Atty. Corazon T. Tirol

September 25, 1991 Atty. Corazon T. Tirol Securities and Exchange Commission Iloilo Extension Office 9 Rizal Corner Gomez Street Iloilo City Atty. Tirol: This refers to your memorandum dated September 18, 1991 requesting opinion on the propriety of an amendment in the articles of incorporation of CABALUM WESTERN COLLEGE, INC. which provides as follows: "To lend, mortgage its real properties under Transfer Certificate of Title Nos. T-138756, T-138757, T-138758, T-138759, T-138760, T-138761, T-138762, T-138763 and T-138764 to any domestic corporation and to use the same as collateral in securing the obligation of the latter corporation in which the Cabalum Western College, Inc., has no interest whatsoever ." (Emphasis supplied) The pertinent provision of the Corporation Code provides: "SECTION 36. Corporate powers and capacity . Every corporation incorporated under this Code has the power and capacity: xxx xxx xxx 7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property ,including securities and bonds of other corporation, as the transaction of the lawful business of the corporation may reasonably and necessarily require subject to the limitations prescribed by law and the Constitution." (Emphasis supplied) ... Thus, the corporation may validly mortgage its assets only if it does so in the legitimate furtherance of its corporate purposes. Accordingly, the exercise of the such power cannot be validated thru the inclusion of such purpose in the articles of incorporation if the corporation has no interest whatsoever in subject transaction. cdll Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman