Davao Integrated Port and Stevedoring Service Corporation

January 8, 1990 Davao Integrated Port and Stevedoring Service Corporation c/o Mr. Isidro A. Panlasigue, Jr. International Port of Davao Sasa, Davao, City Gentlemen : This refers to your letter dated November 13, 1989, requesting opinion on the query posed therein. You stated that Davao Integrated Port & Stevedoring Services Corporation (DIPSSCOR) is a stevedoring corporation owned primarily by four constituent corporations, one of which is Luzon Stevedoring Corporation (LUSTEVECO).One of the former members of the board of directors of DIPSSCOR is Mr. Ambrosio J. Makalintal, Jr. who was issued a certificate of stock for one share to qualify him as member of the board to represent LUSTEVECO. National Development Corporation (NDC) now claims to be the owner of the LUSTEVECO shares of stocks including the one issued to Mr. Makalintal, but the shares of stocks of LUSTEVECO have not yet been registered in the stock and transfer book as having been transferred to NDC. The certificate of stock for one share issued to Mr. Makalintal had been lost. NDC is now requesting that the lost stock certificate of Mr. Makalintal be replaced and that another one be issued in the name of its nominee, Atty. Josephine A. Batiller to qualify her as member of the board of directors of DIPSSCOR. The letter-request of NDC is without any supporting board resolution of either LUSTEVECO or NDC. During the meeting of DIPSSCOR on October 30, 1989, Atty. Batiller was nominated to become a member of the Board to represent LUSTEVECO, provided that she will subsequently qualify by having a certificate of stock issued in her name. During the meeting, 34,999 shares out of the 35,000 shares of DIPSSCOR voted to waive the legal requirement of one share of stock to qualify Atty. Batiller, with the understanding that if she is elected, she becomes a member of the Board as of the date when a certificate of stock is issued in her name. Your queries are: 1. Is it true that just because the lost certificate is only for one share to qualify Mr. Makalintal as a director, the stock certificate can now be replaced on the basis of the affidavit of loss, without complying with the publication requirement of Section 73 of the Corporation Code? 2. Should the request to replace the lost certificate and transfer to Atty. Batiller be supported by a board resolution of LUSTEVECO? 3. Instead of LUSTEVECO board resolution, will an NDC board resolution be a valid and legal basis to replace the lost certificate and transfer it to Atty. Batiller? 4. Was the nomination and election of Atty. Batiller valid and legal under the circumstances above-stated. Anent your first query, a corporation may be compelled to issue a new certificate if a bond of indemnity is given; or might do so voluntarily, and it could be compelled to issue a new certificate without any indemnity where, upon the facts, it is reasonably certain that the original certificate will not reappear, as where there is clear proof that the original had been destroyed, or that it had been lost or stolen, not having an assignment by the owner, or where the certificate was lost by the corporation itself by carelessness, or if the corporation was otherwise protected for in such a case the corporation could not incur any liability by reason of the original certificate .(11 Fletcher Sec. 5180). In the light of the foregoing, a corporation may voluntarily issue a new certificate in lieu of the original certificate of stock which has been lost without the publication requirement provided that the corporation is certain as to the real transferee of the nominal share. Relative to your second and third query, since the certificate evidencing the nominal share had been lost, a board resolution of the corporation who appears in the stock and transfer book to be the beneficial owner of the share represented by the lost certificate is necessary to transfer the share to the new nominee. It is to be noted that a nominee or qualifying shareholder only possesses the naked ownership of the share. The beneficial ownership of the stock remains with the transferor. The fact that one stock standing on the corporate books is in the name of the person as nominee in the certificate or that the holder thereof is described merely as a nominee in the corporate books, is a notice to the corporation that the nominee does not hold the share in his own right. Therefore, the authority to transfer the share in favor of a new nominee should come from the beneficial owner of the share as appearing in the stock and transfer book of DIPSSCOR . Your fourth query is answered by the following jurisprudence on the matter: "Under statutes requiring that a director be a shareholder, the fact that a person does not own stock at the time of his election or appointment to office does not disqualify him, if he becomes a shareholder before entering upon the duties of the office ." (2 Fletcher, sec. 304, citing Cupo v. Community Nat. Bank & Trust Co. of New York, 324 F. Supp. 1390 (EDNY; 130 ALR 156). cdll Please be advised accordingly. Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner