RE : Confederation of Grains Retailers Association of the Philippines, Inc. (GRECON)

July 24, 2003 SEC OPINION NO. 37-03 National Food Authority Matimyas Bldg.,101 E. Rodriguez Sr. Avenue, Quezon City. Attention: Atty. Efren J. Sabong Department Manager III Business Regulations Department RE : Confederation of Grains Retailers Association of the Philippines, Inc. (GRECON) Gentlemen : This refers to your letter dated June 9, 2003 requesting opinion on whether retailer associations which are chapter-affiliates of GRECON but which have no separate registration of their own with this Commission can, by themselves, legally enter into agreements/contracts with the NFA using as basis, GRECON's SEC Certificate of Registration. As mentioned in your letter, it is the contention of these unregistered chapter-affiliates of GRECON that they can legally enter into contracts with the NFA on their own considering that the SEC registered Articles and By-Laws of GRECON already cover their legal existence upon their declaration of adherence to it. Under Section 2 of the Corporation Code of the Philippines, it is provided that: "Section 2. Corporation defined . A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence." (Emphasis supplied.) Pursuant to the afore-quoted provision, a corporation registered under the said Code is considered a juridical person with a personality separate and distinct from that of each shareholder (or member). This is an attribute most characteristic of a corporation. It means that the stockholders of a corporation are different from the corporation itself. (SEC opinions dtd January 18, 1993, Mr. Fred P. Cladera and July 8, 1993, Mr. Roger G. Mercado). In line with the reasoning explained in the above Opinions, it could be said that the legal personality of GRECON does not extend to its affiliated chapters. In the same vein, mere adherence of the affiliated-chapter members to the By-laws of GRECON does not, in any way, confer or vest on the former the legal personality of the latter. Adherence to the by-laws is a duty consequent of being a member thereof, and not a cause giving them the same rights accorded by law to the parent corporation. Further, an unregistered organization does not have the juridical capacity to exercise the powers, rights and privileges granted to registered corporations. Although said association of persons can enter into binding contracts, which can hold the persons making or signing them liable in their personal capacity under the principle of estoppel ,an unincorporated association cannot legally perform corporate acts. Thus, it cannot sue or be sued as a corporation, it cannot maintain bank accounts or issue official receipts under its name. Neither can it enter into contracts in the name of the association nor acquire properties under its common name. TAcSaC But contracts entered into on behalf of an unregistered corporation make the person signing or executing them liable to the other contracting party. (Lopez, Corporation C od e, p. 24). In such instances, the contracting individuals can sue and be sued but only in their personal capacities and not as a corporate entity. For the same reason, an individual-member of an association can bind no one except himself unless his acts are authorized by the said association. Thus, should a local or component chapter of a national association desire to have a personality separate and distinct from that of a parent association, it should be incorporated separately. Only then can it own property in its name and execute contracts under its name. (Ibid., p. 25 citing SEC Opinions dated May 28, 1981, Erminda C. Cruz and August 4, 1993, Teresita R. Sanchez) Hence, should the local or chapter-affiliates of GRECON desire to execute contracts under their own names, they should have legal personalities, separate and distinct from the parent association, which they may acquire by way of registration of the unregistered association with this Commission in accordance with the provisions of the Corporation Code. In the alternative, a chapter-affiliate may represent GRECON and enter into contracts with NFA using GRECON's articles and by-laws provided such chapter-affiliate is authorized by GRECON, thru a board resolution, to act as its agent in the latter's dealings with NFA. Very truly yours, (SGD.) VERNETTE G. UMALI-PACO General Counsel