C A S E - D I G E S T - F O R - C O R P O R A T I O N - L A W CASE: Keller v. COB Group GR NO. L-68097 141 SCRA 404 DATE: January 16, 1986 PONENTE: C.J.

Aquino FACTS: > Edward A. Keller & Co., Ltd. (Keller) appointed COB Group Marketing, Inc. (COB ) as exclusive distributor of its household products in Panay and Negros > this was evidenced by a sales agreement w/c said Keller sold on credit its pro ducts to COB > as security for COB's credit purchases up to the amount of P35,000, one Asunci on Manahan mortgaged her land to Keller and bound herself solidarily w/ COB > Keller and COB executed a second sales agreement whereby the latter's territor y was extended to northern and southern Luzon > as security for COB's credit purchases up to P25,000 for that area, Tomas C. L orenzo, Jr. and his father Tomas, Sr., executed a mortgage on their land > like Manahan, the Lorenzos were solidarily liable with COB for its obligations under the sales agreement > COB's president and general manager, Jose Bax, soon apprised the firm's board of directors that they owed Keller about P179,000 > Bax was authorized to negotiate with Keller for the settlement of his firm's l iability > Bax and a representative of Keller's signed the conditions for the settlement of COB's liability > twelve days later, COB executed two more chattel mortgages over its 12 trucks (already mortgaged to another) as security for its obligation to Keller > these mortgages did not become effective since the first mortgagee did not giv e its consent > HOWEVER, the failed mortgages did serve the purpose of being admissions of the liability of COB to Keller > COB's stockholders, Moises Adao and Tomas Lorenzo, Jr., proposed in a letter t o pay Keller P5,000 every thirtieth day of the month for three years until the o bligation is satisfied > Adao and Lorenzo likewise proposed to substitute Manahan's mortgage with one o n Adao's lot in Quezon City > Bax at some point presented his own reconciliation statements where he claimed overpayment on the part of his firm -- i.e. that COB overpaid Keller P100,596.7 2 [> the Supreme Court noted at this juncture that Bax was not an accountant] > the matter was brought before the courts when Keller sued COB, its stockholder s and mortgagors Manahan and Lorenzo (Tomas, Sr. died in the interim) > COB was declared in default > court below dismissed the complaint and ordered Keller to pay COB the "overpai d" amount + interest + moral damages for the stockholders and Manahan + attorney 's fees and costs of suit; the lower court also declared void the mortgages exec uted by Manahan and Lorenzo > Keller appealled, but in vain > hence this petition ISSUE: Was the ruling of the lower court, affirmed by the Appellate Court, prope r? RULING: NO. [> the SC called out the lower and appellate courts for misapprehension of facts and for adopting findings contradicted by evidence, noting that this was an ins

tance where the SC is not bound by the factual findings of the court(s) below] > the lower courts erred in nullifying the admissions of liability made in 1971 by Bax as president and general manager of COB and in giving credence to the all eged overpayment computed by Bax > the lower courts not only allowed Bax to nullify his admissions as to the liab ility of COB, they also erroneously rendered judgment in its favor in the amount of its "overpayment" (P100,596.72) in spite of the fact that COB was declared i n default and did not file any counterclaim for the supposed overpayment > the lower courts harped on Keller's alleged "failure" to thresh out with repre sentatives of COB their "diverse statements of credits and payments"; this has n o factual basis whatsoever, because there was a conference on COB's liability wh ere Bax DID NOT present his reconciliation statements to show overpayment > as a matter of fact, Bax presented his reconcilation statements long after the case was filed before the court below -- in the SC's words, an afterthought > Bax admitted that Keller sent his company monthly statements of accounts but h e could not produce any formal protest against the supposed inaccuracy thereof > even lamely explaining (SC's words, not mine, obviously the ponente was very s assy) that he would have to dig up his company's records for the formal protest > also, Bax did not make any written demand for reconciliation of accounts > the decisions of the trial and appellate courts = reversed and set aside > in view of the doctrine (see below), stockholder-respondents are solidarity li able with COB up to the amounts of their unpaid subscription to be applied to th e company's liability herein DOCTRINE: "[As held in the case of Vda. de Salvatierra vs. Garlitos (103 Phil. 757, 763; 1 8 CJs 1311-2), a]s to the liability of the stockholders, it is settled that a st ockholder is personally liable for the financial obligations of a corporation to the extent of his unpaid subscription."