Santa Rosa Mining Company, Inc.

July 10, 1990 Santa Rosa Mining Company, Inc. 6 P. Burgos Street, Project 4 Quezon City, Metro Manila Attention : Federico S . Nava President Gentlemen : This refers to your letter dated April 26, 1990 requesting opinion on the following queries: 1. Whether there is a need for SEC approval for reconstitution of lost/destroyed stock and transfer book. llcd 2. Whether there is a need for SEC approval to retire and sell to the public shares of stock of unknown stockholders who failed to respond to newspaper publication requesting them to surrender their old stock certificates for replacement of new certificates within one (1) year from the date of last publication. The Commission does not have rules or regulations governing the reconstruction or reconstitution of lost or destroyed stock and transfer books of corporations. Nevertheless, the following authorities have relevance to your queries. 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 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 exclusive evidences 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).Moreover, the word "evidence" is sometimes used in connection with corporate books and records where judicial evidence or the use of such books and records in a judicial or quasi-judicial sense is not intended. To illustrate, stock and transfer books are commonly said to be evidenced of stock ownership and voting for the purposes of corporate elections, or for the purposes of dividend payment." (Fletcher, p. 644) Extrinsic evidence of the acts or 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 for the introduction of other evidence. Such secondary evidence ordinarily consists of copies of the records, either certified or sworn to, or parol testimony. (Fletcher, sec. 2197 648) Apropos thereto, Section 4 Rule 130 of our Rules of Court reads thus: "SECTION 4. Secondary evidence when original is lost or destroyed . When the original writing has been lost or 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." Hence, when the original stock and transfer book 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. (SEC Opinion dated January 21, 1988) In connection with the subscribed shares of the corporation whose owners cannot be identified or located, it will appear that 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 trustee, or that the holder thereof is described, as a trustee, or that the holder thereof is described, as a trustee in the certificate, is notice to both the corporation and to the persons 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 the cestuis 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. (Ibid. citing 12 Fletcher, Cyc. Corp.,sec. 5547) Nor will the fact that the person seeking the transfer had been unable to discover the cestuis que trustent .(Ibid.) The entry in the books of the corporation is a continuous assertion that the stock is not the private property of the trustee, and thus, prevents the running of the statute of limitations. Hence, you cannot retire the subscribed or issued shares of the corporation and sell them again to the public. It is an elementary rule that a trustee should not profit out of the handling of the trust estates. This springs from the fiduciary duty of the trustee to protect the interest of the beneficiary and not to permit his personal interest to conflict with his duty in this respect. (SEC Opinions dated August 28, 1984 and December 1, 1988) You should, therefore, exhaust all available means in locating the whereabouts of the owners of subscribed/issued shares of the corporation, and if the search proves to be futile, it is nevertheless the fiduciary duty of the corporation to continuously hold said shares as trustee for the owners thereof, unless otherwise escheated in accordance with law. LibLex Very truly yours, (SGD.) RODOLFO L. SAMARISTA Associate Commissioner