Atty. Enrique M. Belo

November 20, 1989 Atty. Enrique M. Belo Belo Abiera & Associates 6th Floor, Cibeles Building 6780 Ayala Avenue Makati, Metro Manila Sir : This refers to your letter dated September 14, 1989, in behalf of Lodestar Mining Corporation, requesting reconsideration of the opinion of the Commission, dated May 19, 1989, stating that the shares held in escrow by the Commission cannot be voted in stockholders meeting. LexLib Records show that Lodestar Mining Corporation applied for the increase of its authorized capital stock from P10,000,000 to P50,000,000 of which increase of P40,000,000, P20,000,000 worth of shares was subscribed and fully paid by way of property (payment based on the transfer value of the rights, titles and interests on several mining claims ). Said increase of capital stock was approved by the Commission on September 28, 1989, subject to the following terms and conditions : "1. That the P20,000,000 worth of shares constituting at least 25% of the amount of the increase of authorized capital stock which have been subscribed and fully paid in property shall be held in escrow or kept and deposited with the Commission until it has been shown to the full satisfaction of the Commission that registrant has fulfilled the following condition, to wit: (a) That the mining properties so acquired/leased have been developed in accordance with the Development Plan (Work Program) submitted to this Commission and devoted for the purpose it was acquired and represented to this Commission. 2. That the said P20,000,000 worth of escrow shares shall not be sold, assigned, pledged, or otherwise encumbered as long as the aforesaid conditions remain unfulfilled." ( SEC Order dated September 27, 1989 ). A subscription upon a condition precedent, or a conditional subscription , is a subscription which does not take effect so as to make the subscriber a stockholder , or confer or impose any rights or liabilities as a stockholder, until the performance or fulfillment of some stated conditions , unless there is a waiver or estoppel, but which does not make him a stockholder , with all the rights and subject to all the liabilities arising out of such a relation, as soon as the condition is performed or fulfilled. (4 Fletcher, sec. 1509, emphasis supplied). When shares of stock are said to be held in escrow , they are deemed to be subjected to an agreement by virtue of which the share is deposited by the grantor or his agent with a third person to be held by the latter until the performance of a certain condition or the happening of a certain event contained in the agreement. ( Letter dated August 10, 1972 addressed to International Metallurgical Corporation citing Common vs. Hadley 12 p. 315). An escrow deposit makes the depository a trustee under an express trust. Title to the stock does not pass under such an agreement until the performance of a certain condition , and does not relate back to the time when the stock was deposited. (Fletcher, sec. 5567). Thus, the Commission previously opined that a holder of escrow shares does not become entitled to the rights pertaining to a stockholder until the conditions for the release of such shares are fully met . ( Letter dated November 6, 1972, addressed to International Metallurgical Corporation citing Ballantine, H.W. Ballentine on Corporations, p. 467). This being the case, the subscriber is not yet the owner of said shares and consequently, he cannot be accorded the rights belonging to a regular stockholder. (Ibid, citing Blythe Vs. Dohemy 73 F 2d 779, 803, C.C.A.). Records neither show that subject corporation has complied with the condition to develop the mining properties in accordance with the development plan submitted to the Commission, nor applied for the release of the shares held in escrow. Accordingly the subscriber(s) to the shares worth P20,000,000 held in escrow by the Commission are not yet entitled to the full rights of a stockholder. Consequently, they are not entitled to vote in stockholders meeting. In view of the foregoing, the Commission, in its meeting in November 16, 1989, resolved to deny your request for reconciliation. Please be advised accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman