7. Halley vs. Printwell, Inc.

Facts:
Petitioner Halley was an incorporator and original director of Business Media Phil. Inc. (BMPI)
while respondent was engaged in commercial and industrial printing. BMPI commissioned respondent
for the printing of magazine Philippines together with wrappers and subscription cards that the former
published and sold. BMPI placed several orders on credit to respondent but failed to pay the balance.
Thus, respondent sued BMPI for the collection of the unpaid balance of P291,342.76 in the RTC.
Printwell amended the complaint to implead as defendants all the original stockholders and
incorporators to recover on the unpaid subscriptions. Petitioner argued that she had paid her
subscriptions, evidenced by several official receipts and that BMPI had a personality separate from its
stockholders which personality should not be disregarded. RTC and CA pierced the veil of corporate
fiction and held the stockholders of BMPI as personally liable for corporate debts up to the extent of
their unpaid subscriptions under the Trust Fund doctrine. Both courts also found some irregularities in
the issuance of official receipts.

Issues:
1. Whether the separate personalities of BMPI and its stockholders should be disregarded.
2. Whether the trust fund doctrine is applicable.
Held:
1. Yes. Corporate personality should not be used to foster injustice. Printwell impleaded the
petitioner and the other stockholders of BMPI for two reasons, namely: (a) to reach the unpaid
subscriptions because it appeared that such subscriptions were the remaining visible assets of
BMPI; and (b) to avoid multiplicity of suits. In the present case, personal liabilities of petitioner
with other stockholders remained because they were in-charge of the operations of BMPI at
the time the unpaid obligation was transacted. To deny respondent from recovering from
petitioner would place the latter in a limbo on where to assert their right to collect from BMPI
since the stockholders who are petitioners are availing the defense of corporate fiction to
evade payment of its obligation.

2. Yes. the petitioner was liable pursuant to the trust fund doctrine for the corporate obligation of
BMPI by virtue of her subscription being still unpaid. The trust fund doctrine states that
subscriptions to the capital of a corporation constitute a fund 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. 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. Thus, Printwell, as BMPIs creditor, had a right to reach petitioner's
unpaid subscription in satisfaction of its claim. The liability of stockholder for corporate debt is
up to the extent of their unpaid subscription. In view of petitioner's unpaid subscription of 265,
500, she was liable up to that amount.

8. Central Textile Mills vs. NWPC

Facts:
On December 29, 1990, respondent Regional Tripartite Wages and Productivity Board-NCR
(the Board) issued a WAGE ORDER which mandated a P12.00 increase in the minimum daily wage
of all employees and workers in the private sector in the NCR, but exempted from its application
distressed employers whose capital has been impaired by at least 25% in the preceding year. The
“Guidelines on Exemption From Compliance With the Prescribed Wage/Cost of Living Allowance
Increase Granted by the Regional Tripartite Wage and Productivity Boards,” issued on February 25,
1991, defined “capital” as the “paid-up capital at the end of the last full accounting period (in case of
corporations).” Under said guidelines, “(a)n applicant firm may be granted exemption from payment of
the prescribed increase in wage/cost-of-living allowance for a period not to exceed one (1) year from
effectivity of the Order x x x when accumulated losses at the end of the period under review have
been impaired by at least 25 percent the paid-up capital at the end of the last full accounting period
preceding the application”. Petitioner Central Textile Mills filed an application for exemption from
compliance with the subject wage order due to financial losses. The Board’s Vice p-Chairman,
Ernesto Gorospe, disapproved of petitioner’s application for exemption after concluding form the
documents submitted that petitioner sustained an impairment of only 22.41%. Petitioner’s motion for
reconsideration was likewise dismissed by the Board, which opined that petitioner’s total paid-up
capital of P305,767, 900.00 should be the basis for determining the capital impairment of petitioner,
instead of the authorized capital stock of P128M which petitioner insists should be the basis of
computation. . The Board also noted that petitioner did not file with the SEC its board resolution
approving an increase in petitioner’s authorized capital stock. Neither did petitioner file any petition to
amend its AOI brought about by such increase in its capitalization. Petitioner argues that its
authorized capital stock, not its unauthorized paid-up capital, should be used in determining its capital
impairment. Citing two SEC Opinions which interpreted Sec 38 of the Corporation Code, it claims that
“the capital stock of a corporation stand(s) increased or decreased only from and after approval and
the issuance of the certificate of filing of increase of capital stock.

ISSUE:
Whether petitioner’s authorized capital stock should be the basis for determining its capital
impairment.

Held:

YES. The guidelines on exemption specifically refer to paid-up capital, not authorized capital
stock, as the basis of capital impairment for exception from the subject wage order. The records
reveal, however, that petitioner included in its total paid-up capital payments on advance
subscriptions, although the proposed increase in its capitalization had not yet been approved by, let
alone presented for the approval of, the SEC. These payments cannot as yet be deemed part of
petitioner’s paid-up capital, technically speaking, because its capital stock has not yet been legally
increased. Thus, it's authorized capital stock in the year when exemption from the subject wage order
was sought stood at P128M, which was impaired by losses of nearly 50%. Since the subject wage
order exempts from its coverage employers whose capital has been impaired by at least 25%, and
petitioner suffered losses of nearly 50%, petitioner qualifies for the exemption and its application for
the same should be approved.

10. Commissioner of Internal Revenue vs. First Express Pawnshop Company Inc.

Facts:
CIR issued assessment notices against respondent for deficiency income tax, VAT and
documentary stamp tax on deposit on subscription and on pawn tickets. Respondent filed its written
protest on assessments. When CIR did not act on the protest during the 180 day period, respondent
filed a petition before the CTA.

Issue:
Has the respondent’s right to dispute the assessment in the CTA prescribed?

Held:
 No. the assessment against the respondent has not become final and unappealable. It cannot
be said that respondent failed to submit relevant supporting documents that would render the
assessment final because when respondent submitted its protest, respondent attached all the
documents it felt were necessary to support its claim. Further, CIR cannot insist on the submission of
proof of DST payment because such documents does not exist as respondent claims that it is not
liable to pay and has not paid the DST on the deposit on subscription.
‘
The term “relevant documents” are those documents necessary to support the legal basis in disputing
a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit
additional documents and cannot demand what type of supporting documents should be submitted.
Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents
that a taxpayer cannot submit. Since the taxpayer is deemed to have submitted all supporting
documents at the time of filing its protest, the 180-day period likewise started to run on the same
date.

11. Atilano II, et. al., vs. Asaali

Facts:
Respondent Atlantic Merchandising filed an action for revival of judgment against Zamboanga
Alta Consolidated Inx. (ZACI). The Regional Trial Court of Zamaboanga, revived the judgment,
ordering ZACI to pay the principal obligation with legal interest and attorney’s fees. A writ of execution
was issued to enforce Regional Trial Court’s decision. However, it was returned unsatisfied, private
respondent sought the examination of ZACI’s debtors which included the petitioners as its
stockholders. In the course of the proceedings, the petitioner’s denied their liability for any unpaid
subscriptions with ZACI and offered various documentary evidence to support their claim. The
Regional Trial Court found the petitioners to be indebted to ZACI as incorporators by way of unpaid
stock subscriptions according to the records of the Securities and Exchange Commission (SEC). With
this, the Regional Trial Court, ordered the petitioners to pay ZACI. Petitioners then appealed before
the Court of Appeals contending that they were not a party to the former judgment, but their petition
was dismissed outright due to the following grounds: 1. Failure to attach certified true copires of the
assailed RTC Decision and Order 2. That only three out of four petitioners signed the Verification and
Certification of non forum shopping 3. That the Integrated Bar of the Philippines Official Receipt
Number of the counsel for the petitioners was outdated, therefore violating Bar Matter No. 287; and 4.
That there is a deficiency in the docket and other fees in the sum of P1,530 Petitioners then filed a
Motion for Reconsideration with technical defects. That the Motion for Reconsideration was denied
despite compliance for the payment of the deficiency in the docket fee was made beyond the
reglementary period.

Issue:
WON the petitioners may be held liable to pay for any unpaid subscriptions with ZACI, NO W/N
there was a denial of due process of law due against the petitioner,

Held:
Yes. Petitioners were total strangers to the civil case between ZACI and respondent, and to
order them to settle an obligation which they persistently denied would be tantamount to deprivation
of their property without due process of law. The only power of the RTC, in this case, is to make an
order authorizing respondent to sue in the proper court to recover an indebtedness in favor of ZACI. It
has no jurisdiction to summarily try the question of whether petitioners were truly indebted to ZACI
when such indebtedness is denied. On this note, it bears stressing that stock subscriptions are
considered a debt of the stockholder to the corporation. Records show that petitioners merely
became involved in this case when, upon failure to execute the revived final judgment in its favor in
Civil Case No. 3776, respondent sought to examine the debtors of ZACI, the judgment obligor, which
included petitioners on the allegation that they had unpaid stock subscriptions to ZACI, as its
incorporators and stockholders. During the proceedings, petitioners vehemently denied any such
liability or indebtedness. Under the circumstances, therefore, the RTC should have directed
respondent to institute a separate action against petitioners for the purpose of recovering their alleged
indebtedness to ZACI, in accordance with Section 43, Rule 39 of the Rules of Court, which provides:
Section 43. Proceedings when indebtedness denied or another person claims the property. If it
appears that a person or corporation, alleged to have property of the judgment obligor or to be
indebted to him, claims an interest in the property adverse to him or denies the debt, the court may
authorize, by an order made to that effect, the judgment obligee to institute an action against such
person or corporation for the recovery of such interest or debt, forbid a transfer or other disposition of
such interest or debt within one hundred twenty (120) days from notice of the order, and may punish
disobedience of such order as for contempt. Such order may be modified or vacated at any time by
the court which issued it, or the court in which the action is brought, upon such terms as may be just.
It is well-settled that no man shall be affected by any proceeding to which he is a stranger, and
strangers to a case are not bound by a judgment rendered by the court. Execution of a judgment can
only be issued against one who is a party to the action, and not against one who, not being a party
thereto, did not have his day in court. Due process dictates that a court decision can only bind a party
to the litigation and not against innocent third parties.

12. Apodaca vs. NLRC

Facts:

Petitioner was employed in respondent corporation. Respondent Jose M. Mirasol persuaded

petitioner to subscribe to 1,500 shares of respondent corporation at P100.00 per share or a total of
P150,000.00. He made an initial payment of P37,500.00. Petitioner was appointed President and
General Manager of the respondent corporation. However, he resigned. Petitioner instituted with the
NLRC a complaint against private respondents for the payment of his unpaid wages, his cost of living
allowance, the balance of his gasoline and representation expenses and his bonus compensation.
Private respondents admitted that there is due to petitioner the amount of P17,060.07 but this was
applied to the unpaid balance of his subscription in the amount of P95,439.93. Petitioner questioned
the set-off alleging that there was no call or notice for the payment of the unpaid subscription and
that, accordingly, the alleged obligation is not enforceable. The labor arbiter ruled in favor of the
petitioner. Then, NLRC held that a stockholder who fails to pay his unpaid subscription on call
becomes a debtor of the corporation and that the set-off of said obligation against the wages and
others due to petitioner is not contrary to law, morals and public policy.

Issue:

WON the corporation can validly offset the unpaid shared in lieu of the wages?

Held:

No. The unpaid subscriptions are not due and payable until a call is made by the corporation
for payment. Private respondents have not presented a resolution of the board of directors of
respondent corporation calling for the payment of the unpaid subscriptions. It does not even appear
that a notice of such call has been sent to petitioner by the respondent corporation. No doubt such
set-off was without lawful basis, if not premature. As there was no notice or call for the payment of
unpaid subscriptions, the same is not yet due and payable. Lastly, the NLRC has no jurisdiction to
determine such intra-corporate dispute between the stockholder and the corporation as in the matter
of unpaid subscriptions. This controversy is within the exclusive jurisdiction of the Securities and
Exchange Commission.