PHILIPPINE TRUST COMPANY v. MARCIANO RIVERA
G.R. No. L-19761, January 29, 1923
Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)
(Topic: Trust Fund Doctrine)
In 1918 the Cooperativa Naval Filipina was duly incorporated under the laws of the Philippine Islands, with a capital of P100,000, divided into one thousand shares of a par value of P100 each. Among the incorporators of this company was numbered the defendant Mariano Rivera, who subscribed for 450 shares representing a value of P45,000, the remainder of the stock being taken by other persons.
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 given for the failure of the defendant to pay the entire subscription is, that not long after the Cooperativa Naval Filipina had been incorporated, a meeting of its stockholders occurred, at which a resolution was adopted to the effect that 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.
Whether or not the resolution adopted to the effect that the capital should be reduced by 50 per centum and the subscribers are released from the obligation to pay any unpaid balance of their subscription in excess of 50 per centum?
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.
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.