Bito, Misa & Lozada

June 8, 1982 Bito, Misa & Lozada 140 Alfaro Street Salcedo Village Makati, Metro Manila Gentlemen: This refers to your letter dated May 28, 1982, requesting confirmation that Section 126 of the Corporation Code does not apply to Pan American World Airways, Inc., a foreign corporation already licensed on the date of effectivity of the Corporation Code. It is your contention that Section 126 of the Code should not be given retroactive effect as would be violative of the constitutional right against impairment of obligation of contracts. It should be noted that before the above-mentioned constitutional right can be invoked, it is a pre-requisite that a contract be in existence. In the instant case, however, the rights enjoyed by the corporation arose not out of a contract but out of grant of a "franchise". Such a grant of a franchise involves a system of public control, and is subject to repeal, alteration, or amendment to protect creditors and the public against abuse of power (Agbayani, Commercial Laws of the Philippines, 1980 Edition, p. 40 citing Ballantine, 65 and Sec. 5 Article XIV of the Constitution of the Philippines). The state, moreover, in the exercise of "police power" can enact any retroactive law affecting the same when it finds it necessary for the protection of the general public. It is very clear form Section 126 of the Corporation Code that the purpose of the investment requirement is to protect present and future creditors of the licensee in the Philippines and it may not be amiss to state that under Section 143 of the Code, the Securities and Exchange Commission under its "rule-making power", shall have the power and authority to implement the provisions of the Code, and to promulgate rules and regulations reasonably necessary to enable it to perform its duties, particularly in the prevention of fraud and abuses. Thus, the provision in the "Guidelines for the Investment Requirement of Foreign Corporations under Section 126 of the Corporation Code of the Philippines" requiring "presently existing" foreign corporation to make the necessary deposit of P100,000.00 is an accordance with law. Very truly yours, (SGD.) JULIO A. SULIT, JR. Associate Commissioner