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Bayla v Silang Traffic Facts: 8 Years after the Silang Traffic Co.

was organized, it entered into an agreement for the sale on installment of its shares of stock with various individuals, including the petitioners. After the latter had paid several installments for the purchase price of said shares of stock, the petitioners defaulted in the payment of the subsequent installments. Thus, the Board of directors passed a resolution authorizing for the refund of the amounts paid and the reversion of the shares of stock to the corporation. Despite the said Board resolution, the amounts paid by petitioners were not returned to them. Thus, they instituted an action in the CFI to recover the sums of money paid. The respondent corporation contends that the resolution does not apply to petitioners as at the time the resolution was passed, the shares had already automatically been reverted back to the corporation, and that the resolution was no longer effective as it was cancelled by a subsequent resolution passed by the Board. The CFI declared that the shares of stock had already been forfeited and absolved the respondent from the complaint. Issues: Whether the contract herein involved is a subscription, and whether failure to pay any installment of the purchase price of the shares of stock would result in its automatic forfeiture in favor of the corporation. Held: The contract herein involved is one of sale and not of subscription as it is an independent agreement between the individual purchaser and corporation to buy the shares of stock at a stipulated price. It does not involve a mutual agreement of the subscribers to take and pay for the stock of the corporation. Whether a particular contract is a purchase or a subscription of shares of stock is a matter of construction and depends upon its terms and the intention of the parties. It has been held that a subscription to stock in an existing corporation is, as between the subscriber and the corporation, simply a contract of purchase and sale. As to forfeiture, the contract did not expressly provide that the failure of the purchaser to pay any installment would give rise to the forfeiture and cancellation without the necessity of any demand from the seller. However, being a contract of sale, it may be rescinded by mutual agreement of the parties. In the subsequent Board resolution, it was stated that the contracts were rescinded for the good of the corporation and in order to terminate a pending civil case involving the validity of such sales of the shares. To such rescission, petitioners apparently agreed, as shown by their demand for the refund of the amount they had already paid to the corporation.