Investment & Development, Inc.

September 3, 1992 Investment & Development, Inc. Room 533, PS Bank Building Ayala Avenue, Makati, Metro Manila Attention : Atty . Aloysius E . Dichoso Corporate Secretary Gentlemen: This refers to your letter of August 31, 1992 requesting opinion on the queries posed therein. As stated, on May 6, 1992, your office and all your files/records were engulfed in a fire that gutted the 8th floor of PhilBank Building at Ayala Avenue, Makati, Metro Manila, where your office was situated. Among the files/records burned were the stock and transfer books of your corporation and stock certificates issued but not yet received by stockholders. In short, everything was lost so that you have only the files at the SEC office wherein you could base the reconstruction, the last being as of December 31, 1991. Your queries are: (a) May you enter the names and shareholdings of your stockholders in the new stock and transfer book you purchased from the SEC, minus the numbers and dates of issuances of the stock certificates, and using as sole basis the records available at the SEC. (b) Is your Board of Directors empowered by law to declare motu proprio and by way of a simple majority resolution that all the stock certificates previously issued to be voided and cancelled and replaced by new set of stock certificates using as basis the latest data available at the SEC? (c) If so, what safeguards should you follow to protect the interests of endorsees, creditors, and the like? Can you lawfully release the new stock certificates to stockholders of record on the basis solely of an affidavit that they remain the absolute owners thereof, and that they have neither encumbered same, or assigned their interests either wholly or partially. Corporate books and records are merely private books and records, and as such, they are subject to the general rules of evidence which are commonly applicable to documentary evidence. (5 Fletcher Cyc. Corp., 1976 rev. vol., sec. 2196 at 643). As held in a number of cases, the general rule is that such original books and records, if they are in existence and can be produced, are prima facie evidence of the matters recorded therein. (Fletcher p. 643) However, it is not to be implied from the foregoing that original books and records are the exclusive evidence of the matters and things which ordinarily are or should be written therein since parol or other extraneous evidences are admissible in many situations. (Fletcher sec. 2196 at 644). Thus, while stock and transfer books are commonly said to be evidence of stock ownership, extrinsic evidence of matters which are or should be recorded in the corporate books and records may be admitted where the original corporate records are lost, mislaid or destroyed, or are otherwise inaccessible. Proper foundation proof explaining the failure to produce the original books and records must first be laid of the introduction of other evidences. Such secondary evidence ordinarily consists of copies of the records, either certified or sworn to, or parol testimony. (Fletcher, sec. 2197, at 648). Apropos thereto, Rule 130 of our Rules of Court reads: "SECTION 4. Secondary evidence when original is lost or destroyed . When the original writing has been lost, destroyed, or cannot be produced in court, upon proof of its execution and loss or destruction or unavailability, its contents may be proved by a copy, or by a recital of its contents in some authentic documents or by the recollection of witnesses." Accordingly, when the original stock and transfer books of a corporation has been lost or destroyed, secondary or extrinsic evidence may be introduced to reconstitute its contents. In line, however, with our rules, requiring the maintenance of a stock and transfer book, said new book should be presented to this Commission for proper registration, accompanied by a sworn statement executed by any responsible corporate officer setting forth the circumstances attending the loss. In connection with the subscribed shares of the corporation whose owners cannot be identified or located, a trust relation is impliedly created between the corporation and the unknown stockholders. As previously ruled by the Commission, these shares may be entered in the corporate books and shall stand in the name of the corporation as "trustee" or said holder may be described as "trustee" in the certificate. The fact that one stock stands on the corporate book in the name of a person as trustees, or that the holder thereof is described, as a trustee in the certificate, is notice to both the corporation and to the person who may purchase such shares from the trustee that he does not hold the shares in his own right. ( Letter addressed to Mr. Candido Dizon, Planters Foundation, Inc. dated September 10, 1982 ). The fact that the cestui que trust is not named is immaterial. Mere lapse of time after failure of cestui que trustent to appear and claim the stock and dividends thereof will not raise a presumption of ownership in the person named in the certificate as trustee nor will the fact that the person seeking the transfer had been unable to discover the cestui que trustent. (Ibid citing 12 Fletcher, Cyc. Corp. see 5547). The entry in the books of the corporation is a continuous assertion that the stock is not a private property of the trustee and thus, prevents the running of the statute of limitations. As a matter of identifying the stockholders of the Corporation, the Commission suggests that they be properly notified thru publication in a newspaper of general circulation, whereby the stockholders of said corporation be directed to step forward and procure the proper recording or transfer of the shares in their respective names, requiring them to produce evidence of identity as well as their rights to the shares. You should exhaust all available means in identifying the owners of the subscribed/issued shares of the corporation and if the publication proves to be futile, it is nevertheless the fiduciary duty of the corporation to continuously hold said shares as trustees for the owners thereof, unless otherwise escheated in accordance with law. As to whether or not the Corporation should issue new certificates of stock in lieu of the old certificates presently held by existing stockholders, same is a matter that only the corporation itself can resolve. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman