearly and distinctly the facts and law on which it is based – NO
WON the CA erred in upholding the decision of the RTC to pierce the veil of corporate fiction – NO
WON the CA erred in applying the trust fund doctrine – NO

ratio
I. As regards the supposed violation of the Constitution and Rules of Court

The petitioner argued that the RTC basically just reproduced the memorandum of Printwell when it
rendered its decision. She alleged that as a result of such reproduction, she had no idea as to how the RTC
reached its conclusions and the bases therefor. The Court debunked this argument by pointing out two things:

1. There is nothing untoward or dubious in the similarity of arguments, cited references, and opinions
between a party-litigant and the court given that both operate under the same set of laws and exist
under the same prevailing jurisprudence
2. Given that the petitioner was able to impute so many alleged mistakes in the RTC’s decision, it can
hardly be said that the decision itself did not readily lend itself to analysis and criticism

II. As to the necessity of piercing the veil of corporate fiction

The petitioner argued that she had no participation in the transaction between BMPI and Printwell, that
she never dealt with Printwell in her capacity as an individual. As such, she should not be held liable for the
debts of BMPI.

The Court ruled that the corporate personality may be disregarded upon a showing that such separate
personality is being used as shield to perpetuate fraud or as a means to unjustly benefit certain individuals at
the cost of others. Further, notwithstanding the absence of any indication in the complaint or testimonies that
the petitioner never dealt with Printwell personally, her personal liability subsisted because she, along with
the other incorporators, were in charge of BMPI at the time that the services of Printwell were availed of. In
other words, as incorporator of BMPI, she derived benefit from its existence by way of Printwell’s services. By

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virtue of such benefit, she cannot evade liability insofar as her unpaid subscription is concerned. In summary,
the degree of her participation in the transaction is immaterial in the context of incurring liability.

III. As regards the application of the trust fund doctrine

Petitioner argues that the trust fund doctrine finds no application because she had already settled her
subscriptions as evidenced by several receipts presented—note that in the case of receipts issued in her name,
no inconsistencies existed.

The Court, however, pointed out that when the satisfaction of a debt is alleged, the burden to prove the
same rests squarely on the shoulders of the debtor. As applied to the case at bar, the receipts she presented are
not able to satisfactorily substantiate such fact of payment. Further, she paid for her subscriptions by means of
a check that, under the law, is not legal tender and does not produce the effect of payment until its
encashment. No such fact of encashment was indicated by the receipts—all they signified was that a check had
been given by the petitioner for the amounts indicated therein. Also, the Court was perplexed as to why the
petitioner relied so much on the income tax return and statement of assets and liabilities of BMPI as proof of
payment. Those documents, according to the court, have no bearing insofar as proving payment is concerned.
What would have been persuasive had it been presented was the stock and transfer book because under Sec.
65 of the Corp Code, no certificate of stock is issued except and only upon full payment of what has been
subscribed to. Given that the petitioner had not proven the fact of payment as regards her subscription, the
trust fund doctrine is applicable.

“All the assets and property belonging to the corporation held in trust for the benefit of creditors that were distributed or in the
possession of the stockholders, regardless of full payment of their subscriptions, may be reached by the creditor in satisfaction of his
claim … a corporation has no legal capacity to release an original subscriber to its capital stock from the obligation of paying for his
shares, in whole or in part, without valuable consideration, or fraudulently, to the prejudice of creditors. The creditor is allowed to
maintain an action upon any unpaid subscriptions and thereby steps into the shoes of the corporation for the satisfaction of its debt.”

Finally, the petitioner argued that the RTC and CA erred in relying on Articles of Incorporation (AoI) of
BMPI because the same did not indicate the latest subscription status of the corporation. In response, the Court
clarified that the AoI were consulted primarily for determining WON there had been full payment of the
subscriptions of the incorporators; it was not consulted for actually determining to what extent the
subscriptions remained unpaid, if any.

IV. As regards liability

The Court held that the RTC was mistaken in only holding the petitioner liable for the pro rated amount of
her subscription. Under the law and jurisprudence, a stockholder is personally liable for the financial
obligations of the corporation to the extent of the unpaid subscription. Hence, she is liable for the totality of her
unpaid subscription. Loko.

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