Mr. Alfonso A. Dantes

November 4, 1987 Mr. Alfonso A. Dantes 72 Magat Salamat, Project 4 Quirino District, Quezon City Sir : This relates to your letter, dated October 17, 1987, requesting clarification of the penultimate paragraph of our letter, dated October 8, 1987, addressed to Mr. Teodoro Cabrieto. In this connection, please be informed that the opinion rendered by the Commission therein was based on the facts stated in the basic letter of Mr. Cabrieto dated October 6, 1987. The letter stated that Board Resolution No. 11, Series of 1986 approved and confirmed the recall and cancellation of all certificates of stock covering any and all shares in excess of the authorized capital stock; that before the recall and cancellation of stock, Teodoro Cabrieto transferred to Felipe Cabrieto 5,834 shares (out of the stock dividends declared) and Corazon Carandang transferred 4,829 shares (also out of the stock dividend declared). Assuming therefore the truth of the allegations stated by Mr. Cabrieto in his letter to us of October 6, 1987, "The purported sale of stock by Teodoro Cabrieto in favor of Felipe Cabrieto and Corazon Carandang is not valid, or void ab initio." Apropos the above opinion, please be advised that "where the corporation has previously issued stock to the entire authorized limit, it cannot of course issue additional stock". (11 Fletcher, Cyc. Corp., 1986 Rev. Vol. 7 sec. 5144, citing Hill v. Small, 228 Ga. 31, 183 SE 2d 752, and others). "Where there is an overissue, the increase and the certificates are void because of the fact that it is beyond the power of the corporation to create and issue the additional stock, and the holder of the certificates, therefore, whether they be the original holders their bonafide transferees, do not become stockholders" (Fletcher, Supra, citing Scoville v. Thayer, 105 US 143, 26 L. Ed. 968; and others). Your letter, however, of October 17, 1987, refutes the veracity of the facts contained in the letter of Mr. Cabrieto, stating otherwise several facts and circumstances thereof. Considering therefore, that the issue has become a matter of evidence, and therefore, justiciable issue which could only be clarified and determined in a proper proceeding, the Commission therefore, opts to refrain from making any further comments thereon, so as not to prejudice the outcome of the case if it will eventually be litigated in the future. Thus, instead of rendering further remark on the issues raised in your letter, and in order to afford the parties due process of law, we suggest that you file the necessary action with this Commission should you believe that your rights are aggrieved in pursuance of Sec. 5 of P.D. 902-A. Please be guided accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman