GR 48195 96; (May, 1942) (CRITIQUE)
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THE AI-ASSISTED CRITIQUE
The Court’s reliance on Velasco vs. Poizat to invalidate the board resolution is a fundamental misapplication of precedent. The Velasco doctrine, which prohibits a corporation from releasing an original subscriber from the obligation to pay for shares, is predicated on the protection of corporate creditors and the integrity of the paid-in capital stock. However, this case does not involve an original subscription to unissued stock for the purpose of forming capital. The agreements, explicitly titled as installment sales and executed eight years post-incorporation, are contracts for the purchase of treasury or unissued stock from the corporation’s assets, not subscriptions to its capital. Therefore, the trust fund doctrine and creditor-protection rationale underpinning Velasco are inapplicable. The board’s resolution to rescind the sales and refund payments is a legitimate exercise of corporate power over its property, not an unlawful release of a subscription obligation that would impair capital.

The automatic forfeiture clause in the sales contracts is an unenforceable penalty that violates principles of equity. The provision stating that upon a single missed installment, “the said shares are to revert to the seller and the payments already made are to be forfeited” operates as a liquidated damages clause grossly disproportionate to any conceivable loss. The corporation would retain all prior payments and reclaim the stock, receiving a windfall while the purchaser loses everything. Philippine law and the general principle against penalties would demand that such a forfeiture be treated as a penalty and disallowed, requiring instead a determination of actual damages. The Court’s tacit acceptance of this clause, by focusing on the resolution’s validity rather than the clause’s unconscionability, fails to protect parties from oppressive contractual terms.

The procedural treatment of the dual appeals unnecessarily complicates the disposition. By consolidating the petition and cross-petition, the Court correctly addressed the core issue but created ambiguity in the final remedy. The Court of Appeals’ decision, which denied refunds but granted a 30-day grace period to cure arrears, implicitly rejected the automatic forfeiture but did so on shaky grounds. The Supreme Court’s ultimate ruling, while likely correct in denying recovery under the voided resolution, should have explicitly voided the penalty clause in pari delicto and remanded for a determination of the parties’ rights under ordinary contract law principles of rescission and damages. This would have provided clearer guidance, rather than leaving the parties in a limbo where the sales contracts are deemed valid yet their most onerous term escapes direct scrutiny.