Facts:

The case at hand involves three civil cases consolidated from an intricate corporate dispute regarding voting rights within the Lingayen Gulf Electric Power Co., Inc. The respondents, Irineo S. Baltazar and Marvin O. Rose, filed complaints against the corporation and several defendants, including Dominador C. Ungson, Brigido G. Estrada, Manuel L. Fernandez, Benedicto C. Yuson, and Bernardo Acena. The company, with its principal office in Lingayen, Pangasinan, had an authorized capital of P300,000, consisting of 3,000 shares with a par value of P100 each.

Baltazar subscribed to 600 shares, paying in full for 535 shares, while Rose subscribed to 400 shares, with 375 shares fully paid. The corporate practice involved issuing stock certificates for unpaid shares, with both plaintiffs having outstanding shares backed by their respective subscriptions. A power struggle emerged between two factions—the plaintiffs' group, identified as the "Baltazar group," and the defenda

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Facts:

Parties and Corporate Background

• Plaintiffs and Appellees:
• Irineo S. Baltazar (subscribed 600 shares)
• Marvin O. Rose (subscribed 400 shares)
• Defendants and Appellants:
• Lingayen Gulf Electric Power Co., Inc. (the Corporation) – doing business in the Philippines with principal offices at Lingayen, Pangasinan; authorized capital stock of P300,000.00 divided into 3,000 shares
• Individual respondents:
• Dominador C. Ungson

ii. Brigido G. Estrada iii. Manuel L. Fernandez iv. Benedicto C. Yuson

Facts on Stock Subscription, Payment, and Certificate Issuance

• Practice of the Corporation:
• Certificates of stock were issued for shares even if not fully paid (“watered stocks”)
• Baltazar had paid in full for 535 of his 600 subscribed shares; however, after transfers he held 341 fully paid and non-assessable shares at the time of the complaint
• Rose had 375 fully paid shares (from his 400 subscribed shares) with proper certificates
• Unpaid Subscriptions:
• Baltazar retained 65 shares for which no certificate had been issued
• The Corporation’s practice permitted issuance of certificates only for those shares that were fully paid
• Board Resolutions and Corporate Control Issues:
• On January 30, 1955, in a board meeting, the Ungson group (with Acena playing a pivotal role) passed three resolutions:
• Resolution No. 2 declared all “watered stocks” issued to certain stockholders (including plaintiffs) as “of no value” and cancelled them from the books

ii. Resolution No. 3 provided that unpaid subscriptions should bear interest and that any payments made were to be allocated first to interest and then to the principal iii. Resolution No. 4 declared that shares issued to delinquent subscribers (upon accumulation of unpaid subscriptions and interest) would be incapacitated from voting until full payment was made

Litigation Chronology and Procedural Developments

• Initiation of Complaints:
• Baltazar filed Civil Case G.R. No. L-16236 against the Corporation and its officers
• Similarly, Rose filed Civil Case G.R. No. L-16257
• A third case, Civil Case G.R. No. L-16238, was filed jointly by Baltazar and Rose against defendant Acena alone
• Relief Sought and Preliminary Injunction:
• Plaintiffs sought a writ of preliminary injunction to stop implementation of the contested resolutions
• The trial court granted the injunction on April 29, 1955, enjoining the defendants from implementing the resolutions and ordering that plaintiffs be allowed to vote their fully paid shares
• Settlement Agreement and Subsequent Lower Court Decisions:
• A tentative amicable settlement was reached on September 13, 1958 involving:
• Adjustments to the value of “watered stocks” for Baltazar, Rose, and Acena

ii. An arrangement for installment payment of unpaid balances, including modifications on the interest charged iii. A provision modifying the effect of board resolutions concerning voting rights and delinquency

Issue:

Voting Rights on Partially Paid Subscriptions

• Whether a stockholder who has subscribed for a certain number of shares but has only partially paid is entitled to vote using the share certificates issued for the portion that has been fully paid
• Whether the right to vote extends over the entire subscribed number of shares, despite nonpayment of the balance and the declaration of delinquency

Validity and Effects of the Board Resolutions

• Whether the board resolutions (Nos. 2, 3, and 4) that nullified the voting rights of shares corresponding to unpaid subscriptions and “watered stocks” were valid and legally enforceable
• Whether the resolutions and unilaterally applied measures regarding interest allocation and delinquency could override the practice of issuing certificates for fully paid shares

Application of Payments and the Role of Settlement Agreements

• Whether the corporation’s practice of applying payments to cover the full par value rather than accrued interest was binding and any subsequent change could be unilaterally imposed
• The effect of the amicable settlement agreement in modifying the controversial board resolutions, including the extension of time to pay and conditions for restoring voting rights

Doctrine of Estoppel and Waiver

• Whether the plaintiffs waived their right to enforce the voting power specified by the settlement agreement by their previous actions
• Whether the principle of estoppel could be invoked to bar plaintiffs from insisting on the newly claimed voting rights when prior agreement or practices had been inconsistent

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)