You are on page 1of 10


(Delaware, 1930)

HELD 1: All the no par value stock that were issued both before and after the
amendment was invalid because therefore was never fixed as required by law.

HELD 2: No proper and lawful consideration was given for the common
shares of stock issued to the Dillmans and Solly at the first board meeting.

McCarty v. Langdeau (Texas, 1960)
1) Pres. McCarty of the C bought stocks from the C with a promissory note
as payment ($379,280).

2) Texas constitution prohibits the purchase of stock through a promissory

3) C was placed under receivership.

4) C’ receiver (Langdeau) files a suit agint McCarty for the recovery of the
sum ($379,280).

5) McCarty’s defense: the contact between him and the C was void since it
was against the Texas constitution, hence the receiver cannot recover from him.

HELD: receiver can recover! Contract was not void.

If court agreed w/ McCarty, the subscription would have been divisible.

Rhode v. DOCK-HOP COMPANY et al (California, 1920)
1) This is an action by the judgment creditor of a C against certain of its SHs,
seeking to collect from them what are claimed to be unpaid balances on the par
value of their shares.

2) Said stockholder only paid 25cents for a 1$ on the par value of the of

3) Defense: they were not subscribers.

ISSUE: WON the defendants are required, because of the creditor’s claim,
to make up any difference which may exist between what was actually paid on
their stock and its par value.

HELD: SH NOT LB! The transferee of watered stock who takes it in
ignorance of its real character is not required, even at the suit of a creditor of the
company, to pay in anything more upon it.
Creditor went after transferee.
Velasco v. Poizat (1918)
1) Poizat subscribed for 20 shares (w/ a par value of P100/share) for P2,000
of w/c he was only able to pay P500 (25%).

2) BOD issued a call to Poizat. Notice of the resolution was given to Poizat.

3) Poizat replied that he was willing to lose the 25% he invested because of
the unreliable position of the C.

4) Indeed the prediction of Poizat became true. The C became insolvent.
Velasco, as assignee of the C, sued Poizat for the balance of his subscription.

HELD: Poizat is LB on his subscription. When insolvency supervenes, all
unpaid subscriptions become at once due and enforceable.

LINGAYEN GULF v. Baltazar (1953)
1) Baltazar subscribed to the C’s 600 shares (P100 par value per share)
for a total P60,000.

2) Baltazar has an unpaid balance of P18,500.

3) BOD issued a call to 50% of all unpaid subscriptions. The BOD call
was not published, although Baltazar received a notice of said call.

4) BOD also released Baltazar from paying his unpaid balance.

5) Since Baltazar ignored the call, C sued him for the balance.

6) Baltazar’s defense:

a) C’s action was premature because there was no valid call (because
no publication).
b) he was released by the BOD
c) claims from the C a reasonable compensation as president

HELD 1: Call should not only be sent by letter but also published.

Velasco is different because the C there became insolvent. The rule is
notice of call for payment of unpaid subscribed stock must be published except
when the C is insolvent, in w/c case, payment is immediately demandable.

HELD 2: The release attempted in the Resolution 17 was not valid for lack of
a unanimous vote. Release from such payment must be made by all SH.
De Silva v. ABOITIZ & COMPANY (1923)
1) De Silva subscribed for 650 shares of stock (P500/share) of ABOITIZ.

2) He paid only for 200 shares, so that 450 remained unpaid for which he
was indebted to the sum of P225,000 .

3) April 1922- he was notified of the call for payment for unpaid
subscribed stocks and that it will be declared delinquent and sold if not

4) The call was also published.

5) De Silva filed a complaint arguing that the C exceeded its executive
authority and asked for an injunction based on the ground:

The B-Ls provide that “Provided however, That from this 70% of the
profit obtained the BOD may deduct such amount as it may deem fit
for the payment of the unpaid subscriptions to the capitals stock and
not pay any dividend to the holders until said shares were paid in full.”

Thus, when C made a call and declared the unpaid subscribed stocks
of complainant to be delinquent, C violated the right of the SH as
stated in the B-Ls.

HELD: The said provision may be resorted to in the discretion of the BOD.
Said B-L provision does not give the shareholder the right.

If the BOD does not wish to make, or does not make, use of said authority,
it has 2 other remedies for accomplishing the same purpose. As stated in
Velasco v. Poizat: sale of delinquent shares or court action.

BOD elected to avail of the remedy of sale of the delinquent shares.

1) Dexter subscribed to 300 shares of C S SALMON & CO. where the
subscription contract states:

payable from the first dividends declared on the shares.

2) Receiver of the C sued Dexter for his unpaid subscribed shares.

ISSUE: WON the stipulation contained in the subscription to the effect that
the subscription is payable from the first 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: STIPULATION IS ILLEGAL! This situation obligates the
subscriber to pay nothing for the shares except as dividends may accrue upon
the stock. In the contingency that dividends are not paid there is no liability at all.
This is a discrimination in favor of the particular subscriber, and hence the
stipulation is unlawful.

Lumanlan v. Cura (1934)
1) Lumanlan subscribed for 300 shares of the C for P15,000.
2) Lumanlan did not pay P13,500 of the subscription.
3) C sued by its creditors.
4) C sued Lumanlan. Court decided in favor of C. Lumanlan appealed.
5) C and Lumanlan agreed that he will pay one of the creditors in return for
withdrawing his appeal.
6) Lumanlan paid Valenzuela (creditor).
7) C still pursued execution of the judgment.

Fua Cun v. Summers (1923)
1) Chua Soco subscribed for 500 shares of stock worth P50,000 (at par
value P100/share) of Defendant BANK.

2) Chua Soco only paid P25,000 and executed a promissory note
(secured by a Chattel Mortgage on the subscribed shares of stock) for
P25,000 in favor of Plaintiff Fua Cun.

3) Chua Soco endorsed the the PN and delivered it to Fua Cun

4) Chua Soco became the judgment debtor to China Banking Corp. in an
action brought against him (for the non-payment of drafts accepted by
dishonored acceptance of commercial papers).

5) Chua Soco’s interest n the 500 shares subscribed for was attached
and the receipt seized by the sheriff.

6) The attachment was levied after the defendant Bank had received
notice of the fact that the receipt had been endorsed over to the

7) Fua Cun brought an action against the Bank contending that:
a) By virtue of the payment of ½ of the subscription price of 500
shares, Chua Soco in effect became the owner of 250 shares and

b) praying that his, the plaintiff’s, lien on said shares, by virtue of the
chattel mortgage, be declared to hold priority over the claim of the
defendant Bank.

8) Defendant Bank’s Defense:

the interest held by Chua Soco was merely an equity w/c could not be
made the subject of a chattel mortgage

HELD 1: At common law, a C has no lien upon the shares of SHs for any
indebtedness to the C.

HELD 2: Defendant Bank had no lien whatsoever. As against the rights of
the Plaintiff, the Defendant Bank had, as we have seen, no lien unless by virtue
of attachment. But the attachment was levied after the Bank had received notice
of the assignment of Chua Soco’s interest to the Plaintiff and was therefore
subject to the rights of the latter. It follows that as against these rights, the
defendant Bank holds no lien whatsoever.

HELD 3: Court below erred in holding that Chua Soco, by paying ½ of
the subscription price of 500 shares, in effect became the owner of 250

In the absence of special agreement to the contrary, a subscriber for
a certain number of shares of stock does not, upon payment of one-half of
the subscription price become entitled to the issuance of certificates for
one-half of the number of shares subscribed for; the subscriber's right
consists only in equity entitling him to a certificate for the total number of
shares subscribed for by him upon payment of the remaining portion of the
subscription price."

1) Plaintiffs Baltazar and Rose, were among the incorporators, having
subscribed to 600 and 400 shares of the capital stock, or a total par value of
P60,000.00 and P40,000, respectively.

2) It is alleged that it has always been the practice and procedure of the
Corporation, to issue certificates of stock to its individual subscribers for unpaid
shares of stock.

3) Of the 600 shares of capital stock subscribed by Baltazar, he had fully
paid 535 shares of stock, and the Corporation issued to him several fully paid-up
and non-assessable certificates of stock, corresponding to the 535 shares.
4) After having made transfers to third persons and acquired new ones,
Baltazar had to his credit, on the filing of the complaint, 341 shares fully paid and
non-assessable. He had also 65 shares with a par value of P6,500.00, for which
no certificate was issued to him.

5) Of the 400 shares of stock subscribed by Rose, he had 375 shares of fully
paid stock, duly covered by certificates of stock issued to him.

9) The Ungson group (specially defendant Acena), which had been in
complete control of the management and property of the Corporation since
January 1, 1955, in order to continue retaining such control, over the objection of
three majority members of the Board, in the regular meeting of the Board of
Directors, held on January 30, 1955, passed three (3) Resolutions (Exhs. A, B,

a) Resolution No. 2 (Exh. A), declared all watered stocks issued to
Acena, Baltazar, Rose and Jubenville, "of no value and
consequently cancelled from the books of the Corporation."

b) Resolution No. 3 (Exh. B) resolved that ". . . all unpaid subscriptions
should bear interest annually from the year of subscription on the
basis of quarterly payments and any or all payments already made
on said unpaid subscriptions should be credited to pay interest first,
then the capital debt after all interest is fully paid.

All shares of stock issued to and in favor of any stockholder or
stockholders of the Lingayen Gulf Electric Power Co., Inc., on
accounts of payments on unpaid subscriptions without the interest
thereon - accrued and collectible having been fully paid from the
date of subscription as required by the Corporation Law, shall be
declared of no value and cancelled from its books, and if the
payments already made exceeded the interest accrued and
collectible by virtue of the provision of law and the previous
resolution of its board of directors, the excess should be applied to
the payment of the unpaid subscription. For this purpose, the
accountant of the corporation is directed to make and report the
proper computation of the interest."

c) Resolution No. 4 (Exh. C) resolved that "any and all shares of stock
of the Lingayen Gulf Electric Power Co., Inc., issued as fully paid-
up to stockholders whose subscription to a number of shares has
been declared delinquent with the accrued interest on the unpaid
thereof per Resolution No. 42, S. 1954, of the Board of Directors
which has been duly published in the `Manila Chronicle,' are hereby
incapacitated to utilize or avail of the voting power until such
delinquency with the accrued interest is fully paid-up as indicated in
Resolution No. 3, S. 1955."

10) In their complaint, Baltazar and Rose prayed that a writ of preliminary
injunction be issued against the defendants, enjoining them to desist and refrain
from carrying out the objects and purposes of the three resolutions aforestated,
and commanding them to allow plaintiffs and companions to vote in the
stockholders' meeting on May 1, 1955, their fully paid-up shares of stocks, as
evidence by stock certificates issued to them and outstanding on the stock book
of the defendant Corporation, on or before January 30, 1955, to declare said
three resolutions illegal and invalid, and to pay plaintiffs the sum of P10,000.00
each, as damages.

11) Defense:

a) Defendants-appellants claim that resolution No. 4 (Exh. C-2),
withdrawing or nullifying the voting power of all the aforesaid shares
of stock is valid, notwithstanding the existence of partial payments,
evidenced by certificates duly issued therefor. They invoke the
ruling laid down by the Court in the Fua Cun vs. Summers Case.

b) if Baltazar subscribed to 600 shares of stock in a single
subscription, and he merely paid for 300 shares, for which he was
given fully paid certificates for 300 shares, he cannot vote said 300
shares, in any meeting of the Corporation, until he shall have paid
the remaining 300 shares of stock

ISSUE 1: If a stockholder, in a stock corporation, subscribes to a certain
number of shares of stock, and he pays only partially, for which he is issued
certificates of stock, he is entitled to vote the latter, notwithstanding the fact that
he has not paid the balance of his subscription, which has been called for
payment or declared delinquent?

HELD 1: The cases at bar do not come under the aegis of the principle
enunciated in the Fua Cun vs. Summers case, because it was the practice
and procedure, since the inception of the corporation, to issue certificates
of stock to its individual subscribers for unpaid shares of stock and gave
voting power to shares of stock fully paid.

And even though no agreement existed, the ruling in said case, does not
now reflect the correct view on the matter, for better than an agreement or
practice, there is the law, which renders the said case of Fua Cun-Summers,
obsolescent.(Note: does not agree with Sec. 64 of current Code).
Then the decision discussed how the principle applies differently for par
and no par stocks.

In this case, the stockholder, an incorporator, was the holder of a
certificate of stock for the shares the par value of which had been paid by
him. The issue was whether the said shares had voting rights although the
incorporator had not paid fully the total amount of his subscription. That is not the
issue in this case.

Where a stockholder subscribed to a certain number of shares with
par value and he made a partial payment and was issued a certificate for
the shares covered by his partial payment, he is entitled to vote the said
shares, although he has not paid the balance of his subscription and a call
or demand had been made for the payment of the par value of the
delinquent shares.

ISSUE 2: If a stockholder subscribes to a certain number of shares of stock
and makes partial payment only, and declared delinquent as to the rest, with
interest, should previous payments on account of the capital, be first applied to
interest, thus diminishing the voting power of the shares of stock already paid? In
other words, if the entire subscribed shares of stock are not paid, the paid shares
of stock be deprived of the right to vote, until the entire subscribed shares of
stock are fully paid, including interest?


1) This is a mandamus case.

2) Teofilo Po as an incorporator subscribed to 80 of PEERS MARKETING
CORP. (P100/share) for P8,000. Po paid P2,000 or 25% of the amount of his
subscription. No certificate of stock was issued to him or, for that matter, to any
incorporator, subscriber or stockholder. No stock certificate was issued to Po.

3) Po sold to Ricardo A. Nava for two thousand pesos twenty of his eighty
shares. In the deed of sale Po represented that he was "the absolute and
registered owner of twenty shares" of PEERS MARKETING CORP.

4) Nava requested the officers of the corporation to register the sale in the
books of the corporation.
5) C denied the request because Po has not paid fully the amount of his
subscription. Nava was informed that Po was delinquent in the payment of the
balance due on his subscription and that the corporation had a claim on his entire
subscription of eighty shares which included the twenty shares that had been
sold to Nava.

6) Nava filed a Petition for Mandamus to compel the corporation and its EVP
and secretary, respectively, to register the 20 shares in Nava's name in the C's
transfer book contending that:

Nava argues that under section 37 a certificate of stock may be issued for
shares the par value of which have already been paid for although the entire
subscription has not been fully paid. He contends that Peers Marketing
Corporation should issue a certificate of stock for the twenty shares,
notwithstanding that Po had not paid fully his subscription for the eighty shares,
because section 37 requires full payment for the subscription, as a condition
precedent for the issuance of the certificate of stock, only in the case of no par
Nava relies on Baltazar vs. Lingayen Gulf Electric Power Co., Inc., L-162,36-38,
June 30, 1965, 14 SCRA 522, where it was held that section 37 "requires as a
condition before a shareholder can vote his shares that his full subscription be
paid in the case of no par value stock; and in case of stock corporation with par
value, the stockholder can vote the shares fully paid by him only, irrespective of
the unpaid delinquent shares".

7) C Defense:

no shares of stock against which the C holds an unpaid claim are
transferable in the books of the C.

HELD: In this case no stock, certificate was issued to Po. Without the stock
certificate, which is the evidence of ownership of corporate stocks; the
assignment of corporate shares is effective only between the parties to the

There is no parallelism between this case and the Baltazar case. It is
noteworthy that in the Baltazar case the stockholder, an incorporator, was the
holder of a certificate of stock for the shares the par value of which had been
paid by him. The issue was whether the said shares had voting rights although
the incorporator had not paid fully the total amount of his subscription. That is not
the issue in this case.

In the Baltazar case, it was held that where a stockholder subscribed to a
certain number of shares with par value and he made a partial payment and was
issued a certificate for the shares covered by his partial payment, he is entitled to
vote the said shares, although he has not paid the balance of his subscription
and a call or demand had been made for the payment of the par value of the
delinquent shares.
[Campos Notes: The Nava case reinforced the ruling in the Fua Cun case,
making it clear that the decision in Lingayen Gulf case should be applicable only
to the special circumstances appearing there.]

[Campos Notes: Section 64 of the Code clearly supports the Fua Cun case and
its prohibitory language seems to rule out an agreement contrary to its
provisions. The rule applies to par and no par stocks leaving no room for the
application of the Lingayen Gulf case.]