G.R. No. L-4824 and G.R. No. L-6244; June 30, 1953.
LINGAYEN GULF ELECTRIC POWER COMPANY, INC., plaintiff-appellant, vs. IRINEO BALTAZAR, defendant-appellee. (G.R. No. L-4824)

LINGAYEN GULF ELECTRIC POWER COMPANY, INC., plaintiff-appellee, vs. IRINEO BALTAZAR, defendant and appellant. (G.R. No. L-6244)

FACTS

The plaintiff, Lingayen Gulf Electric Power Company, Inc., is a domestic corporation. The defendant, Irineo Baltazar, subscribed for 600 shares, paying P15,000 initially and leaving an unpaid balance of P18,500. On July 23, 1946, a majority of stockholders, including Baltazar, adopted Resolution No. 17, calling for payment of the unpaid subscriptions in two installments, with the provision that unpaid subscriptions after grace periods would revert to the corporation. The defendant asked for and was granted an extension to pay by February 1, 1947. On April 17, 1948, the Board of Directors adopted a resolution setting aside the 1946 stockholders’ resolution as null and void and calling for 50% of the unpaid subscription within 60 days from notice. This call was not published in a newspaper of general circulation as required by law. The defendant refused to pay, claiming the action was premature due to an invalid call and that he was released by stockholders’ resolutions. He also counterclaimed for compensation as president of the corporation.

ISSUE

1. Was the call for payment (Exhibit E-2) valid?
2. Was the defendant released from his obligation by virtue of stockholders’ Resolution Nos. 17 and 4?
3. Is the defendant entitled to compensation as president of the plaintiff corporation?

RULING

1. No, the call was not valid. The Supreme Court affirmed the lower court’s ruling that the call was null and void for lack of publication. Section 40 of the Corporation Law ( Act No. 1459 ) mandates that notice of a call for unpaid subscriptions must be published once a week for four successive weeks in a newspaper of general circulation. This requirement is mandatory, and the plaintiff corporation admitted the call was not published. The rule requiring publication applies to solvent corporations; it is dispensed with only in cases of corporate insolvency.
2. No, the defendant was not released from his obligation. The Court agreed with the trial court that a release from the payment of unpaid subscriptions must be approved by all stockholders of the corporation. The resolutions in question were not approved by all stockholders; therefore, they could not validly release the defendant from his liability.
3. No, the defendant is not entitled to compensation as president. The by-laws of the company were silent on the president’s salary. Resolutions provided per diems for the president and directors for meetings attended but no fixed salary. The Court concluded the president and board were expected to serve without salary, with per diems as sufficient compensation. Furthermore, the defendant did not claim a salary until the suit was filed against him.
The decision of the trial court was affirmed in its entirety.