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

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

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 multi-million company until his death

Esteban dela Rama = owned and controlled the stocks of the corporation
= distributed his shareholdings among his five daughters

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

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

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

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 Director’s resolution was an ultra vires act?
Held: NO
1) 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

2) 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

3) 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 Estefania’s 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.
LUNETA MOTOR COMPANY vs A.D. SANTOS, INC., ET AL.

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

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 Motor’s 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

Acoje Mining’s BOD = made the said resolution

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

Failed to pay hence filed a case

Company in its answer denied liability = Grounds:

1. resolution of the board of directors is ultra vires
2. Assuming they are liable = limited to being mere guarantor

Court = ordered Acoje to pay. Hence appeal

Issue:
WON the acts of BOD is ultra vires?

Held: NO
The contention has no factual or legal basis
 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 ----------- President  Atty. Benares

Atty. Benares = Accommodated Ong spouses for a check drawn payable to Ernestina Crisologo-Jose
= 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 Crisologo’s 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

2. 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
FRED M. HARDEN vs BENGUET CONSOLIDATED MINING COMPANY

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

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

Balatoc called for a meeting = to establish a committee to find investors ( APPROVED BY SH )

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
 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

2. 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 PTC’s 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 Tapnio’s 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 PNB’s 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. Rita’s 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 1½ 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 party’s 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

“Exposé” = 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. Rima’s only participation is that he AGREED TO THE EXPOSE

Court of Appeals affirmed the trial court’s 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
AMEC’s 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

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

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
a) actual cash paid to the corporation
b) 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

Shareholder’s 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

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