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Title023 - Fleischer v Botica Nolasco.doc
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CORPO - 023
Fleischer v Botica Nolasco Co. Inc.

A by-law of a corporation which provides that transfers of stock shall not be valid without
board approval cannot defeat the rights of third persons.

1. Manuel Gonzales assigned his 5 shares of Botica Nolasco stock to Fleischer in

consideration of a debt he owed to the latter. Gonzales requested Botica Nolasco to
transfer the shares to Fleischer’s name.

2. The treasurer of Botica Nolasco offered to buy the shares from Fleischer for P100 each
(total P500). Fleischer refused the offer.

3. Fleischer filed an action for mandamus against the board of directors of Botica Nolasco.
4. Fleischer wanted Botica Nolasco to

a. Register in its books 5 shares of stock under his name
b. Pay him the sum of P500 for damages

5. Botica Nolasco refused to accede to Fleischer’s demands pursuant to article 12 of its by-
laws (“preferential right to buy shares from retiring stockholders”).

a. According to article 12, it had the preferential right to buy the shares from
Fleischer at the par value of P100 per share, with P90 as dividends, and that
Fleischer refused the offer

6. The lower court ruled that article 12 was in conflict with the provisions of the
Corporation Law

a. Article 12 creates in favor of Botica Nolasco a preferential right to buy the shares
of a retiring shareholder (in this case, Botica Nolasco has a preferential right to
buy Gonzales’ shares over Fleischer.)

1. Is article 12 in conflict with the Corporation Law? YES

1. By-law article 12 is in conflict with the Corporation Law because it is a

restraint of trade not contemplated by Sec 35 of the Corporation Law. While
it was validly created under the provisions of Sec 13(7), it is not in harmony
with Sec 35.

2. Moreover, Fleischer had no knowledge of article 12 when Gonzales
assigned the shares to him. He was not a privy to the contract and obtained
the shares in good faith and for valuable consideration.

3. According to Sec 13(7) and Sec 35 of the Corporation Law, by-laws relating to
transfer of stock should be in harmony with the law on the subject of transfer of

a. 13(7)
SEC. 13. Every corporation has the power:
(7) To make by-laws, not inconsistent with any existing law, for the fixing or
changing of the number of its officers and directors within the limits
prescribed by law, and for the transferring of its stock, the
administration of its corporate affairs, etc.

b. 35

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