Acsay & Associates Law Office

July 30, 1987 Acsay & Associates Law Office 779 J. P. Rizal Avenue Makati, Metro Manila Attention : Atty . Vicente R . Acsay Sir : This has reference to your letter dated June 17, 1987, requesting the opinion of this Commission on the query posed therein. LexLib It appears therein that Laperal Development Corporation is organized primarily to engage in agriculture. As one of its secondary purposes, said corporation is authorized to guarantee the performance of any undertaking or obligation of other firms, entities or persons and pursuant thereto, to mortgage its real estate and other properties. Complying with the requirements of law, all the stockholders of Laperal Development Corporation in a meeting called for the purpose and for a valuable consideration accruing unto it, consisting of the transfer of ownership of P100,000.00 worth of fully paid shares of Kumpulan Agro-Forest, Inc. and the irrevocable option to subscribe to P250,000.00 worth of its shares, unanimously approved to exercise its secondary purpose of encumbering its three (3) real estate properties as collateral for the payment of the loan obligation of Kumpulan Agro-Forest, Inc. Said authorization was implemented by the Board of Directors which approved the execution of the deed of mortgage covering the aforementioned real estate properties to secure payment of the proposed loan of Kumpulan Agro-Forest, Inc. Considering the general powers of corporation, and the authorization to exercise the secondary purpose pursuant to the procedures hereinabove outlined, will the execution of the mortgage by Laperal Development Corporation covering its three (3) parcels of land as collateral for the loan of Kumpulan Agro-Forest, Inc. be an ultra-vires act of the Corporation? Relative thereto, the following ruling is appropriate: "It is not, however, ultra vires for a corporation to enter into contract of guarantee or suretyship where it does so in the legitimate furtherance of its purposes or business. . . . (7 R.C. 2 p. 604 and cases cited, Campos and Lopez-Campus, Corporation Code, p. 191). Furthermore, since said act is well within the broad authorization of the second paragraph of the Secondary Purposes of your articles of incorporation, the same therefore, cannot be considered an ultra-vires act of your corporation. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman