Mrs. Consolacion V. Odra

February 20, 1981 Mrs. Consolacion V. Odra Director, Department of Rural Banks and Saving and Loan Association Madam: This refers to your letter of 20 October 1980, requesting opinion on the applicability of the provisions of Section 6, paragraph 6 of the Corporation Code of the Philippines which allows non-voting shares to vote on specific cases enumerated therein. You cited in this connection, the provision of Section 7, paragraph 2 of the Rural Banks Act, (Republic Act No. 720, as amended) which we quote: "Stock held by the Development Bank of the Philippines, under the terms of this section, shall be made preferred only as to assets upon liquidation and without the power to vote and shall share in dividend distributions not exceeding two per cent thereof without preference; Provided, however, That if such stock of the Development Bank of the Philippines is sold to private shareholders, the same shall be converted automatically into common stock of the class provided for ...,Provided further, That pending amendment of the Articles of Incorporation of the rural bank, if necessary, for the purpose of reflecting the conversion into common stock of preferred stock sold to private shareholders, the transfer shall be recorded by the rural bank in the stock and transfer boo k and such shareholders shall thereafter enjoy all the rights and privileges of common stockholders. The preferred stock so transferred shall be surrendered and canceled and the corresponding common stocks shall be issued." This Commission, in the past, had occasion to rule on a similar query posed by your Office involving the interpretation of Section 17 of the old Corporation Law (Act 1459, as amended) in relation to R.A. No. 720. We opined then that the required "two-thirds of the entire corporate stock favoring the increase or diminution of the capital stock" included the non-voting stockholders. However, since the articles of incorporation format for rural banks explicitly provides for preferred shares to be non-voting conformably with the limitation set forth under R.A. 720, as amended, the law governing the creation, organization and operation of rural banks, and considering that said law is a later enactment we interpreted the same to prevail over the Corporation Law (Act 1459, as amended). Non-voting shares, were, therefore, excluded in the computation of the vote requirement for the increase or diminution of the authorized capital stock. The query before us required an interpretation of the provision of an earlier special law (Section 7, paragraph 2, R.A. 720) in relation to the provision of the later general law (Section 6, paragraph 6, Corporation Code of the Philippines) which seem inconsistent with each other. Although by practice, all preferred shares issued by rural banks are reserved for government financial institutions, these shares held by them are not almost always represented in the corporate meetings. To require the presence of their representatives is impractical considering the number of rural banks where they have shareholdings. So in effect, while the special law withholds the voting rights of preferred shares, the general law grants them such rights in the enumerated cases but which can not be enjoyed by them for the reasons just stated. Even if the general act dealing specifically with a particular subject supersedes and repeals inconsistent and conflicting provisions in an earlier special act generally dealing with the same subject, the special act is not repealed thereby where the two acts are not inconsistent to such an extent that both cannot stand and be enforced (32 CTS p. 575). Precisely in this case, even if the general law permits the non-voting shares to vote in certain cases, yet the right can not be exercised because of its impracticability. Apparently, the inconsistency has not rendered irreconcilable the provisions of both statutes. An inconsistency that falls short of that standard does not suffice to repeal what had been formerly enacted (Villegas vs. Subido, G.R. No. L-31711, September 30, 1971 cited in Martine, Statutory Construction p. 175). It is a well-known rule in statutory construction that a subsequent statute which is general does not repeal or abrogate a former statute which is special and intended to operate on a particular phase of a single subject (82 COS p. 515). In view of the foregoing, we are of the opinion that Section 6 paragraph 6 of the Corporation Code of the Philippines did not repeal Section 7 paragraph 2 of R.A. 720 and therefore, the preferred non-voting shares need not vote in the cases enumerated in the Code. "It is now the settled rule in this jurisdiction that a special statute, providing for a particular cases or class of cases, is not repealed by a subsequent statute, general in its terms, provisions and applications, unless the intent to repeal or alter is manifest, although the terms of the general law are broad enough to include the cases embraced in the special law." (MRR vs. Rafferty, G.R. No. 14205, September 30, 1919, 20 Phil. 225; City of Manila vs. PSC, G.R. No. 29955, December 22, 1928, 52 Phil. 515, cited in Martin, Statutory Construction p. 188). Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department