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Wilson P. Gamboa v. Finance Secretary Margarito Teves, et al., G.R. No.

176579, June 28, 2011

CARPIO, J.: I. THE FACTS This is a petition to nullify the sale of shares of stock of Philippine Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines, acting through the Inter-Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited (First Pacific), a Hong Kong-based investment management and holding company and a shareholder of the Philippine Long Distance Telephone Company (PLDT). The petitioner questioned the sale on the ground that it also involved an indirect sale of 12 million shares (or about 6.3 percent of the outstanding common shares) of PLDT owned by PTIC to First Pacific. With the this sale, First Pacifics common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing the total common shareholdings of foreigners in PLDT to about 81.47%. This, according to the petitioner, violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership of the capital of a public utility to not more than 40%, thus:
Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. (Emphasis supplied)


THE ISSUE Does the term capital in Section 11, Article XII of the Constitution refer to the total common shares only, or to the total outstanding capital stock (combined total of common and non-voting preferred shares) of PLDT, a public utility?

III. THE RULING [The Court partly granted the petition and held that the term capital in Section 11, Article XII of the Constitution refers only to shares of stock entitled to vote in the election of directors of a public utility, i.e., to the total common shares in PLDT.] Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no voting rights, the term capital in Section 11, Article XII of the Constitution refers only to common shares. However, if the preferred shares also have the right to vote in the election of directors, then the term capital shall include such preferred shares because the right to participate in the control or management of the corporation is exercised

through the right to vote in the election of directors. In short, the term capital in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of directors. To construe broadly the term capital as the total outstanding capital stock, including both common and non-voting preferred shares, grossly contravenes the intent and letter of the Constitution that the State shall develop a self-reliant and independent national economy effectively controlled by Filipinos. A broad definition unjustifiably disregards who owns the all-important voting stock, which necessarily equates to control of the public utility. Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors. PLDTs Articles of Incorporation expressly state that the holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the election of directors or for any other purpose or otherwise participate in any action taken by the corporation or its stockholders, or to receive notice of any meeting of stockholders. On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors. PLDTs Articles of Incorporation state that each holder of Common Capital Stock shall have one vote in respect of each share of such stock held by him on all matters voted upon by the stockholders, and the holders of Common Capital Stock shall have the exclusive right to vote for the election of directors and for all other purposes. It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common shares of PLDT. In fact, based on PLDTs 2010 General Information Sheet (GIS), which is a document required to be submitted annually to the Securities and Exchange Commission, foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common shares. In other words, foreigners hold 64.27% of the total number of PLDTs common shares, while Filipinos hold only 35.73%. Since holding a majority of the common shares equates to control, it is clear that foreigners exercise control over PLDT. Such amount of control unmistakably exceeds the allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, Article XII of the Constitution. As shown in PLDTs 2010 GIS, as submitted to the SEC, the par value of PLDT common shares is P5.00 per share, whereas the par value of preferred shares is P10.00 per share. In other words, preferred shares have twice the par value of common shares but cannot elect directors and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos while foreigners own only a minuscule 0.56% of the preferred shares. Worse, preferred shares constitute 77.85% of the authorized capital stock of PLDT while common shares constitute only 22.15%. This undeniably shows that beneficial interest in PLDT is not with the nonvoting preferred shares but with the common shares, blatantly violating the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership in a public utility. In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of the dividends, of PLDT. This directly contravenes the express command in Section 11, Article XII of the Constitution that [n]o franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to x x x corporations x x x organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens x x x. To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the sole right to vote in the election of directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDTs common shares, constituting a minority of the voting stock, and thus do not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the dividends that common shares earn; (5) preferred shares have twice the par value of common shares; and (6) preferred shares constitute

77.85% of the authorized capital stock of PLDT and common shares only 22.15%. This kind of ownership and control of a public utility is a mockery of the Constitution. [Thus, the Respondent Chairperson of the Securities and Exchange Commission was DIRECTED by the Court to apply the foregoing definition of the term capital in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company, and if there is a violation of Section 11, Article XII of the Constitution, to impose the appropriate sanctions under the law.]


* The

Heirs of Wilson P. Gamboa substituted petitioner Wilson P. Gamboa per Resolution dated 17 April 2012 which noted the Manifestation of Lauro Gamboa dated 12 April 2012.

Resolution 2 G.R. No. 176579

PABLITO V. SANIDAD and Promulgated: ARNO V. SANIDAD, P ett tl oners-m -In terventw n. OCTOBER 09, 2012

G.R. No. 176579, October 9, 2012 [Constitutional Law, Corporation] The term capital does not refer to both preferred and common stocks treated as the same class of shares regardless of differences in voting rights and privileges. Consistent with the constitutional mandate that the State shall develop a self-reliant and independent national economy effectively controlled by Filipinos, the term "capital" means the outstanding capital stock entitled to vote (voting stock), coupled with beneficial

ownership, both of which results to "effective control." "Mere legal title is insufficient to meet the 60 percent Filipino owned capital required in the Constitution for certain industries. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is required." In this case, such twin requirements must apply uniformly and across the board to all classes of shares comprising the capital. Thus, "the 60-40 ownership requirement in favor of Filipino citizens must apply separately to each class of shares, whether common, preferred non-voting, preferred voting or any other class of shares." This guarantees that the controlling interest in public utilities always lies in the hands of Filipino citizens.

Hydro Resources Contractors vs National Irrigation Administration (GR No 160251, Nov 10, 2005, Santiago) Facts: A contract was entered into between Hydro and NIA for the project of the latter. The contract price is to be payable partly in Philippine peso and US dollars. Once the project was being executed, there was depreciation in value of Peso resulting to price differential. In order to resolve the issue, the administrator of NIA, Mr Tek, and Hydro made a joint computation of the amount corresponding to the foreign currency differential. The computation showed that NIA owed Hydro for the differential. When a demand was made by Hydro against NIA, NIA refused to pay contending that Mr Tek has no authority to participate into a joint computation of the foreign currency differential and that Mr Tek has no authority to bind NIA. Issue: Whether or not Mr Tek has the authority to bind NIA in the joint computation of the foreign currency differential. Held: The SC found out that in the course of the project, Hydro has been dealing with NIA represented by Mr. Tek. And applying the doctrine of apparent authority, if a corporation knowingly permits one of its officers to act within the scope of an apparent authority, it holds him out to the public possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be stopped from denying the agents authority.

Associated Bank vs. Court of Appeals

FACTS: Associated Banking Corporation and Citizens Bank and Trust Company (CBTC) merged to form just one banking corporation known as Associated Citizens Bank (later renamed Associated Bank), the surviving bank. After the merger agreement had been signed, but before a certificate of merger was issued, respondent Lorenzo Sarmiento, Jr. executed in favor of Associated Bank a promissory note, promising to pay the bank P2.5 million on or before due date at 14% interest per annum, among other accessory dues. For failure to pay the amount due, Sarmiento was sued by Associated Bank. Respondent argued that the plaintiff is not the proper party in interest because the promissory note was executed in favor of CBTC. Also, while respondent executed the promissory note in favor of CBTC, said note was a contract pour autrui, one in favor of a third person who may demand its fulfillment. Also, respondent claimed that he received no consideration for the promissory note and, in support thereof, cites petitioner's failure to submit any proof of his loan application and of his actual receipt of the amount loaned. ISSUE: 1.) Whether or not Associated Bank, the surviving corporation, may enforce the promissory note made by private respondent in favor of CBTC, the absorbed company, after the merger agreement had been signed, but before a certificate of merger was issued? 2.) Whether or not the promissory note was a contract pour autrui and was issued without consideration? HELD: The petition is impressed with merit. Associated Bank assumed all the rights of CBTC. Although absorbed corporations are dissolved, there is no winding up of their affairs or liquidation of their assets, because the surviving corporation automatically acquires all their rights, privileges and powers, as well as their liabilities. The merger, however, does not become effective upon the mere agreement of the constituent corporations. The Securities and Exchange Commission (SEC) and majority of the respective stockholders of the constituent corporations must have approved the merger. (Section 79, Corporation Code) It will be effective only upon the issuance by the SEC of a certificate of merger. Records do not show when the SEC approved the merger. But assuming that the effectivity date of the merger was the date of its execution, we still cannot agree that petitioner no longer has any interest in the promissory note. The agreement itself clearly provides that all contracts irrespective of the date of execution entered into in the name of CBTC shall be understood as pertaining to the surviving bank,

herein petitioner. Such must have been deliberately included in the agreement in order to avoid giving the merger agreement a farcical interpretation aimed at evading fulfillment of a due obligation. Thus, although the subject promissory note names CBTC as the payee, the reference to CBTC in the note shall be construed, under the very provisions of the merger agreement, as a reference to petitioner bank. On the issue that the promissory note was a contract pour autrui and was issued without consideration, the Supreme Court held it was not. In a contract pour autrui, an incidental benefit or interest, which another person gains, is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. The "fairest test" in determining whether the third person's interest in a contract is a stipulation pour autrui or merely an incidental interest is to examine the intention of the parties as disclosed by their contract. It did not indicate that a benefit or interest was created in favor of a third person. The instrument itself says nothing on the purpose of the loan, only the terms of payment and the penalties in case of failure to pay. Private respondent also claims that he received no consideration for the promissory note, citing petitioner's failure to submit any proof of his loan application and of his actual receipt of the amount loaned. These arguments deserve no merit. Res ipsa loquitur. The instrument, bearing the signature of private respondent, speaks for itself. Respondent Sarmiento has not questioned the genuineness and due execution thereof. That he partially paid his obligation is itself an express acknowledgment of his obligation. WHEREFORE, the petition is GRANTED.

Mindanao Savings and Loan Association, Inc. (MSLAI) vs Willkom Facts:

The First Iligan Savings and Loan Association, Inc. (FISLAI) and the Davao Savings and Loan Association, Inc. (DSLAI) are entities duly registered with the Securities and Exchange Commission, primarily engaged in the business of granting loans and receiving deposits from the general public, and treated as banks. 1985, FISLAI and DSLAI entered into a merger, DSLAI being the surviving corporation. The articles of merger were not registered with the SEC due to incomplete documentation. DSLAI changed its corporate name to MSLAI. May 26, 1986, The Board of Directors of FSLAI approved the assignment of assets in favor of DSLAI, which assumed FISLAI's liabilities (the novation in question)

MSLAI's business failed and the Monetary Board of the Central Bank of the Philippines ordered its closure. The Monetary Board found that MSLAI was insolvent and to continue business would involve probable loss to its depositors and creditors. The Monetary Board ordered the liquidation of MSLAI with PDIC as its liquidator. Prior to MSLAI's closure, Uy filed an action for collection of sum of money against FISLAI. RTC rendered a decision in favor of Uy and ordered defendants (including FISLAI) to pay the sum of P136,801.70 plus interest, 25% attorney's fees and the costs of suit. CA modified the decision by ordering the third party defendant to reimburse the payments that would be made by defendants. April 28, 1993, sheriff Bantuas levied on 6 parcels of land of FSLAI in Cagayan de Oro, and during the public auction, Willkom was the highest bidder. A certificate of sale was issued, and was registered with the Register of Deeds. September 20, 1994, Willkom sold one of the parcels of land to Go. June 14, 1995, MSLAI, represented by PDIC, filed a complaint for the Annulment of the Sale, Cancellation of Title and Reconveyance of the properties, stating that the sale was conducted without notice given to them and PDIC. PDIC came to know about the sale, almost two years after, while liquidating MSLAI's assets. MSLAI stated that the sale was illegal not only due to lack of notice, but also because the assets under liquidation should be deemed in custodia legis and exempt from garnishment, levy, attachment or execution. Respondents stated that MSLAI had no cause of action; MSLAI is a separate entity from FSLAI, further stating that the merger was unofficial and did not comply with formalities and procedure. RTC: dismissed the case for a supposed lack of jurisdiction. CA affirmed the dismissal but stated that accdg. to Associated Bank vs CA, there was no merger between FISLAI and MSLAI for failure to follow procedure for a valid merger, but even if there was a de facto merger, Willkom was an innocent purchaser and had a superior right. The assignment of assets and liabilities was not binding on third parties because it wasn't registered. The validity of the auction sale could not be invalidated by the fact that the sheriff had no authority to conduct the sale.

Issues: 1. Whether the merger between FISLAI and DSLAI valid and effective 2. Whether there was novation of the obligation by substituting the person of the debtor Held: 1. No. A merger does not become effective upon the mere agreement of the corporations. There must be an express provision of law authorizing them. There is a procedure to be followed as stated in the Corporation Code. The board of each corporation draws up a plan of merger and is submitted to stockholders or members for approval. The formal agreement is executed (the articles of merger) and is submitted to the SEC for approval. If approved, the SEC issues a certificate of merger. The merger shall only be effective upon the issuance of the certificate. (An exception would be if a party to a merger is a special corporation governed by its own charter, then a favorable recommendation of the appropriate government agency should first be obtained.) In this case, no certificate was issued and such merger is incomplete without it. The certificate is important because it bears the approval of the SEC and it marks the moment when the consequences of a merger take place. Since there is no valid merger, FISLAI and MSLAI are still considered as two separate corporations. ASs far as third parties are concerned, FISLAI's assets still belongs to them, not MSLAI. 2. No. The assumption by MSLAI of FISLAI's liabilities did not result in novation. "Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor." Novation must always be done with the consent of the creditor as stated in Article 1293 of the Civil Code. In this case, it was not shown that Uy consented to the agreement between FISLAI and MSLAI. MSLAI cannot question the levy, and subsequent sale of the properties of FISLAI. Since novation implies a waiver of right which the creditor had before novation, such waiver must be express.

*CA ruling affirmed.

Gonzales vs PNB Case Digest

Gonzales vs. Philippine National Bank [GR L-33320, 30 May 1983] Facts: Ramon A. Gonzales initially instituted several cases in the Supreme Court questioning different transactions entered into by the Bank with other parties. First among them is Civil Case 69345 filed on 27 April 1967, by Gonzales as a taxpayer versus Sec. Antonio Raquiza of Public Works and Communications, the Commissioner of Public Highways, the Bank, Continental Ore Phil., Inc., Continental Ore, Huber Corporation, Allis Chalmers and General Motors Corporation. In the course of the hearing of said case on 3 August 1967, the personality of Gonzales to sue the bank and question the letters of credit it has extended for the importation by the Republic of the Philippines of public works equipment intended for the massive development program of the President was raised. In view thereof, he expressed and made known his intention to acquire one share of stock from Congressman Justiniano Montano which, on the following day, 30 August 1967, was transferred in his name in the books of the Bank. Subsequent to his aforementioned acquisition of one share of stock of the Bank, Gonzales, in his dual capacity as a taxpayer and stockholder, filed the following cases involving the bank or the members of its Board of Directors to wit: (1) On 18 October 1967, Civil Case 71044 versus the Board of Directors of the Bank; the National Investment and Development Corp., Marubeni Iida Co., Ltd., and Agro-Inc. Dev. Co. or Saravia; (2) On 11 May 1968, Civil Case 72936 versus Roberto Benedicto and other Directors of the Bank, Passi (Iloilo) Sugar Central, Inc., Calinog-Lambunao Sugar Mill Integrated Farming, Inc., Talog sugar Milling Co., Inc., Safary Central, Inc., and Batangas Sugar Central Inc.; and (3) On 8 May 1969, Civil Case 76427 versus Alfredo Montelibano and the Directors of both the PNB and DBP. On 11 January 1969, however, Gonzales addressed a letter to the President of the Bank, requesting submission to look into the records of its transactions covering the purchase of a sugar central by the Southern Negros Development Corp. to be financed by Japanese suppliers and financiers; its financing of the Cebu-Mactan Bridge to be constructed by V.C. Ponce, Inc. and the construction of the Passi Sugar Mills in Iloilo. On January 23, 1969, the Asst. Vice President and Legal Counsel of the Bank answered petitioner's letter denying his request for being not germane to his interest as a one share stockholder and for the cloud of doubt as to his real intention and purpose in acquiring said share. In view of the Bank's refusal, Gonzales instituted the petition for mandamus. The Court of First Instance of Manila denied the prayer of Gonzales that he be allowed to examine and inspect the books and records of PNB regarding the transactions mentioned on the grounds that the right of a stockholder to inspect the record of the business transactions of a corporation granted under Section 51 of the former Corporation Law (Act No. 1459, as amended) is not absolute, but is limited to purposes reasonably related to the interest of the stockholder, must be asked for in good faith for a specific and honest purpose and not gratify curiosity or for speculative or vicious purposes; that such examination would violate the confidentiality of the records of the bank as provided in Section 16 of its charter, RA 1300, as amended; and that Gonzales has not exhausted his administrative remedies. Gonzales filed the petition for review. Issue: 1. Whether Gonzales' can ask for an examination of the books and records of PNB, in light of his ownership of one share in the bank. 2. Whether the inspection sought to be exercised by Gonzales would be violative of the provisions of PNB's charter. Held:

1. The unqualified provision on the right of inspection previously contained in Section 51, Act No. 1459, as amended, no longer holds true under the provisions of the present law. The argument of Gonzales that the right granted to him under Section 51 of the former Corporation Law should not be dependent on the propriety of his motive or purpose in asking for the inspection of the books of PNB loses whatever validity it might have had before the amendment of the law. If there is any doubt in the correctness of the ruling of the trial court that the right of inspection granted under Section 51 of the old Corporation Law must be dependent on a showing of proper motive on the part of the stockholder demanding the same, it is now dissipated by the clear language of the pertinent provision contained in Section 74 of Batas Pambansa Bilang 68. Although Gonzales has claimed that he has justifiable motives in seeking the inspection of the books of the PNB, he has not set forth the reasons and the purposes for which he desires such inspection, except to satisfy himself as to the truth of published reports regarding certain transactions entered into by the respondent bank and to inquire into their validity. The circumstances under which he acquired one share of stock in the PNB purposely to exercise the right of inspection do not argue in favor of his good faith and proper motivation. Admittedly he sought to be a stockholder in order to pry into transactions entered into by the PNB even before he became a stockholder. His obvious purpose was to arm himself with materials which he can use against the PNB for acts done by the latter when Gonzales was a total stranger to the same. He could have been impelled by a laudable sense of civic consciousness, but it could not be said that his purpose is germane to his interest as a stockholder. 2. Section 15 of the PNB's Charter (RA 1300, as amended) provides that "Inspection by Department of Supervision and Examination of the Central Bank. The National Bank shall be subject to inspection by the Department of Supervision and Examination of the Central Bank." Section 16 thereof providest that "Confidential information. The Superintendent of Banks and the Auditor General, or other officers designated by law to inspect or investigate the condition of the National Bank, shall not reveal to any person other than the President of the Philippines, the Secretary of Finance, and the Board of Directors the details of the inspection or investigation, nor shall they give any information relative to the funds in its custody, its current accounts or deposits belonging to private individuals, corporations, or any other entity, except by order of a Court of competent jurisdiction." On the other hand, Section 30 of the same provides that "Penalties for violation of the provisions of this Act. Any director, officer, employee, or agent of the Bank, who violates or permits the violation of any of the provisions of this Act, or any person aiding or abetting the violations of any of the provisions of this Act, shall be punished by a fine not to exceed ten thousand pesos or by imprisonment of not more than five years, or both such fine and imprisonment." The Philippine National Bank is not an ordinary corporation. Having a charter of its own, it is not governed, as a rule, by the Corporation Code of the Philippines. The provision of Section 74 of Batas Pambansa Blg. 68 of the new Corporation Code with respect to the right of a stockholder to demand an inspection or examination of the books of the corporation may not be reconciled with the above quoted provisions of the charter of the PNB. It is not correct to claim, therefore, that the right of inspection under Section 74 of the new Corporation Code may apply in a supplementary capacity to the charter of the PNB.

Donnina Halley vs. Printwell, Inc.

Facts: o o BMPI (Business Media Philippines Inc.) is a corporation under the control of its stockholders, including Donnina Halley. In the course of its business, BMPI commissioned PRINTWELL to print Philippines, Inc. (a magazine published and distributed by BMPI)

o o o o o o

PRINTWELL extended 30-day credit accommodation in favor of BMPI and in a period of 9 mos. BMPI placed several orders amounting to 316,000. However, only 25,000 was paid hence a balance of 291,000 PRINTWELL sued BMPI for collection of the unpaid balance and later on impleaded BMPIs original stockholders and incorporators to recover on their unpaid subscriptions. It appears that BMPI has an authorized capital stock of 3M divided into 300,000 shares with P10 par value. Only 75,000 shares worth P750,000 were originally subscribed of which P187,500 were paid up capital. Halley subscribed to 35,000 shares worth P350,000 but only paid P87,500.

Halley contends that: 1. 2. 3. They all had already paid their subscriptions in full BMPI had a separate and distinct personality BOD and SH had resolved to dissolve BMPI

RTC and CA o o Defendant merely used the corporate fiction as a cloak/cover to create an injustice (against PRINTWELL) Rejected allegations of full payment in view of irregularity in the issuance of ORs (Payment made on a later date was covered by an OR with a lower serial number than payment made on an earlier date.

Issue: WON a stockholder who was in active management of the business of the corporation and still has unpaid subscriptions should be made liable for the debts of the corporation by piercing the veil of corporate fiction

Held: YES! Such stockholder should be made liable up to the extent of her unpaid subscription

Ratio: It was found that at the time the obligation was incurred, BMPI was under the control of its stockholders who know fully well that the corporation was not in a position to pay its account (thinly capitalized). And, that the stockholders personally benefited from the operations of the corporation even though they never paid their subscriptions in full.

The stockholders cannot now claim the doctrine of corporate fiction otherwise (to deny creditors to collect from SH) it would create an injustice because creditors would be at a loss (limbo) against whom it would assert the right to collect.

On piercing the veil: Although the corporation has a personality separate and distinct from its SH, such personality is merely a legal fiction (for the convenience and to promote the ends of justice) which may be disregarded by the courts if it is used as a cloak or cover for fraud, justification of a wrong, or an alter ego for the sole benefit of the SH.

As to the Trust Fund Doctrine: The RTC and CA correctly applied the Trust Fund Doctrine

Under which corporate debtors might look to the unpaid subscriptions for the satisfaction of unpaid corporate debts Subscriptions to the capital of a corporation constitutes a trust fund for the payment of the creditors (by mere analogy) In reality, corporation is a simple debtor. Moreover, the 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 the 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. The trust fund doctrine is not limited to reaching the SHs unpaid subscriptions. The scope of the doctrine when the corporation is insolvent encompasses not only the capital stock but also other property and assets generally regarded in equity as a trust fund for the payment of corporate debts.