Integrated Rural Bank of Misamis

April 7, 1987 Integrated Rural Bank of Misamis Oriental (Lagonglong),Inc. Lagonglong, Misamis Oriental Attention : Mr . Ponciano A . Bana Officer-in Charge Sir : This has reference to your letter dated March 2, 1987, requesting for the opinion of this Commission on the following query: "Would the stockholders, whose stock certificates were used as collaterals for a loan in the same bank, and which is now past due, have voting rights as to the non-borrower stockholders?" Relative thereto, Sec. 55 of the Corporation Code provides and we quote: "SECTION 55. Right to vote of pledgors, mortgagors and administrators . In case of pledged or mortgaged shares in stock corporations, the pledgor or mortgagor shall have the right to attend and vote at meetings of stockholders, unless the pledgee or mortgagee is expressly given by the pledgor or mortgagor such right in writing as recorded on the appropriate corporate books. ..." (Emphasis supplied) From the abovequoted provision and applying the same to the instant case, the stockholders whose stock certificates were used as collaterals for a loan have the right to vote unless said stockholders authorized the bank in writing to vote the pledged or mortgaged shares. The following rulings are likewise appropriate: "Most statutes provide that a stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred." (Model Bus Corp. Act & 31 (8) cited in Fletcher Cyclopedia Corporations, Vol. 5, p; 177) "Even when shares are on the books in the name of the pledgee, he has not the title, as the right to vote is in the pledgor, in the absence of agreement to the contrary." (Fletchers, Vol. 5 p. 178 citing Italo Petroleum Corp. v. Producers' Oil Corp.,20 Del. Ch. 283, 174 A 276) Please be guided accordingly. Very truly yours. (SGD.) JULIO A. SULIT, JR. Chairman