Quezon Capital Rural Bank, Inc.

June 4, 1984 Quezon Capital Rural Bank, Inc. corner Perez & C.M. Recto Sts. Lucena City Attention : Mr . Jose S . Laureles Corporate Secretary Gentlemen: This has reference to your letter dated September 14, 1983, requesting this Commission to approve the market valuation of a residential lot located at Poblacion, Candelaria, Quezon. LexLib It appears from the facts on record that a free patent for a parcel of land identified as Lot 825 No. 1, CAD-312-D, located at Poblacion, Candelaria, Quezon, was issued on June 30, 1977, in favor of Ricardo Bautista. On July 6, 1977, said free patent was transcribed in the registration book of the Register of Deeds for Quezon Province as Original Certificate of Title No. P-23709. On September 14, 1983, Quezon Capital Rural Bank, Inc. (QCRBI, in short),requested this Commission to approve the market valuation of the aforesaid lot wherein their building is erected and proposed to be acquired by the Bank by way of exchange of stock in the amount of P76,800.00 and the reimbursement to the landowner for land development, filling and ejectment in the amount of P23, 200.00 or a total consideration of P100,000.00. The excerpts from the minutes of the meeting of the Board of Directors of the said bank held on September 3, 1983 show that the fair market value of said property was pegged at P123,000.00, through a board resolution. Said property was also appraised by Cuervo Appraisers, Inc. at a fair market value of P159,900.00 as of November 22, 1983. As per tax declaration submitted, the said property is mortgaged to Candelaria Rural Bank for P15,000.00. On November 7, 1983, the Acting Register of Deeds of Quezon issued a certification that Original Certificate of Title No. P-23709 is registered in the name of Ricardo Bautista. On February 6, 1984, the Central Bank, in its letter to QCRBI required the submission of SEC approval on the valuation of the subject property. The Examiners' and Appraisers' Department, this Commission, in its Report dated March 7, 1984, stated that as regards the property's valuation, the proposed acquisition thereof in exchange for shares and in consideration of the P23,200.00 reimbursement for land development, filling and ejectment is in order. The issue to be resolved herein is whether or not the market valuation of the aforesaid lot be approved by this Commission pursuant to Section 62 of the Corporation Code. Section 62 of the Corporation Code, the pertinent law on the matter, is quoted hereunder: "SECTION 62. Consideration for stocks . Stocks shall not be issued for a consideration less than the par or issued price thereof. Consideration for the issuance of stock may be any or a combination of any two or more of the following: prcd xxx xxx xxx 2. Property-tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stocks issued ;(emphasis supplied) There is no doubt that said property satisfies the requirements of the afore-quoted provision. The land is to be used by the bank inasmuch as its building is presently erected therein, as evidenced by the excerpts from the minutes of the meeting submitted by the bank. Furthermore, it must be noted that the value of said property was set at P123,000.00 and P159,900.00 by the bank's Board of Directors and by the Cuervo Appraisers, respectively. Said appraisal was made using the Market Data Approach which is primarily based on sales and listings of comparable lots in the neighborhood where the subject lot is located, adjusted for time of sale, location and general characteristics. The fact that said property is mortgaged to Candelaria Rural Bank for P15,000.00 is of no moment considering that even if said amount is deducted from the fair market value, the difference would not result to an amount less than its transfer value of P100,000.00. An examination of the title covering the said property reveals that the same is covered by a free patent issued by the Bureau of Lands pursuant to the provision of Commonwealth Act No. 141, as amended. The five-year prohibition period provided for under Sections 118, 119, 121, 122 and 124 of said Act is no longer controlling inasmuch as it has expired on June 30, 1982, five (5) years from the date of issuance, which is on June 30, 1977. Likewise, worthy of mention is the fact that the Acting Register of Deeds of Quezon has issued a certification that the said property is registered in the name of owner, Ricardo Bautista. The fact that EAD favorably endorses said valuation should also be taken into consideration. In view of the foregoing, this Commission hereby approves the subject market valuation. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner