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:
contending that three Negros sugar centrals had already granted
increased participation to their planters
under paragraph 9 of the resolution Bacolod is obligated to grant
similar concessions to them
Bacolod = resisted the claim --- Grounds:
stipulations contained in the resolution were made without
consideration
being in effect a donation that was ultra vires and beyond the powers
of the corporate directors
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 preemptive 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:
The corporation could not dispose of its assets by gifts
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:
the resolution and the contract executed pursuant thereto are ultra
vires
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
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.

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 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
Acoje Minings 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:
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
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
Benares

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

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 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
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
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:
Benguet was to Construc a milling plant AND Erect a power plant
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
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

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:
purchase at par the bonds of Mindoro Sugar AND to resell them, with or
without the guarantee of said trust corporation
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
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
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
Tapnio mortgage his standing crops and sugar quota to PNB.
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
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
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
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.
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:
adopting a resolution to such effect
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
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
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.
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:
its reputation was debased when they failed to air the shows that they
promised to their viewers
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
that AMEC is a reputable learning institution
transmitted malicious imputations, and as such, destroyed their
reputation.
FBNI and the broad casters filed Answer alleging that
the broadcasts against AMEC were fair and true
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:
broadcasts are libelous per se
no factual basis = did not even verify their reports before airing them
to show good faith
FBNI failed to exercise diligence in the selection and supervision of its
employees
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
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
Pay in installments
with the interest
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
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 =
there was no valid call hence premature
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
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
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