In the Matter of Mardison Finance & Development Corporation

October 15, 2014 SEC ADMINISTRATIVE CASE NO. 05-12-156 IN THE MATTER OF MARDISON FINANCE & DEVELOPMENT CORPORATION, ENFORCEMENT AND PROSECUTION DEPARTMENT, now the ENFORCEMENT AND INVESTOR PROTECTION DEPARTMENT , petitioner . FOR : Revocation of Certificate of Incorporation ORDER Pending consideration by the Commission is the Petition (for Revocation of Certificate of Incorporation) (Petition) 1 filed on 25 May 2012 by the then Enforcement and Prosecution Department (EPD) of this Commission, now the Enforcement and Investor Protection Department (EIPD), against MARDISON FINANCE & DEVELOPMENT CORPORATION (MARDISON). MARDISON is a corporation duly registered with the Commission on 11 April 2002 with Company Registration No. A200114007. 2 Its principal office address is located at No. 164 Del Monte Ave. cor. Cordillera St., Quezon City. The primary purpose of MARDISON is "to engage in the general financing extending credit facilities to consumers and to industrial, commercial or agricultural enterprises by discounting or factoring commercial papers or accounts receivables by buying and selling contracts, lease, chattel mortgages, real estate mortgages or other evidences of indebtedness or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances, motorcycles and other movable and real estate property." Its incorporators include Vicente D. Uy, and Emerson P. Uy, who is also its treasurer. 3 Its Certificate of Authority to operate as a financing company (CA) was issued by the Commission on 11 April 2002. 4 The Corporation Finance Department (CFD), now the Corporate Governance and Finance Department (CGFD), issued an Assessment dated 16 August 2006 in the maximum amount of Php100,000.00 against MARDISON for four (4) violations of the non-payment of its annual fees for the years 2003, 2004, 2005 and 2006. 5 On 17 May 2007, MARDISON requested for a certification of its compliance or non-compliance of its reportorial requirements. 6 The CFD issued a Certification dated 18 May 2007 stating that MARDISON has not been complying with the reportorial requirements ( i.e. , General Information Sheet and Financial Statements) since 2002 and has not paid its annual fees since 2003. 7 On 15 February 2008, a Show Cause Order was issued by the CFD against MARDISON directing the latter to show cause in a hearing scheduled on 20 February 2008 as to why its CA should not be suspended for the commission of the following violations: (i) non-commencement of its operations; (ii) non-payment of its annual fees for the years 2003, 2004, 2005 and 2006; and (iii) non-payment of the assessed penalty of Php100,000.00. 8 On 27 February 2008, the Commission received a letter from the counsel of MARDISON requesting that the assessed penalty of Php100,000.00 be made in installments. 9 However, the EPD alleges that to date the penalty has not been paid. 10 EcDATH A Notice of Hearing was issued by the CFD on 25 August 2011 directing MARDISON to appear in a hearing on 15 September 2011 to explain why its CA should not be suspended for the following violations: (i) non-commencement of its operations; (ii) non-payment of its 2002-2011 annual fees; (iii) non-filing of its 2002-2011 financial reports; and (iv) non-payment of the assessed penalty of Php100,000.00, and for failure to comply with the 15 February 2008 show cause order. 11 However, the EPD alleges that no one from MARDISON appeared before the Commission. 12 On 02 November 2011, a securities specialist from the CFD conducted an ocular inspection at the last known principal address of respondent MARDISON and found that the address where the company is supposed to be holding office is now being occupied by Sure Deal Marketing Corporation, a motor bicycle dealer, also owned by Vicente D. Uy. 13 On 2 December 2011, the Commission En Banc , upon the recommendation of the CFD, resolved to revoke the CA of MARDISON due to the latter's (i) non-commencement of its operations, (ii) non-payment of its 2002-2011 annual fees, (iii) non-filing of its 2002-2011 financial reports, and (iv) non-payment of the assessed penalty of Php100,000.00. 14 In a Memorandum dated 2 March 2012, the CFD informed the EPD, that the CA of MARDISON has been revoked by the Commission En Banc on 2 December 2011, and indorsed the matter to the latter for any appropriate administrative and criminal charges that may be imposed against the directors and officers of the corporation. 15 Hence, this instant Petition filed by the EPD praying that the Certificate of Incorporation of MARDISON be revoked pursuant to Presidential Decree No. 902-A (P.D. No. 902-A), as amended, and SEC Memorandum Circular No. 6, Series of 2005, and that the latter pay the assessed penalty of Php100,000.00. 16 The Commission issued a Summons to MARDISON and its treasurer, Emerson P. Uy, ordering them to enter appearance in the case and file their Answer to the Petition within fifteen (15) days from the receipt thereof. The Summons states that the failure to file an Answer within the above-mentioned period may result in a judgment by default in favor of the petitioner and the reliefs applied for may be granted. 17 Records show that Summons was successfully served on MARDISON at its principal office address and on Emerson P. Uy on 7 June 2012. 18 However, both MARDISON and Emerson P. Uy have not entered their appearance nor filed their Answer within the fifteen (15)-day period mandated in the Summons . Thus, both were declared as in DEFAULT. 19 A financing company is defined under Republic Act No. 8556 (R.A. 8556), otherwise known as the Financing Company Act of 1998, as a corporation which is primarily organized for the purpose of extending credit facilities to consumers and to other enterprises, by direct lending or by discounting or factoring commercial papers or accounts receivable. 20 As shown by its Articles of Incorporation, MARDISON is a financing company as its primary purpose is "to engage in the general financing extending credit facilities to consumers and to industrial, commercial or agricultural . . .". Thus, the Commission issued a CA to MARDISON on 11 April 2002. Section 14 of the Implementing Rules and Regulations (IRR) of R.A. 8556 provides for the penalties imposed on a financing company, as follows: " Section 14. Administrative Sanctions. If the Commission finds that there is a violation of R.A. 8556, of these Rules and Regulations, of the terms and conditions of the Certificate of Authority to Operate as a Financing Company, of any Commission order, decision or ruling, or the financing company refuses to have its books of accounts audited, or continuously fails to comply with the Commission's requirements, the Commission shall, in its discretion, impose any or all of the following sanctions : a) Suspension or revocation of the Certificate of Authority to Operate as a Financing Company after proper notice and hearing; b) A basic fine of not less than Ten Thousand Pesos (P10,000) and P100 for each day of continuing violation, but in no case shall the total fine be more than One Hundred Thousand Pesos (P100,000); c) Other sanctions within the power of the Commission ." (Emphasis Ours) In short, Section 14 of the IRR allows the Commission to impose, aside from revocation of the CA, other sanctions within its power. Such other sanctions include the power to revoke the certificate of registration of corporations pursuant to Section 6, par. (1) of P.D. No. 902-A, to wit: " Section 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx (1) To suspend, or REVOKE , after proper notice and hearing, the franchise or certificate of registration of corporations , partnerships or associations, upon any of the grounds provided by law, including the following: xxx xxx xxx (3) Refusal to comply or defiance of any lawful order of the Commission restraining commission of acts which would amount to a grave violation of its franchise; (6) Failure to file required reports on appropriate forms as determined by the Commission within the prescribed period. " (Emphasis Ours) Section 8 of the IRR of R.A. 8556 provides that a financing company shall be charged an annual fee which shall be paid not later than forty five (45) days before the anniversary date of the CA. The Consolidated Scale of Fines (SEC Memorandum Circular No. 6, Series of 2005), which provides, among others, for the administrative penalties for violations of the Financing Company Act and the IRR, states the following offenses for the late payment or non-payment of annual fee before the anniversary date of the CA under Section 8 of the IRR as follows: i) reprimand/warning for the first offense; ii) Php10,000.00 plus Php100.00 per day for the second offense; iii) Php10,000.00 plus Php200.00 per day for the third offense; and iv) revocation of the company's registration for the commission of a fourth offense . In this case, the following penalties were imposed on MARDISON for its non-payment of annual fee: 21 i) a reprimand was imposed for the 1st offense for its non-payment of 2003 annual fee; ii) a fine in the amount of Php70,300.00 was imposed for the 2nd offense for its non-payment of 2004 annual fee; 22 iii) a fine in the amount of Php80,800.00 was imposed for the 3rd offense for its non-payment of 2005 annual fee; 23 and iv) a fine in the amount of Php30,000.00 was imposed for the 4th offense for its non-payment of 2006 annual fee. 24 In fact, MARDISON has failed to pay its annual fees up to 2011 which warranted the Commission En Banc to revoke of its CA on 02 December 2011. Thus, considering that a penalty was imposed on MARDISON for its 4th offense for non-payment of annual fee, and that the violation continues up to the present, the revocation of MARDISON's certificate of registration is warranted pursuant to SEC Memorandum Circular No. 6, Series of 2005. Further, MARDISON is obligated to file its General Information Sheet for each year pursuant to Sections 26 and 141 of the Corporation Code. However, Mardison continuously failed to file its General Information Sheet from 2002 to 2011. 25 In which case, such failure warrants the revocation of Mardison's certificate of registration pursuant to Section 6, par. (1) (6) of P.D. No. 902-A, in relation to Section 14 of the IRR of R.A. 8556 and SEC Resolution No. 359, Series of 2010. 26 MARDISON is also obligated to file its financial reports pursuant to Section 13 of the IRR. However, such non-filing of its 2002-2011 financial reports likewise warrants the revocation of its Certificate of Registration pursuant to SEC Memorandum Circular No. 6, Series of 2005 27 and SEC Memorandum Circular No. 6, Series of 2006, 28 in relation to Section 14 of the IRR of R.A. 8556 and Section 6, par. (l) (6) of P.D. No. 902-A. IcaEDC Moreover, Section 22 of the Corporation Code provides for the effects of non-commencement of operations as follows: " Section 22. Effects on non-use of corporate charter and continuous inoperation of a corporation. If a corporation does not formally organize and commence the transaction of its business or the construction of its works within two (2) years from the date of its incorporation, its corporate powers cease and the corporation shall be deemed dissolved . However, if a corporation has commenced the transaction of its business but subsequently becomes continuously inoperative for a period of at least five (5) years, the same shall be a ground for the suspension or revocation of its corporate franchise or certificate of incorporation. . . ." (Italics Ours) In the case at bar, the Commission En Banc resolved, on 2 December 2011, to revoke the CA of MARDISON for, among others, its non-commencement of its operations. Moreover, since 2008 up to the time its CA was revoked on 02 December 2011, MARDISON was repeatedly put to the task and explain its non-commencement of operations, to no avail. Such non-commencement of its operations is a ground for the revocation of the certificate of registration of MARDISON pursuant to Section 22 of the Corporation Code. Lastly, there was a refusal on the part of MARDISON to comply or defiance with the lawful order of Commission when the former failed to settle the assessed penalties for the non-payment of its annual fees in the amount of Php100,000.00 which warrants the revocation of its Certificate of Registration pursuant to Section 6, par. (l) (3) of Presidential Decree No. 902-A. WHEREFORE, premises considered, the instant Petition (for Revocation of Articles of Incorporation) is hereby GRANTED and the Certificate of Registration of MARDISON FINANCE & DEVELOPMENT CORPORATION is REVOKED for: (1) the non payment of its annual fees from 2003 to 2006 pursuant to Section 6, par. (l) (3) of Presidential Decree No. 902-A (P.D. No. 902-A), Section 14 of the Implementing Rules and Regulations (IRR) of R.A. 8556 and the Consolidated Scale of Fines (SEC Memorandum Circular No. 6, Series of 2005); (2) its failure to file its required reports ( i.e. , General Information Sheet and Audited Financial Statements from 2002 to 2011) pursuant to Section 6, par. (l) (6) of P.D. No. 902-A, Section 14 of the IRR of R.A. 8556, SEC Memorandum Circular No. 6, Series of 2005, SEC Memorandum Circular No. 6, Series of 2006 and SEC Resolution No. 359, Series of 2010; (3) for the non-commencement of its operations pursuant to Section 22 of the Corporation Code; and (4) its refusal to comply or defiance with the lawful order of the Commission pursuant to 6, par. (l) (3) of P.D. No. 902-A, by failing to settle the assessed penalties for the non payment of its annual fees in the amount of Php100,000.00. Further, due the numerous violations it has committed, MARDISON FINANCE & DEVELOPMENT CORPORATION is hereby DISQUALIFIED from filing a Petition to Set Aside the Order of Revocation. Let a copy of this Order be furnished the Company Registration and Monitoring Department, the Corporate Governance and Finance Department, the Economic Research and Information Department for their information and appropriate action. SO ORDERED. Mandaluyong City, October 15, 2014. The dispositive portion reads as follows: "WHEREFORE, premises considered, the instant Petition (for Revocation of Articles of Incorporation) is hereby GRANTED and the Certificate of Registration of MARDISON FINANCE & DEVELOPMENT CORPORATION is REVOKED for: (1) the non-payment of its annual fees from 2003 to 2006 pursuant to Section 6, par. (l) (3) of Presidential Decree No. 902-A (P.D. No. 902-A), Section 14 of the Implementing Rules and Regulations (IRR) of R.A. 8556 and the Consolidated Scale of Fines (SEC Memorandum Circular No. 6, Series of 2005); (2) its failure to file its required reports ( i.e. , General Information Sheet and Audited Financial Statements from 2002 to 2011) pursuant to Section 6, par. (l) (6) of P.D. No. 902-A, Section 14 of the IRR of R.A. 8556, SEC Memorandum Circular No. 6, Series of 2005, SEC Memorandum Circular No. 6, Series of 2006 and SEC Resolution No. 359, Series of 2010; (3) for the non-commencement of its operations pursuant to Section 22 of the Corporation Code; and (4) its refusal to comply or defiance with the lawful order of the Commission pursuant to 6, par. (l) (3) of P.D. No. 902-A, by failing to settle the assessed penalties for the non payment of its annual fees in the amount of Php100,000.00. Further, due to the numerous violations it has committed, MARDISON FINANCE & DEVELOPMENT CORPORATION is hereby DISQUALIFIED from filing a Petition to Set Aside the Order of Revocation. Let a copy of this Order be furnished the Company Registration and Monitoring Department, the Corporate Governance and Finance Department, the Economic Research and Information Department for their information and appropriate action. SO ORDERED. AIaSTE Mandaluyong City, October 15, 2014." (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MANUEL B. GAITE Commissioner On Leave ANTONIETA F. IBE Commissioner (SGD.) EPHYRO LUIS B. AMATONG Commissioner (SGD.) BLAS JAMES G. VITERBO Commissioner Footnotes 1. Petition dated 25 May 2012. 2. Id. , Annex "A" (Certificate of Incorporation of MARDISON). 3. Id. , Annex "B" (Articles of Incorporation of MARDISON). 4. Id. , Annex "F" (Order of the CFD dated 15 February 2008). 5. Petition, Annex "G" (Assessment dated 16 August 2006). 6. Id. , Annex "D" (Request Slip for Monitoring dated 11 May 2007). 7. Id. , Annex "E" (Certificate of the CFD dated 18 May 2007), and par. 18. 8. See Note 4. 9. Petition Annex "H" (Letter of the counsel of MARDISON dated 21 February 2008). 10. Id. , par. 10. 11. Id. , Annex "I" (Notice of Hearing dated 25 August 2011). 12. Id. , par. 11. 13. Id. , Annex "K" (Memorandum of the CFD dated 9 November 2011). 14. Petition, pars. 13-14 and Annex "L" (Order of the CFD dated 7 December 2011). 15. Id. , Annex "C" (Memorandum of CFD dated 02 March 2012). 16. Id. , pp. 6-7. 17. Summons dated 05 June 2012; Records, p. 30. 18. Affidavit of Service executed by Edgar Arabe on 18 December 2012; Records, p. 35. 19. Order dated 11 March 2013. 20. Section 3 (a) of R.A. 8556. 21. See Note 5. 22. The penalty for the 2nd offense is computed as follows: Php10,000.00 (Basic Fine) + Php60,300.00 (Daily fine @ Php100.00 for 603 days) = Php70,300.00 . 23. The penalty for the 3rd offense is computed as follows: Php10,000.00 (Basic Fine) + Php70,800.00 (Daily fine @ Php200.00 for 354 days) = Php80,800.00 . 24. The penalty for the 4th offense is computed as follows: Php10,000.00 (Basic Fine) + Php20,000.00 (Daily fine @ Php200.00 for 100 days) = Php30,000.00 . 25. Petition, Par. 18. 26. SEC Resolution No. 359, Series of 2010 authorizes the revocation of the certificate of registration of a corporation for the non filing of its General Information Sheet for five (5) consecutive years. 27. Consolidated Scale of Fines. 28. Submission of General Information Sheet and the General and Special Form for Financial Statements in Electronic Form.