Mr. Andres C. Chua

February 5, 1993 Mr. Andres C. Chua Rural Bank of San Juan, Inc. 71 N. Domingo Street San Juan, Metro Manila S i r : This refers to your letter of December 10, 1992 requesting opinion whether or not non-voting preferred shares of "rural banks" held by private persons fall within the scope of the provisions of Section 6 of the Corporation Code, quoted hereunder, so as to be included in the computation of the required votes for increase of capital stock. cdlex "Where the articles of incorporation provide for non-voting shares in cases allowed by this Code the holders of such shares shall nevertheless be entitled to vote on the following matters: xxx xxx xxx 5. Increase of Capital Stock xxx xxx xxx" As stated, per opinion of the Central Bank Office of the General Counsel (OGC),the application of Rural Bank of San Juan, Inc. for an amendment to its articles of incorporation increasing its capital stock from P50 Million to P100 Million cannot be given due course in view of the alleged failure of the Bank to meet the required 2/3 vote of the outstanding capital stock. The OGC believes that "private" shareholders of preferred shares should be included in the determination of whether or not the capital stock shall be increased. You disagree to this view, hence, your present query. The Department of Justice, in its Opinion No. 82, s. 1981, states that in case a conflict between a statute which deals with a subject in general terms and another which deals with the same subject in a more specific manner, the latter shall prevail regardless of their respective dates of enactment. Upon the principle that the Corporation Code is a general law, it is not to be deemed to have repealed Section 7, paragraph 2 of Rural Bank Act (RA 720), which is a special law. Thus, the Department of Justice opined that Section 6 of the Corporation Code, above quoted, does not apply to non-voting preferred share of rural banks held by the government. However, under the present law on rural banks, RA No. 7353 entitled: "An Act Providing For the Creation, Organization and Operation of Rural Banks and For Other Purposes" which was approved and signed on April 2, 1992 by then President Corazon C. Aquino, preferred shares owned by private individuals are not included in the enumeration of non-voting stocks. The Law provides thus: "SECTION 8. ... Stock held by the Land Bank of the Philippines ,the Development Bank of the Philippines or by any government-owned or controlled bank or financial institution, 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 from the date of issuance in the amount of four percent (4%) on the first and second years, six percent (6%) on the third and fourth years, eight percent (8%) on the fifth and sixth years, ten percent (10%) on the seventh and eighth years and twelve percent (12%) on the ninth to the fifteenth years without preference: Provided, however, That if such stock of the Land Bank of the Philippines, the Development Bank of the Philippines or any government owned or controlled bank or financial institution is sold to private shareholders, the same may be converted into common stock of the class provided for in Section 10 hereof: Provided further, That pending the 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 stockholders, the transfer shall be recorded by the rural bank in the stock and transfer book and such shareholders shall thereafter enjoy all the rights and privileges of common stockholders. The preferred stocks so transferred shall be surrendered and cancelled and corresponding common stocks shall be issued." (Emphasis supplied) Applying the principle of Expressio Unius Est Exclusio Alterius (Express mention is implied exclusion),other shares not expressly enumerated therein are deemed excluded. Wherefore, where the articles of incorporation of a rural bank provide for non-voting shares, other than those shares held by the above mentioned entities, the holders of such shares are nevertheless entitled to vote in cases enumerated under Section 6 of the Corporation Code. We, therefore, support the view of the Central Bank that preferred shares of rural banks held by private persons shall be included in the computation of the required two-thirds (2/3) vote for increase of capital stock of rural banks. cdlex Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman