Nava v. Peers Marketing Corporation

Doctrines: 

• A stock subscription is a subsisting liability and the corporation has a right to demand payment thereof. 
• Corporation cannot release subscriber from payment of Ins obligation without the unanimous consent of stockholders. 

Facts: Teofilo Po as an incorporator, subscribed to 80 shares of Peers Marketing Corporation at P100/share or a total par value of P8000. Po paid P2000 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. 

Po sold his 20 shares to Ricardo A. Nava for P2000. In the deed of sale Po represented that he was “the absolute and registered owner of twenty shares” of Peers Marketing Corporation. 

Nava requested the officers of the corporation to register the sale in the books of the corporation but it was denied 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. 

Nava filed a petition for mandamus in CFI Negros Occidental to compel the corporation and Renato R. Cusi and Amparo Cusi, its executive vice-president and secretary, respectively, to register the said 20 shares in Nava’s name in the corporation’s transfer book. Petition was denied.

Nava appealed on the ground that the decision “is contrary to law”. 

Issue: Whether or not the officers of Peers Marketing Corporation can be compelled by mandamus to enter in its stock and transfer book the sale made by Po to Nava.

Held: Apparently, no provision of the by-laws of the corporation covers that situation. The parties did not bother to submit in evidence the by-laws nor invoke any of its provisions. The corporation can include in its by-laws rules, not inconsistent with law, governing the transfer of its shares of stock (Sec. 13 7 , Act No. 1459; Fleischer vs. Botica Nolasco Co., 47 Phil. 583, 589). 

Under the facts of this case, there is no clear legal duty on the part of the officers of the corporation to register the twenty shares in Nava’s name. Hence, there is no cause of action for mandamus. 

A stock subscription is a subsisting liability from the time the subscription is made. The subscriber is as much bound to pay his subscription as he would be to pay any other debt. The right of the corporation to demand payment is no less incontestable. 

A corporal ion cannot release an original subscriber from paying for his shares without a valuable consideration or without the unanimous consent of the stockholders. 

In this case no stock certificate was issued to Po. Without the stock certificate, which is the evidence of ownership of corporate stock, the assignment of corporate shares is effective only between the parties to the transaction (Davis vs. Wachter, 140 So. 361). 

The delivery of the stock certificate, which represents the shares to be alienated, is essential for the protection of both the corporation and its stockholders (Smallwood vs. Moretti, 128 So. 2d 628).