Velasco v. Poizat
REITERATIONFacts
The Antecedents: Plaintiff, as assignee in insolvency of The Philippine Chemical Product Company (Ltd.), sought to recover P1,500 from the defendant, Jean M. Poizat, representing his unpaid subscription to the company's corporate stock. Poizat subscribed to 20 shares, paid for 5, and owed for the remaining 15. While serving as treasurer and manager, Poizat collected all subscriptions except for his own and those of Jose R. Infante. Procedural History: A resolution was passed by the board of directors requiring Poizat to pay for his outstanding 15 shares, with authorization to undertake judicial proceedings if he refused. Poizat, in a letter, expressed his desire to be relieved from the subscription, citing a poor opinion of the business and preferring to lose his initial payment rather than invest more. Subsequently, the company went into voluntary insolvency, and Velasco was appointed assignee. The Court of First Instance rendered judgment in favor of the defendant, dismissing the complaint. The Petition: The plaintiff appealed the decision of the lower court, arguing that Poizat is liable for the unpaid subscription.
Issue(s)
Whether the call made by the board of directors was in accordance with the requirements of the Corporation Law. Whether the action was instituted prematurely. Whether the assignee can recover the unpaid stock subscription despite the alleged irregularities in the call or the release of another subscriber. Whether the defendant is liable for the unpaid subscription and interest.
Ruling
The judgment of the lower court is reversed. Judgment is rendered in favor of the plaintiff and against the defendant for the sum of P1,500, with interest from July 13, 1914, and costs.
Ratio Decidendi
On the validity of the call and premature institution of the action: The Court held that while a stock subscription is a contract enforceable by the corporation, the Corporation Law provides two remedies: sale of the stock or an action in court. Section 49 allows directors to collect unpaid subscriptions by action. The assignee, by virtue of the Insolvency Law, succeeds to the corporate rights of action. Even if the call made by the board was irregular or the action was prematurely brought based on the original complaint, a right of action existed when the assignee filed the amended complaint, and no exception was taken to its filing. Furthermore, the Court noted that when insolvency supervenes, all unpaid stock subscriptions become payable on demand and are immediately recoverable by the assignee without the necessity of a prior call. On the liability for unpaid subscription: A stock subscription is a contract, and the law implies a promise to pay. Section 36 of the Corporation Law recognizes a stock subscription as a subsisting liability from its inception. The subscriber is bound to pay the amount subscribed, and the company's right to demand payment is incontestable. The assignee succeeds to all corporate rights of action, including the right to sue for unpaid subscriptions. On the effect of releasing another subscriber: The Court stated that the corporation has no legal capacity to release an original subscriber from the obligation to pay for shares, in whole or in part. Therefore, the resolution to release Infante from his subscription was beyond the board's powers and did not prejudice the corporation's right to recover from Poizat. Poizat's understanding that he would be relieved on the same terms as Infante was also without merit, even if proven. On the liability for interest: Under Section 36 of the Corporation Law, a subscriber is liable for interest at the lawful rate from the date of subscription, unless relieved by the by-laws. As the by-laws were not presented and the exact date of subscription was not proven, but Poizat's letter indicated his subscription was made prior to July 13, 1914, the Court held him liable for interest from that date.
Main Doctrine
Upon the insolvency of a corporation, all unpaid stock subscriptions become payable on demand and are immediately recoverable in an action instituted by the assignee or receiver, without the necessity of a prior call or assessment by the board of directors.