Atty. Ruben O. Purisima

May 5, 1982 Atty. Ruben O. Purisima Philippine Export and Foreign Loan Guarantee Corp. Executive Bldg.,Center, Buendia Ave.,Ext. Makati Metro Manila Dear Atty. Purisima, This is a reply to your letter-query dated February 18, 1982 requesting the comment of the Commission on the query posed therein regarding Philippine Infrastructures, Inc. (PII and B.F. Homes, Inc.) It appears that PHILGUARANTEE has approved a guarantee accommodation for account of Philippines Infrastructures, Inc. (PII) subject to some terms and conditions among which is that B.F. Homes, Inc. (a sister company) shall be jointly and severally liable with PII. The latter company is primarily engaged in the general business if construction, contracting and consultancy while B.F. Homes, Inc.'s primary purpose is to acquire, develop, improve, subdivide or dispose lands and other real properties as well as construct, improve, lease, sell and/or dispose houses, buildings and other improvements thereon. Under the foregoing premises, a query is posed as to whether B.F. Homes, Inc. may guarantee the obligations of PII? It is fundamental that a corporation, being a creation of law, may only exercise such powers expressly granted to it by law, its Articles of Incorporation and those incidental to its existence and/or those reasonably necessary to carry out the purposes for which it was organized. A perusal of the Articles of Incorporation of B.F. Homes, Inc. specifically No. 7 of the Secondary Purpose shows that it authorizes said corporation To borrow and raise money from time to time and to secure the payment thereof by mortgage, pledge, deed or trust and to make, accept, endorse, guarantee ,execute, and issue promissory notes, bills of exchange and other credit instruments for the purchase of any property or any purposes permissible under the Corporation Law ." (Emphasis supplied.) It is therefore, expressly authorized to assume, guarantee and/or secure any and all kinds of obligations of private individuals and/or corporation. However, although B.F. Homes may undertake any of its secondary purposes like guaranteeing the obligations of Philippine Infrastructure Inc. without further amending its Articles of Incorporation, it must first comply with the provision of Sec. 42 of the Corporation Code. Please be guided accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner