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Corporate Stock Subscription Dispute

The Philippine Trust Company, as assignee in bankruptcy of the insolvent Cooperativa Naval Filipina, brought action against Mariano Rivera to recover the unpaid balance of his stock subscription of 45,000 pesos. The company had adopted a resolution to reduce capital by 50% and release subscribers from paying any unpaid balance over 50% of their subscription. The court ruled that the company could still claim the unpaid balance from Rivera. A corporation cannot release an original subscriber from their obligation to pay for shares without consideration, and a capital reduction can only occur through statutory means, which were not followed. The resolution was an invalid withdrawal of capital that creditors were entitled to rely on.

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43 views1 page

Corporate Stock Subscription Dispute

The Philippine Trust Company, as assignee in bankruptcy of the insolvent Cooperativa Naval Filipina, brought action against Mariano Rivera to recover the unpaid balance of his stock subscription of 45,000 pesos. The company had adopted a resolution to reduce capital by 50% and release subscribers from paying any unpaid balance over 50% of their subscription. The court ruled that the company could still claim the unpaid balance from Rivera. A corporation cannot release an original subscriber from their obligation to pay for shares without consideration, and a capital reduction can only occur through statutory means, which were not followed. The resolution was an invalid withdrawal of capital that creditors were entitled to rely on.

Uploaded by

rudilyn.palero9
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Phil Trust vs.

Rivera, 44 PHIL 496

FACTS:
When Cooperativa Naval Filipina was incorporated, Mariano Rivera subscribed for 450
shares representing a value of 45,000 pesos. In the course of time the company
became insolvent and went into the hands of the Philippine Trust Company, as assignee
in bankruptcy; and by it this action was instituted to recover one-half of the stock
subscription of the defendant, which admittedly has never been paid. The reason is that
the company adopted a resolution which the capital should be reduced by 50 per
centum and the subscribers released from the obligation to pay any unpaid balance of
their subscription in excess of 50 per centum of the same. The trial judge ordered the
defendant to pay the unpaid balance for his subscription.

ISSUE:
Whether or not the company can still claim the unpaid balance of the defendant despite
the issued resolution.

RULING:

Yes, the Court ruled that it is established doctrine that subscription to the capital of a
corporation constitute a find to which creditors have a right to look for satisfaction of
their claims and that the assignee in insolvency can maintain an action upon any unpaid
stock subscription in order to realize assets for the payment of its debts.
(Velasco vs. Poizat, 37 Phil., 802.) A corporation has no power to release an original
subscriber to its capital stock from the obligation of paying for his shares, without a
valuable consideration for such release; and as against creditors a reduction of the
capital stock can take place only in the manner an under the conditions prescribed by
the statute or the charter or the articles of incorporation. Moreover, strict compliance
with the statutory regulations is necessary (14 C. J., 498, 620).

In the case before us the resolution releasing the shareholders from their obligation to
pay 50 per centum of their respective subscriptions was an attempted withdrawal of so
much capital from the fund upon which the company's creditors were entitled ultimately
to rely and, having been effected without compliance with the statutory requirements,
was wholly ineffectual.

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