Case Digest (G.R. No. 30460) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In C. H. Steinberg, as Receiver of the Sibuguey Trading Company, Inc. v. Gregorio Velasco et al., decided March 12, 1929 under the Organic Act of 1902, the board of directors of Sibuguey Trading Company approved on July 24, 1922 the repurchase of 330 shares of its own capital stock at par value (P3,300) and, at that same meeting, declared P3,000 in dividends to be paid in installments. At the time the purchases and dividend declaration were made, the corporation’s books showed accounts payable of P13,807.50 and accounts receivable of P19,126.02, yielding a stated surplus profit of P3,314.72. On September 11, 1923, a petition for corporate dissolution was filed for insolvency, with accounts payable reduced to P9,241.19 and receivable to P12,512.47. Receiver C. H. Steinberg was appointed February 28, 1924, but was unable to collect the outstanding receivables. The lower court dismissed the receiver’s complaint seeking recovery of the amounts paid for the shares and dividends, prom Case Digest (G.R. No. 30460) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Corporate Capitalization and Financial Condition
- Authorized capital stock: 2,000 shares at ₱10 par each; subscribed and paid-up capital: 1,003 shares (₱10,030).
- Balance sheet as of June 30, 1922:
- Accounts Payable: ₱13,807.50
- Accounts Receivable: ₱19,126.02
- Surplus profit: ₱3,314.72
- Reserve for bad debts/depreciation: ₱2,889.23
- Board Resolutions of July 24, 1922
- Authorized and made treasury stock purchases (total 330 shares for ₱3,300):
- 100 shares from S.R. Ganzon at ₱1,000
- 200 shares from Felix D. Mendaros at ₱2,000 (100 shares on June 29, 100 on July 16)
- 10 shares from Dionisio Saavedra at ₱100
- Declared dividends of ₱3,000 from surplus, to be paid in installments (Sept 30, 1922–May 12, 1923); shareholders with outstanding accounts to settle first.
- Insolvency Petition and Receiver’s Efforts
- September 11, 1923 petition for dissolution:
- Accounts Payable: ₱9,241.19
- Accounts Receivable: ₱12,512.47 (apparent net asset ₱3,271.28)
- Receiver’s appointment (Feb 28, 1924) and diligent but unsuccessful attempts to collect receivables due to debtors’ insolvency and lack of funds for litigation fees.
Issues:
- Whether the corporation lawfully repurchased its own stock while insolvent.
- Whether the declaration and payment of dividends from an ostensible but unrealized surplus was valid.
- Whether directors and purchaser-shareholders are personally liable for impairment of corporate assets.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)