NATIONAL EXCHANGE VS. DEXTER CASE DIGEST

 G.R. No. L-27872             February 25, 1928
THE NATIONAL EXCHANGE CO., INC., plaintiff-appellee,
vs.
I. B. DEXTER, defendant-appellant.

CORPORATION LAW; CONSIDERATION

FACTS:

• This action was instituted by the National Exchange Co., Inc., as assignee of C. S. Salmon & Co., for the purpose of recovering from I. B. Dexter a balance of P15,000, the par value of one hundred fifty shares of the capital stock of C. S. Salmon & co. 

• I. B. Dexter, signed a written subscription to the corporate stock of C. S. Salmon & Co
• It appears that the defendant, I. B. Dexter, signed a written subscription to the corporate stock of C. S. Salmon & Co. subscribing for three hundred (300) shares of the capital stock of C. S. Salmon and Company, payable from the first dividends declared on any and all shares of said company owned by me at the time dividends are declared, until the full amount of this subscription has been paid.

• Upon this subscription the sum of P15,000 was paid, beyond this nothing has been paid on the shares and no further dividend has been declared by the corporation. There is therefore a balance of P15,000 still paid upon the subscription.

• TC gave judgment for the plaintiff to recover the amount claimed, from this judgment the defendant appealed.

ISSUE:

Whether the stipulation contained in the subscription to the effect that the subscription is payable from the first dividends declared on the shares has the effect of relieving the subscriber from personal liability in an action to recover the value of the shares.

HELD:

• No corporation shall issue stock or bonds except in exchange for actual cash paid to the corporation or for property actually received by it at a fair valuation equal to the par value of the stock or bonds so issued. 

• Nor has a corporation the power to receive a subscription upon such terms as will operate as a fraud upon the other subscribers or stockholders by subjecting the particular subcriber to lighter burdens, or by giving him greater rights and privileges, or as a fraud upon creditors of the corporation by withdrawing or decreasing the capital. It is well settled therefore, as a general rule, that an agreement between a corporation and a particular subscriber, by which the subscription is not to be payable, or is to be payable in part only, whether it is for the purpose of pretending that the stock is really greater than it is, or for the purpose of preventing the predominance of certain stockholders, or for any other purpose, is illegal and void as in fraud of other stockholders or creditors, or both, and cannot be either enforced by the subscriber or interposed as a defense in an action on the subscription.

• Judgment appealed from must be affirmed.