DOJ Opinion No. 030, s. 1992

DOJ OPINION NO. 030 , s. 1992 March 10, 1992 Secretary Jesus Estanislao Department of Justice Manila Sir : This refers to your query on whether or not the Development Bank of the Philippines ("DBP") can "enter into a swap arrangement with Land Bank of the Philippines ("LBP") whereby may of its branches [shall] be transferred to LBP under agreed terms and condition, as a partial alternative to privatization." You state that the National Government, "as the sole stockholder of DBP", wants the said bank to divest itself of most of its branches so as to leave it with only about 15 branches, with at least one branch in every regional capital; that this divestment program was already committed by the government to the World Bank in connection with the Economic Recovery Loan and the Financial Sector Adjustment Loan; that DBP has agreed to the privatization of 30% of its branch network, but has failed to meet the December 31, 1991 target date; that the President of the Philippines has approved the proposal for the transfer of certain DBP branches to LBP; and that DBP objects to the scheme inasmuch as it needs these branches to discharge its retail banking operations, especially its countryside lending program, and that the privatization of DBP's branches can be accomplished only through making equity investments. prcd We believe that DBP possesses sufficient corporate authority to undertake the transfer of portions of its branch network. There is no question that DBP's branches constitute part of the bank's assets or properties. While there is nothing in its charter (E.O. No. 81) specifically empowering DBP to acquire, hold and convey real or personal property, the same charter explicitly authorizes it "to exercise the general powers of a corporation mentioned in the Corporation Code" "insofar as such powers are not inconsistent or incompatible with the provisions of [such] Charter" (Sec. 3[g]). One of the express powers of a corporation under the Corporation Code (B.P. No. 68) is "[t]o purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property" as the transaction of the lawful business of the corporation may reasonably and necessarily require" (SEC. 36[7].) Moreover, authorities are agreed that the power of a corporation to acquire and hold property is an incident to its corporate existence; hence it is acknowledged that a corporation possesses such authority even in the absence of an express grant, (de Leon, Corporation Code, 1986 Ed., p. 238; Agbayani, Commercial Law, Vol. 3, 1984 Ed., pp. 304-305). More pointedly, it has been held that, except where restricted by its charter or by statute, a corporation has the same prerogative as a natural person to dispose of or alienate its properties as long as such action is undertaken for a legitimate corporate purpose, upon the arguments that a corporation has absolute right of disposal or jus disponendi over its property (Maben vs. Gulf Coke, etc., Co., 55 So. 607), that the right to dispose of its property in an incident of ownership (State vs. Warren Irrigation Canal Co., 19 p. 349) and that if a corporation has the power to acquire property of any nature, it necessarily has the power to dispose of such property in any manner for the purpose of converting it into money to be used for corporate purposes (Prenant vs. Messenger Printing C., 41 pa co. 49). It is pertinent to observe that in Opn. No. 65, s. 1991, this Office held that by its enabling law, "DBP was intended to engage mainly in the retail banking business". We believe, however, that the divestment plan under consideration will not materially affect the DBP's ability to function primarily as a retail bank since DBP will still retain a significant number of its existing branch offices which are strategically located throughout the country. In addition, it can continue to pursue its business activities as a thrift bank and as a trust corporation. prcd Please be advised accordingly. Very truly yours, (SGD.) EDUARDO G. MONTENEGRO Acting Secretary