Aviation Support International, Inc.

January 8, 1999 Aviation Support International, Inc. c/o Mr. Romualdo N. Alvestir Philair Hangar, Manila Domestic Airport Metro Manila Gentlemen: This refers to your letter dated February 10, 1998 inquiring on the procedure on how a corporation could collect the indebtedness of one of its major stockholders, a foreigner, against his shareholdings; under the circumstances mentioned therein. If the corporation has a lien over the shares of stock by way of pledge or mortgage, then the remedy of the corporation is to foreclose on the mortgage or pledge. If the corporation has no lien over the shares of stock, then its remedy would be to file a case for collection before the regular courts. The judgment may then be satisfied by levy on execution against and sale of the shares which are property of the judgment debtor. If the requisites under Section * 57 of the Rules of Court are obtaining in the circumstances, you may move for a preliminary attachment of the shares simultaneous with the filing of the complaint for collection of the obligation. The offsetting of the debt of a stockholder against his shareholdings is not permissible. While the corporation may be a creditor to the stockholder, a stockholder's indebtedness to a corporation cannot be compensated with the amount of his shares in the same institution, there being no relation of creditor and debtor with regard to such shares. (Garcia vs. Lim Chu Sing, G.R. No. 39427, February 24, 1934, 59 Phil. 562). Very truly yours, (SGD.) ROSALINDA U. CASIGURAN Associate Commissioner * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .