Mr. Pantaleon Z. Salcedo

December 17, 1990 Mr. Pantaleon Z. Salcedo Corales Corner Ramon Chavez Sts. Cagayan de Oro City S i r : This refers to your letter dated November 9, 1990 requesting clarification on the extent of power and authority of a financing company licensed under R.A. 5980, particularly on whether or not it can engage in " direct financing " and the legal effects if it engages in said line of business without authority, given the following facts: cdll "A, a financing company, entered into a contract of sale with mortgage over a motor vehicle owned by B, who sold it to C thru financing. As a result, C executed a promissory note in favor of A covering the amount financed." Relative thereto, please be advised that as a matter of policy, this Commission refrains from giving categorical answers to hypothetical questions involving any of the statutes entrusted to it for enforcement. Unless, therefore, the Commission is fully informed of the facts of a given situation, we regret to inform you that we cannot make a pronouncement to your query. However, for information purposes, only the following may be imparted. A study of RA 5980, otherwise known as The Financing Act, reveals that "direct lending", if you are referring to this business, is not a financing activity within the purview of the Act. Section 3 (a) thereof defines "financing companies" as follows: "(a) "Financing Companies, hereinafter called companies, are corporations or partnerships, except those regulated by the Central Bank of the Philippines, the Insurance Commissioner and the Cooperative Administration Office, which are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial or agricultural enterprises, either by discounting or factoring commercial papers or accounts receivables, or by buying and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property." (Emphasis supplied) The aforecited definition does not include "direct lending" as one of the activities which can be undertaken by a financing company. Applying the principle of "Expressio Unius Est Exclusio Alterius", "direct lending", therefore, would not be included as a financing activity within the purview of the Act. (SEC opinions dated January 18, 1984; July 24, 1984; August 27, 1984) This ruling is, however, without prejudice to the power of the corporation to engage in direct lending if so authorized in the secondary purposes of its articles of incorporation. It is well-settled that a corporation can only transact the business for which it was lawfully organized and to exercise such powers and to perform such acts as may be necessary to accomplish the purpose for which the corporation was formed. Consequently, any business not authorized by law or articles of incorporation if pursued by a corporation as part of its regular or permanent business would be violative of law or articles of incorporation, hence, "ultra vires". The Corporation Code provides thus: "SECTION 45. Ultra vires acts of corporations . No corporation under this Code shall possess or exercise any corporate power except those conferred by this Code or by its articles of incorporation and except such are necessary or incidental to the exercise of the powers so conferred." Please be advised accordingly. (SGD.) RODOLFO L. SAMARISTA Associate Commissioner