# 103

ARNALDO F. DE SILVA, plaintiff-appellant,

vs.
ABOITIZ & COMPANY, INC., defendant-appellee.
March 31, 1923
G.R. No. L-19893

Facts: De Silva subscribed for 650 shares of stock of Aboitiz of the value of P500 each. He only paid for
the value of 200 shares, for which he became indebted to the corporation in the amount of P255,000,
representing the unpaid value of his subscription. The secretary of the corporation notified him of the
resolution passed by its Board, declaring the unpaid subscriptions to have become due and demandable.
The resolution also stated that all such shares which remain unpaid will be declared delinquent, and will
be advertised for sale at public auction. De Silva thus filed a complaint in the CFI against the corporation,
asking the court to enjoin the corporation from holding such sale. He said that the corporation exceeded
its authority, as he said that its By-laws stated that the unpaid shares shall be paid out of the 70% of the
profit obtained, which shall be distributed among the subscribers, who shall not receive any dividend until
the shares are paid in full. Further, he contends that the By-laws provide an operative way of paying for
the shares continuously until their full amortization. The CFI dismissed the case.

Issue: Whether the corporation may declare the unpaid shares delinquent and/or collect their value by
another method different from that prescribed in the By-laws.

Held: In the By-laws, it is stated that the directors are authorized to create a special emergency fund or
extraordinary reserve fund, when, in its judgment, and in case all the shares subscribed to have been fully
paid. The directors are given the discretion to do whatever is stated in the By-laws relative to the
application of the 70% profit. They may decide whether or not such profit shall be used to pay for the
unpaid subscriptions.
If the Board of Directors does not wish to make use of such authority, it has 2 other remedies for
accomplishing the purpose, as enunciated in  Velasco v Poizat: : 1) to sell the stock for the account of the
delinquent subscriber, and 2) to bring a legal action against him for the amount due.
In this case, BoDs elected to avail themselves of the first remedy granted to it by law, and
declared that payment of De Silva’s subscription to 450 shares which had not been fully paid by him was
due, and that said shares were delinquent, and performed all the other acts subsequent to said
declaration, as it deemed it disadvantageous to the corporation to apply a part of the profit realized or to
be realized to the payment of his subscription. De Silva has no right to prevent the Board from following,
any other method than that mentioned in the law, for the very reason that the law does not give
stockholders any right in connection with the determination of the question whether or not there should be
deducted from the 70% of the profit distributable among the stockholders such amount as may be
deemed fit for the payment of subscriptions due and unpaid.