PHILIPPINE NATIONAL BANK, PLAINTIFF-APPELANT, VS. BITULOK SAWMILL, INC., DINGALAN LUMBER CO., INC., SIERRA MADRE LUMBER CO., INC., NASIPIT LUMBER CO., INC., WOODWORKS, INC., GON…

In the face of a statutory norm, which, as interpreted in a
uniform Line of decisions by this Court, speaks unequivo­cally and is free from
doubt, the lower court with full recognition that the case for the plaintiff
creditor, Philippine National Bank, “is meritorious strictly from the
legal standpoint”^[1]
but apparently unable to “close its eyes to the equity of the case”^[2]
dismissed nine (9) cases filed by it, seeking “to recover from the
defendant lumber producers [Bitulok Sawmill, Inc.; Dingalan Lumber Co., Inc.; Sierra Madre Lumber Co., Inc.; Nasipit Lumber Co., Inc.; Woodworks, Inc.; Gonzalo Puyat; Tomas B. Morato; Findlay
Millar Lumber Co., Inc.; Insular Lumber Co. Inc.; Anakan
Lumber Co., Inc., and Cantilan Lumber Co., Inc.] the
balance of their stock subscriptions to the Philippine Lumber Distributing
Agency, Inc.”^[3]
In essence then, the crucial question posed by this appeal from such a decision
of the lower court is adherence to the rule of law.  Otherwise stated, would non-compliance with a
plain statutory command, considering the persuasiveness of the plea that
defendants-appellees would “not have subscribed
to [the] capital stock” of the Philippine Lumber Distributing Agency
“were it not for the assurance of the [then] Presi­dent of the Republic of
the Philippines that the Government would back [it] up by investing P9.00 for
every peso”^[4]
subscribed, a condition which was not fulfilled, such commitment not having
been complied with, be justified?  The
answer must be in the negative.

It cannot be otherwise even if an element of unfairness and
injustice could be predicated, as the lower court, in a rather sympathetic
mood, did find in the plaintiff bank as creditor, compelling defendant lumber
producers under the above circumstances to pay the balance of their
subscriptions.  For a plain and statutory
command, if applicable, must be respected. 
The rule of law cannot be satisfied with anything Less.  The appeal must be sustained.

In these various suits decided jointly, the Philippine National
Bank, as creditor, and therefore the real party in interest, was allowed by the
lower court to substitute the receiver of the Philippine Lumber Distributing
Agency in these respective actions for the recovery from defendant lumber
producers the balance of their stock subscriptions.  The amount sought to be collected from defendants-appellees Bitulok Sawmill, Inc., Dingalan Lumber Co., Inc., and Sierra Madre Lumber Co.,
Inc., is P5,000.00, defendants-appellees having made
a partial payment of P15,000.00 of their total subscription worth P20,000.00;
from defendant-appellee Nasipit
Lumber Co., Inc., the sum of P10,000.00, defendant-appellee
having made a partial payment of P10,000.00 of its total subscription worth
P20,000.00; from defendant-appellee Woodworks, Inc.,
the sum of P10,886.00, defendant-appellee having made
a partial payment of P9,114.00 of its total subscription worth P20,000.00; from
defendant-appellee Gonzalo Puyat
the sum of P10,000,00, defendant-appellee having made
a partial payment of P10,000.00 of his total subscription worth.  P20,000.00; from defendant-appellee Tomas Morato the sum of
P10,000.00, defendant-appellee having made a partial
payment of P10,000.00, of his total subscription worth P20,000.00; from
defendant-appellee Findlay Millar Lumber Co., Inc.,
the sum of P10,000.00, defendant-appellee having made
a partial payment of P10,000.00 of its total subscription worth P20,000.00;
from defendant-appellee Insular Lumber Co., Inc., the
sum of P5,000.00, defendant-appellee having made a
partial payment of P15,000.00 of its total subscription worth P20,000.00; from
defendant-appellee Anakan
Lumber Co., Inc., the sum of P15,000.00, defendant-appellee
having made a partial payment of P5,000.00 of its total subscription worth
P20,000.00; and from defendant-appellee Cantilan Lumber Co., Inc., the sum of P7,500.00, defendant-appellee having made a partial payment of P2,500.00 of its
total subscription worth P10,000.00, plus interest et the legal rate from the
filing of the suits and the costs of the suits in all the nine (9) cases.

The Philippine Lumber Distributing Agency, Inc.,
accord­ing to the lower court, “was organized sometime in the early
part of 1947 upon the initiative and insistence of the late President Manuel Roxas of the Republic of the Philippines
who for the purpose, had called several conferences between him and the
subscribers and organizers of the Philippine Lumber Distributing Agency,
Inc.”^[5]
The purpose was praiseworthy, to insure a steady supply of lumber, which could
be sold at reasonable prices to enable the war sufferers to rehabilitate their
devastated homes.  The decision continues:  “He con­vinced the lumber producers to
form a lumber cooperative and to pool their resources together in order to
wrest, parti­cularly, the retail trade from aliens who were acting as middle
men in the distribution of lumber.  At
the beginning, the lumber producers were reluctant to organize the cooperative
agency as they believed that it would not be easy to eliminate from the retail
trade the alien middlemen who had been in this business from time immemorial,
but because the late President Roxas made it clear
that such a cooperative agency would not be successful without a substantial
working capital which the lumber producers could not entirely shoulder, and as
an induce­ment he promised and agreed to finance the agency by making the
Government invest P9.00 by way of counterpart for every peso that the members
would invest therein, * * *.”^[6]

This was the assurance relied upon according to the decision,
which stated that the amount thus contributed by such lumber producers was not
enough for the operation of its business especially having in mind the primary
purpose of putting an end to alien domination in the retail trade of lumber
products.  Nor was there any
appropriation by the legislature of the counterpart fund to be put up by the
Government, namely, P9.00 for every peso invested by defendant lumber
producers.  Accordingly, “the Late
President Roxas in­structed the Hon. Emilio Abello, then Executive Secretary and Chairman of the Board
of Directors of the Philippine National Bank, for the latter to grant said
agency an overdraft in the original sum of P250,000.00 which was later
increased to P350,000.00, which was approved by said Board of Directors of the
Philippine National Bank on July 28, 1947, payable on or before April 30, 1958,
with interest at the rate of 6% per annum, and secured by the chattel mortgages
on the stock of lumber of said agency.”^[7]
The Philippine Government did not invest the P9.00 for every peso coming from
defendant lumber producers.  The loan
extended to the Philippine Lumber Distributing Agency by the Philippine
National Bank was not paid.  Hence these suits.

For the lower courts the above facts sufficed for their
dismissal.  To its mind it is grossly
unfair and unjust for the plaintiff bank now to compel the lumber producers to
pay the balance of their subscriptions* * *. Indeed, when the late President Roxas made representations to the plaintiff bank, thru the
Hon. Emilio Abello who was then the Executive
Secretary and Chairman of its Board of Directors, to grant said over­draft to
the agency, it was the only way by which President Roxas
could make good his commitment that the Government would invest in said agency
to the extent already mentioned because, according to said late President Roxas, the legislature had not appropriated any amount for
such Counter­part.  Consequently, viewing
from all considerations of equity in the case, the Court finds that plaintiff
bank should not collect any more from the defendants the balance of their
subscriptions to the capital stock of the Philippine Lumber Distributing
Agency, Inc.”^[8]

Even with the case for defendant lumber producers being put forth
in its strongest possible light in the appealed decision, the plaintiff
creditor, the Philippine National Bank, should have been the prevailing party.  On the law as it stands, the judgment reached
by the lower court cannot be sustained. 
The appeal as earlier made clear, possesses
merit.

In Philippine Trust Co. v. Rivera,^[9]
citing the lead­ing case of Velasco v. Poizat,^[10]
this Court: held: “It is established doctrine that subscriptions to the
capital of a corporation constitute a fund to which creditors have a right to
look for satisfaction of their claims and that the assignee in insolvency can
maintain an action upon any unpaid stock subscription in order to realize
assets for the payment of its debts.  * *
* A corporation has no power to release an original subscriber to its capital
stock from the obligation of paying for his shares, without a valuable consideration
for such release; and as against creditors a reduction of the capital stock can
take place only in the manner and under the conditions prescribed by the
statute or the charter or the articles of incorporation.  Moreover, strict compliance with the statutory
regulations is necessary * * *” The Poizat
doctrine found acceptance in later cases.^[11]
One of the latest cases, Lingayen Gulf Electric Power
v. Baltazar,^[12]
speaks to this effect:  “In the case
of Velasco v. Poizat,^[13]
the corporation involved was insolvent, in which case all unpaid stock subscriptions
become payable on demand and are immediately recoverable in an action
instituted by the assignee.”

It would be unwarranted to ascribe to the late President Roxas the view that the payment of the stock subscriptions,
as thus required by Law, could be condoned in the event that the counter part
fund to be invested by the Government would not be available.  Even if such were the case, however, and such
a promise were in fact made, to further the Laudable purpose to which the
proposed corporation would be devoted and the possibility that the lumber
producers would lose money in the process, still the plain and specific wording
of the applicable legal prevision as interpreted by this Court must be
controlling. It is a well settled principle that with all the vast powers
lodged in the Executive, he is still devoid of the prerogative of suspending
the operations of any statute or any of its terms.

The emphatic and categorical language of an American decision
cited by the late Justice Laurel, In People v. Vera,^[14]
comes to mind:  ‘”By the twentieth
article of the declaration of rights in the constitution of commonwealth, it is
declared that the power of suspending the laws, or the execution of the Laws,
ought never to be exercised but by the legislature, or by authority derived
from it, to be exercised in such particular cases only as the Legislature shall
expressly provide for.’” Nor could it be other­wise considering that the
Constitution specifically enjoins the President to see to it that all Laws be
faithfully executed.^[15]
There may be a discretion as to what a particular legal provision requires;
there can be none whatsoever as to the enforcement and application thereof once
its meaning has been ascertained.  What it decrees must be followed; what it
commands must be obeyed.  It must be
respected, the wishes of the President, to the contrary notwithstanding, even
if impelled by the most worthy of motives and the most persuasive equitable
considerations.  To repeat, such is not
the case here.  For at no time did President
Roxas ever give defendant lumber producers to
understand that the failure of the Govern­ment for any reason to put up the
counterpart fund could terminate their statutory liability.

Such is not the law. 
Unfortunately, the lower court was of a different mind.  Mat is not to pay homage to the rule of
law.  Its decision then, one it is to be
repeated influenced by what it considered to be the “equity of the case”, is
not legally impeccable.

WHEREFORE, the decision of the lower court is reversed and
the cases remanded to the lower court for judgment according to law, with full
consideration of the legal defenses raised by defendants-appellees,
Bitulok Sawmill, Inc.; Dingalan
Lumber Co., Inc.; Sierra Madre Lumber Co., Inc.; Nasipit
Lumber Co., Inc.; Woodworks, Inc.; Gonzalo Puyat;
Tomas B. Morato; Findlay Millar Lumber Co., Inc.; Anakan Lumber Co., Inc.; and Cantilan
Lumber Co., Inc.  No pronouncement as to
costs.

Concepcion, C.J., Reyes, Dizon, Makalintal, Zaldivar, Sanchez, and
Angeles, JJ., concur.

Castro, J., did not take part.

^[1]
Decision, Record on Appeal, p. 447.

^[2] Ibid, p. 447.

^[3] Ibid, p. 442.

^[4] Ibid, p. 447.

^[5] Ibid, p. 442.

^[6] Ibid, p. 443.

^[7] Ibid,
pp. 444-445.

^[8] Ibid,
pp. 449-450.

^[9] 44 Phil. 469, 470-471 (1923).

^[10] 37 Phil. 802 (1918).

^[11] National Exchange Co., Inc. v. Dexter, 51 Phil. 601 (1928);
Miranda v. Tarlac Rice Mill Co., Inc., 57
Phil. 619 (1932); Lumanlan v. Cura, 59 Phil. 746 (1934); Garcia v. Suarez, 67
Phil. 441 (1939); and Baluyut v. Bank of P.
I., 72 Phil. 17 (1941).

^[12]  93 Phil, 404, 410 (1953).
Cf. 13 Fletcher, Cyclopedia of Corporations, pp. 747-750 (1961).  See also Lattin on The Law of Corporations, p. 113 (1959).

^[13]  37 Phil. 805 (1918).

^[14]  65 Phil. 56, 121 (1937), citing Holden v.
James, 11 Mass., 396 (1814).

^[15]
Art. VII, Sec. 10, par. 1, Constitution of the Philippines.