Atty. Alfredo F. Laya Jr.

November 18, 2003 SEC OPINION NO. 60-03 Atty. Alfredo F. Laya Jr. Philippine Veterans Bank PVB Bldg. V.A. Rufino cor. Dela Rosa Sts., Legaspi Village, Makati City, Philippines S i r : This refers to your query dated November 3, 2003 inquiring whether or not a non-stock corporation organized for religious worship could legally use acquired property as collateral for its loans and also for the loans of third persons. It is a general rule in corporate law that a corporation exercises its powers for the purpose of attaining its objectives. In the absence of express restrictions by charter or statute, the management of a corporation has authority to enter into all contracts or transactions which may reasonably be deemed incidental to its authorized business; but it has no authority to enter into contracts entirely foreign to the objects and purposes specified in its articles or charter. The statement of objects and purposes in the articles is controlling over the powers or authority of the management, both those stated in the articles and those given by statute. So the mention of general powers such as those to acquire property, borrow money and purchase the shares and securities of other corporations must be deemed auxiliary or ancillary to the primary, authorized purposes and limited thereby. (Ballantine of Corporations. P. 223) CEcaTH In the case of your corporation, it may use acquired property as collateral for its loans incurred as a means to carry into effect its real objects and which may have redounded to the benefit of the religious corporation in the course of its authorized activities. However, said property cannot be used as collateral for the loans of third persons as it would no longer be incidental to its primary purpose of religious worship. In the same manner, the subject corporation cannot legally act as "guarantor" for the personal loans of its members and the same can neither be validated through the inclusion of such purpose in the articles of incorporation as it would not be in the furtherance of the corporate objects and for the benefit of the corporation. In short, a religious corporation cannot guarantee loans of third persons since guaranteeing obligations is not reasonably necessary or incidental to the purpose of the religious worship. Very truly yours; (SGD.) VERNETTE G. UMALI-PACO General Counsel