GR L 45694; (April, 1939) (Digest)
G.R. No. L-45694; April 27, 1939
FRANCISCO YATCO, as guardian of Maria Jacoba Cruz, plaintiff-appellee, vs. EL HOGAR FILIPINO, defendant-appellant.
FACTS
Maria Jacoba Cruz, through her guardian Francisco Yatco, subscribed to sixty paid-up shares in El Hogar Filipino, a mutual building and loan association, for P12,000. She was issued a stock certificate promising a fixed 6% annual dividend. On December 6, 1933, she gave the required twelve-month notice to surrender her shares and obtain a refund. The corporation suspended dividend payments in April 1934 and, upon the notice’s expiration on December 6, 1934, refused to refund the capital or pay dividends. Cruz died, and Yatco, as administrator of her estate, sued for recovery. El Hogar Filipino defended by citing its by-laws, which provided that refunds of paid-up shares were to be made strictly in the order of application and only from one-third of net monthly profits, and that it had insufficient funds to cover prior applications. It also claimed no net profits from April 1934 to June 1936 to declare dividends.
ISSUE
Whether El Hogar Filipino is obligated to refund the value of the paid-up shares and pay the stipulated 6% dividends despite its claims of insufficient profits and funds under its by-laws.
RULING
Yes. The Supreme Court affirmed the lower court’s judgment ordering El Hogar Filipino to pay P12,000 with 6% interest from April 1934. The Court held that while the corporation had the power to make reasonable depreciation adjustments to assets to determine real profits, the burden of proving the reasonableness of such depreciation rested on the corporation. El Hogar Filipino failed to present evidence that the 10% depreciation it claimed was reasonable or constituted a real loss. The corporation’s books showed net profits for 1934 and 1935, and it had advertised the 6% dividend. Without proof that its net earnings were insufficient to cover the fixed dividend on paid-up shares as stipulated, the corporation remained liable. The by-law provisions could not be used to avoid the clear contractual obligation to pay the fixed dividend on the paid-up shares.
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