G.R. Nos. L-48195 and Similar among them is that 5% is to be paid CFI 2.
whether the contract was a subscription
48196 May 1, 1942 upon the execution of the contract, and the contract or a purchase agreement remainder in installments of 5% quarterly due SOFRONIO T. BAYLA, ET AL., petitioners, within the first month of the quarter. The trial court absolved the corporation and vs. forfeited the petitioners’ shares and payments SILANG TRAFFIC CO., INC., respondent. to the corporation. SILANG TRAFFIC CO., petitioner, vs. Deferred payments will incur 6% interest per SOFRONIO BAYLA, ET AL., respondents. annum until paid, and failure to pay any of said installments when they are due will revert the RULING shares back to the seller and the payments CA DOCTRINE already made are to be forfeited in favor of the company, without resort to court proceedings. 1. No. The Court held that for their stocks It held that the nature of the contract covering The Court of Appeals affirmed the decision but to be forfeited to the corporation, a unissued shares made after its incorporation, the contract ws either a subscription contract allowed the petitioners 30 days to pay the demand must first be given by the Petitioners have already paid sums of money arrears in their subscription. From this corporation for the payments due on or or a purchase of stock, depending upon the for the shares of stock they wanted to decision, petitioner and respondent appealed before July 31. terms of the agreement and the intention of the parties. purchase. to the Supreme Court.
It did not automatically revert to the
It held that a subscription is a mutual However, they failed to pay the installment xxx corporation. agreement among the subscribers to take and which fell due. pay for the stock of a corporation and therefore it was not possible to withdraw from such Under Article 1100 of the Civil Code, persons agreement without the consent of the other The parties litigant, the trial court, and the obliged to deliver or do something are not in subscribers, and even if the corporation should The BOD of Silang Traffic Co. released a Court of Appeals have interpreted or resolution stating a rescission was to be made default until the moment the creditor demands become insolvent because of the enforcement considered the said agreement as a for the good of the corporation and in order to of them judicially or extra-judicially the of the trust fund doctrine. contract of subscription to the capital fulfillment of their obligation. The current terminate the then pending civil case involving stock of the respondent corporation. the validity of the sale of the shares in situation does not fall under the any of the question. exceptions. In contrast, the Court recognized that a It should be noted, however, that said “purchase” of shares of stock is an agreement is entitled "Agreement for independent agreement between the Installment Sale of Shares in the Silang Those who would agree can refund the Traffic Company, Inc.,"; that while the The contract itself did not expressly provide individual and the corporation to buy shares of that the failure of the purchaser to pay any stock from it at a stipulated price, and the installments already paid. purchaser is designated as "subscriber," the corporation is described as "seller"; that the installment would give rise to forfeiture and insolvency of the corporation makes it cancellation without the necessity of any incapable of complying with its obligation, agreement was entered into long after the demand from the seller. which grants to the purchaser the right to incorporation and organization of the The petitioners agreed to the rescission and corporation; and that the price of the stock rescind the agreement. demanded for the refund of the amounts they was payable in quarterly installments spread had paid. over a period of five years. In fact, it states that there would be a 6% FACTS interest on deferred payments which shows ISSUE that there was no intention of automatic Petitioners instituted this action in the CFI of Silang Traffic Co. refused to refund the forfeiture and cancellation of contract. As Cavite against the respondent Silang Traffic petitioners’ money stating that because of such, the Court reversed the decision of the Co., Inc., to recover certain sums of money their failure to pay the installment due on or Court of Appeals and ordered Silang Traffic which they had paid severally to the before July 31, the clause stating that their 1. Whether or not the petitioners’ shares of Co. to REFUND THE PETITIONERS’ corporation on account of shares of stock they shares would revert back to the corporation stock automatically forfeited in favor of Silang MONEY. individually agreed to take and pay for under and their payments forfeited had taken effect, Traffic Corporation upon their failure to pay certain specified terms and conditions. and that there was nothing to refund. the installment due on or before July 31? 2. It seems clear from the terms of the contracts in question that they are contracts of sale and not of subscription.
The lower courts erred in overlooking the
distinction between subscription and purchase
"A subscription, properly speaking, is the
mutual agreement of the subscribers to take and pay for the stock of a corporation, while a purchase is an independent agreement between the individual and the corporation to buy shares of stock from it at stipulated price."
In some particulars the rules governing
subscriptions and sales of shares are different.
For instance, the provisions of our
Corporation Law regarding calls for unpaid subscription and assessment of stock (sections 37-50) do not apply to a purchase of stock.
Likewise the rule that corporation has no
legal capacity to release an original subscriber to its capital stock from the obligation to pay for his shares, is inapplicable to a contract of purchase of shares.