Mr. Benedicto D. Leyson

January 2, 1981 Mr. Benedicto D. Leyson 2620 F. Muoz, Singalong Manila Sir : This refers to your letter-query dated 15 October 1980 requesting the opinion of this Commission on questions posed therein. It appears that as an incorporator of Roga Marble Inc., you have pledged your shares of stocks with the Development Bank of the Philippines when your corporation secured a loan from the said bank. That sometime in 1978, your shares of stocks were assigned to a certain Pablo Santiago who has not yet paid you to date. The pertinent queries for resolutions are as follows: 1. Can you rescind the assignment of your shares of stocks to Mr. Pablo Santiago in view of his non-payment of the same. 2. Can you compel the Development Bank of the Philippines to release you from the obligation and be substituted by the assignee Mr. Pablo Santiago? 3. Can your shares of stock be sold to any person who is a non-stockholder without any pre-emptive rights to the existing stockholders? Considering that the assignment of stocks is in the nature of a contract of sale, the provisions of the New Civil Code on sales apply, thus, for failure to receive the price for these stocks, the unpaid assignor (seller) has the "right to rescind" the assignment (Article 1524 (4), New Civil Code * ). Moreover, under the foregoing facts, it was not mentioned if Development Bank of the Philippines consented to the assignment which is a necessary requisite to establish a valid transfer of ownership of stock. Relative thereto, the New Civil Code provides: "ARTICLE 2097. With the consent of the pledgee, the thing pledged may be alienated by the pledgor or owner, subject to the pledge. The ownership of the thing pledged is transmitted to the vendee or transferee as soon as the pledgor consents to the alienation, but the latter shall continue in possession" prcd In view thereof, your first query is answered in the affirmative. For obvious reasons, your second query is answered in the negative. Granting that there arises a valid transfer of stocks under circumstances, you still remain indebted to the Development Bank of the Philippines since the assignee merely acquired ownership of the stocks pledged and not your loan. Said loan must be settled first before you can be released from your obligation, but under the aforementioned facts, the assignee can not be compelled to take your place as debtor of Development Bank of the Philippines. With respect to the last query, the answer is in the affirmative. The articles of incorporation of Roga Marble, Inc. filed in this Commission do not provide for any restriction with respect to the transfer of stocks. Please be guided accordingly. cdlex Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .