Capitol City Development Bank

December 4, 1986 Capitol City Development Bank CCDB Bldg.,827 Aurora Blvd. Cubao, Quezon City Gentlemen: This relates to your letter, dated November 21, 1986, requesting opinion of this Commission on the query posed therein. LibLex From the facts presented in your letter, it appears that the Bank prepared and issued certificates of stock in favor of some of its stockholders of record. However, prior physical delivery of the certificates of stock to their respective owners, said certificates were lost or misplaced by the bank. After a request from the stockholders for the issuance of the corresponding stock certificates, and a determination by the Bank's officers that the stock certificates had been lost or misplaced, a notice of loss was published in pursuance of the provision of Section 73 of the Corporation Code. Anent thereto, your query is: is there a need to comply with the indemnity bond requirement and/or the one-year waiting period before the Bank may issue the replacement certificates to the stockholders concerned? Jurisprudence is replete of authorities to the effect that the procedure prescribed by statute authorizing the issuance of new certificates in lieu of lost or destroyed ones is not applicable in a proceeding to compel issuance of a certificate in whose favor none was ever issued by the corporation. (11 Fletcher, Cyc. Corps.,1958 Rev. Vol.,sec. 5177, p. 505).A corporation could be compelled to issue a new certificate without any bond of indemnity where upon the facts, the certificate was lost by the corporation itself by carelessness. (Fletcher, Supra.,pp. 507-508).The following precedents are cited: "Where a statute provides that every stockholder shall have a certificate of stock, a stockholder whose rights to a certificate is conceded and who is conceded never to have received one is entitled to compel issuance of a certificate to him without compliance with statutory or by-law provisions relating to lost or destroyed certificates, where none was ever issued to him although some steps toward issuance were taken." (Smith v. Universal Service Motors Co.,17 Del. Ch. 58, 147 Atl. 247, cited in Fletcher, sec. 505). "A corporation may be compelled to issue new certificate without any indemnity where, upon the facts, it is reasonably certain that the original certificate had been lost or stolen, not having an assignment thereon by the owner." (Guilford v. Western Union Tile Co.,59 Minn. 332, 61 N.W. 324, 50 Am. St.,Rep. 407, cited in Fletcher, sec. 5180, p. 507). "A stockholder to whom a certificate has never been delivered, it being claimed by the company to have been lost before delivery, is entitled to another certificate without complying with the by-law relative to the issuance of a new certificate in lieu of one claimed to be lost or destroyed, which requires a stockholder claiming the certificate to have been lost or destroyed to give bond before issuance of a new certificate. (Smith v. Universal Service Motors Co.,17 Del. Ch. 58, 147 Atl. 247, cited in Fletcher, sec. 5180, p. 508). Considering the foregoing, the Commission opined that certificates left with the company and mislaid while in its possession are not lost or destroyed within the meaning of Section 73 of the Corporation Code so as to make it obligatory on the corporation to require an indemnity bond from the stockholders or the lapse of the one-year waiting period before issuing new certificates. In such instance, the stockholders should not suffer the consequences arising on account of the negligence of the corporate officers of the Bank. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman