8/14/2019 023 - 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.

Facts:

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 Fleischers name.

. !he treasurer of Botica Nolasco offered to bu" the shares from Fleischer for #1$$ each

%total #5$$&. Fleischer refused the offer.

'. Fleischer filed an action for mandamus against the board of directors of Botica Nolasco.

(. Fleischer wanted Botica Nolasco to

a. )egister in its books 5 shares of stock under his name

b. #a" him the sum of #5$$ for damages

5. Botica Nolasco refused to accede to Fleischers demands *ursuant to article 1 of its b"+

laws %,*referential right to bu" shares from retiring stockholders-&.a. ccording to article 1/ it had the *referential right to bu" the shares from

Fleischer at the *ar 0alue of #1$$ *er share/ with #$ as di0idends/ and that

Fleischer refused the offer

2. !he lower court ruled that article 1 was in conflict with the *ro0isions of the

3or*oration 4aw

a. rticle 1 creates in fa0or of Botica Nolasco a *referential right to bu" the shares

of a retiring shareholder %in this case/ Botica Nolasco has a *referential right to

bu" Gonzales shares o0er Fleischer.&

Issue/s:

1. s article 1 in conflict with the 3or*oration 4aw6 789

Held/Ratio:

. B!-la" article 2 is in con#lict "ith the Cor$oration %a" &ecause it is a

restraint o# trade not conte'$lated &! (ec 3) o# the Cor$oration %a". *hile

it "as validl! created under the $rovisions o# (ec 3+, it is not in har'on!

"ith (ec 3).

2. oreover Fleischer had no no"led1e o# article 2 "hen onales

assi1ned the shares to hi'. He "as not a $riv! to the contract and o&tained

the shares in 1ood #aith and #or valua&le consideration.

'. ccording to 9ec 1'%:& and 9ec '5 of the 3or*oration 4aw/ b"+laws relating to

transfer of stock should be in harmon" with the law on the sub;ect of transfer of

stock.a. 1'%:&

983. 1'. 80er" cor*oration has the *ower?76 B"+laws or other regulations restraining transfers are regarded as

im*ositions in restraint of trade

@. b"+law of a cor*oration which *ro0ides that transfers of stock shall not be 0alid

without board a**ro0al cannot defeat the rights of third *ersons.

Aigested b"< Aee %$15&