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Case # 26 - Enano-Bote v. Alvarez - G.R. No. 223572

This case discusses the applicability of the trust fund doctrine to hold original incorporators and stockholders of an insolvent corporation personally liable for unpaid debts. Specifically, Central Air failed to pay rent obligations to the Subic Bay Metro Authority (SBMA) under a lease agreement. SBMA sued Central Air and its stockholders to recover unpaid rentals. The Court of Appeals applied the trust fund doctrine to hold the stockholders solidarily liable. However, the Supreme Court ruled that for the trust fund doctrine to apply, insolvency of the corporation must first be established, which was not proven in this simple collection suit against Central Air.

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3K views1 page

Case # 26 - Enano-Bote v. Alvarez - G.R. No. 223572

This case discusses the applicability of the trust fund doctrine to hold original incorporators and stockholders of an insolvent corporation personally liable for unpaid debts. Specifically, Central Air failed to pay rent obligations to the Subic Bay Metro Authority (SBMA) under a lease agreement. SBMA sued Central Air and its stockholders to recover unpaid rentals. The Court of Appeals applied the trust fund doctrine to hold the stockholders solidarily liable. However, the Supreme Court ruled that for the trust fund doctrine to apply, insolvency of the corporation must first be established, which was not proven in this simple collection suit against Central Air.

Uploaded by

Mikhael Ong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Enano-Bote v. Alvarez, G.R. No.

223572, November 10, 2020


Caguiao, J.

Doctrine:

Applicability of the trust fund doctrine - To make out a prima facie case in a suit
against stockholders of an insolvent corporation to compel them to contribute to the
payment of its debts by making good unpaid balances upon their subscriptions, it is
only necessary to establish that the stockholders have not in good faith paid the par
value of the stocks of the corporation.
Facts:

Subic Bay Metro Authority entered into a lease agreement with Central Air for
a building in Subic Bay Freeport Zone for five years.

Central Air was remiss in the payment of its obligations. Due to the continuous
refusal of Central Air to pay, SBMA filed a complaint against Central Air and its
stockholders.

Summons were served upon Enano-Bote, et al. (original incorporators of


Central Air) They argued that they were no longer stockholders when the lease was
executed and that they assigned subscription rights to Alvarez.

The Court of Appeals held that Central Air and Enano-Bote, et al are solidarily
liable for the unpaid rentals of the former.

Issue:

Was it proper to apply the trust fund doctrine to make petitioners personally and
solidarily liable with Central Air for the unpaid rentals claimed by SBMA against Central
Air for their supposedly unpaid subscriptions in Central Air’s capital stock?

Ruling:

Citing Halley v. Printwell, the SC held: The creditor is allowed to maintain an


action upon any unpaid subscriptions and thereby steps into the shoes of the
corporation for the satisfaction of its debt. To make out a prima facie case in a suit
against stockholders of an insolvent corporation to compel them to contribute to the
payment of its debts by making good unpaid balances upon their subscriptions, it is
only necessary to establish that the stockholders have not in good faith paid the par
value of the stocks of the corporation.
Therefore, for the trust fund doctrine to apply, it must first be established that
the corporation in question is insolvent or has dissolved. In the present case, SBMA’s
complaint was merely for a simple collection suit.

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