Mr. Teodoro G. Mendoza

February 6, 1981 Mr. Teodoro G. Mendoza Corp. Secretary & Asst. Manager Samahang Magsasaka, Inc. Cabanatuan City Sir : This has reference to your letter dated 24 December 1980 requesting the opinion of this Commission regarding a deed of sale of stocks submitted to Samahang Magsasaka, Inc., owner and operator of Cabanatuan Electric Plant, for registration. It appears that the said instrument grants the vendor the right to repurchase the shares within an unspecified period. LexLib Relative to the above-mentioned document the following question are presented before this Commission: a) Should the Secretary just accept the document with the corresponding stock certificates for entry and annotation of the same only in the corporation's stock and transfer book; or b) Should the Secretary cancel the certificate of stock presented and issue a new certificate to the vendee based on the document presented after the annotation; c) In the negative, what then is the nature and status of the document presented, that of a Deed of Sale with Right to Repurchase. It is well settled that the seller of corporate stock may agree to repurchase it at a specified price at the option of the buyer, or upon certain contingencies, and under such an agreement the title to the stock passes at once to the buyer when issued, subject to his right to rescind and return the stock under the terms of the agreement. So an agreement entered into between the stockholders of a corporation and the purchaser of stock by which the stockholders agree to repurchase such stock before a certain date at a specified price, if the purchaser desires to sell, is valid. (12 A Fletcher 5617). Hereunder for your ready reference are the pertinent provisions of the New Civil Code on Sales: "ARTICLE 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon. ARTICLE 1606. The right referred to in Article 1601, in the absence of an express agreement, shall last four years from the date of the contract. (first sentence) ARTICLE 1609. The vendee is subrogated to the vendor's rights and actions." In view of the foregoing, your first two queries are answered in the affirmative, while the last one is rendered academic by this answer. Please be advised accordingly. LexLib Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department