G.R. No. 104720, 4 April 2001


Petitioner is a duly organized corporation registered with the SEC located at Pedro Gil, Metro Manila. The articles of incorporation of private respondent states that its primary purpose is to extend loans at legal interest on the security of either personal properties on the security of real properties, and to finance installment sales of motor vehicles, home appliances and other chattels.

Private respondent filed a complaint against petitioner with the Prosecution and Enforcement Department of the SEC alleging that:

(1) petitioner, contrary to the restriction set by the Commission, has been operating and doing business as a pawnbroker, pawnshop or sanglaan in the same neighborhood where private respondent has had its own pawnshop for 30 years in violation of its primary purpose and without the imprimatur of the Central Bank to engage in the pawnshop business thereby causing unjust and unfair competition with private respondent; and

(2) the business name of the petitioner bears similarity in spelling and phonetics with the corporate name of pvt respondent creating constant confusion in the minds of the public and the customers of the latter.

Petitioner denied that is engaged in the pawnshop business, alleging that it is a lending investor duly registered with the Central Bank.


Whether or not petitioner violated its primary franchise.


A corporation, under the Corporation Code, has only such powers as are expressly granted to it by law and by its articles of incorporation, those which may be incidental to such conferred powers, those reasonably necessary to accomplish its purposes and those which may be incident to its existence. In the case at bar. The limit of the powers of petitioner as a corporation is very clear, it is determining what constitutes pawnbrokerage, the relevant law to consider is PD 114.

Indispensable therefore to the determination of whether or not petitioner had violated its articlesof incorporation, was an inquiry by the SEC if petitioner was holding out itself to the public as a pawnshop. It must be stressed that the determination of whether petitioner violated PD 114 was merely incidental to the regulatory powers of the SEC, to see to it that a corporation does not go beyond the powers granted to it by its articles of incorporation.

*Case Digest by Jhazel Zhan Jebone, JD-4, Andres Bonifacio Law School, SY 2019-2020