In the Matter of Claver Mineral Development Corporation SEC Reg. No. ASO95-001246

May 6, 2016 SEC CRMD CASE NO. 16-895 IN THE MATTER OF CLAVER MINERAL DEVELOPMENT CORPORATION SEC Reg. No. ASO95-001246 , petitioner . FOR : Petition for Revocation of the Certificate of Approval of Increase of Capital Stock and Certificate of Filing of Amended Articles of Incorporation ORDER This refers to the Complaint Affidavit and Supplemental Complaint Affidavit filed by Mr. Ireneo L. Cezar, alleged stockholder and officer of CLAVER MINERAL DEVELOPMENT CORPORATION (CMDC) dated 01 February 2016 and 08 February 2016, respectively, praying for the cancellation of the following: (a) Certificate of Approval of Increase of Capital Stock approved on 23 December 2014; (b) Certificate of Filing of Amended Articles of Incorporation [amending Articles III and VII thereof] approved on 23 December 2014; (c) Certificate of Approval of Increase of Capital Stock approved on 02 October 2015; and (d) Certificate of Filing of Amended Articles of Incorporation [amending Article VII thereof] approved on 02 October 2015. The subject corporation is a domestic corporation duly registered with the Commission on 10 February 1995 under Company Registration No. ASO95-001246, with principal office address at P. Burgos St., Butuan City. The primary purpose of the subject corporation is to prospect for, conduct geological, geophysical and all kinds of exploration work; mine; extract; . . ., as stated in its Articles of Incorporation. CMDC's Certificate of Incorporation was revoked on 03 November 2003 for failure to comply with the reportorial requirements. The corporation filed a Petition to Lift Order of Revocation dated 29 May 2006. Pursuant to SEC Order dated 29 August 2006 issued by SEC Cagayan de Oro Extension Office, the Order of Revocation dated 03 November 2003 was set aside. The status of CMDC was changed from "Revoked" to "Registered" on 22 October 2010. Records show that on 23 December 2014, the Commission approved the Petitioner's application for increase in authorized capital stock from Ten Million Pesos (Php10,000,000.00) divided into One Hundred Thousand (100,000) Shares with a par value of One Hundred Pesos (Php100.00) per share to One Hundred Million Pesos (Php100,000,000.00) divided into One Million (1,000,000) Shares with a par value of One Hundred Pesos (Php100.00) per share. Further, on 02 October 2015, the Commission approved the Petitioner's application for increase in authorized capital stock from One Hundred Million Pesos (Php100,000,000.00) divided into One Million (1,000,000) Shares with a par value of One Hundred Pesos (Php100.00) per share to One Hundred Fifty Million Pesos (Php150,000,000.00) divided into One Million Five Hundred Thousand (1,500,000) Shares with a par value of One Hundred Pesos (Php100.00) per share. Among others, the Complainant alleges that the group (Fe Ligtas, Prospero Pichay, Jr. and Cesar Detera) who filed the increase of capital stock committed fraud in procuring the Certificate of Approval of Increase of Capital Stock and Certificate of Filing of Amended Articles of Incorporation. Fe Ligtas, et al. were alleged to have submitted a Certificate of No Intra-Corporate Dispute despite the existence of intra-corporate controversies involving the subject corporation, which are pending with the courts. The Complainant submitted various documents to support its Complaint. CAIHTE A perusal of the records of the Commission shows that CMDC filed multiple General Information Sheets (GIS) with different set of officers for the years 2013-2015. Some of the GIS were filed by the subject corporation at the SEC main office while others were filed at the SEC Cagayan de Oro Extension Office. The GIS revealed that there are three (3) groups claiming to be the legitimate directors and officers of the subject corporation: (1) Ireneo L. Cezar, et al.; (2) Fe M. Ligtas/Prospero Pichay, et al.; and (3) Niceforo S. Calo, et al. Pursuant to the 2006 Rules of Procedure of the Securities and Exchange Commission (SEC), the Company Registration and Monitoring Department (CRMD), in a summons dated 09 February 2016 (for the Complaint Affidavit) and 15 February 2016 (for the Supplemental Complaint), directed the groups of Ms. Ligtas and Mr. Calo to file an Answer to the Complaint and Supplemental Complaint filed by Mr. Cezar for the Cancellation of the Certificate of Approval of Increase of Capital Stock within fifteen (15) days from receipt of the same. On 07 March 2016, the group of Ms. Ligtas, through their counsel, Atty. Portia D. Flores-Diesta, filed a Motion for Extension of Time to File Answer, praying that they be given an additional fifteen (15) days to file a responsive pleading. Subsequently, or on 05 April 2016, Atty. Flores-Diesta filed a Second Motion for Extension to File Answer asking for another extension of fifteen (15) days. The CRMD issued an Order dated 08 April 2016 denying the First and Second Motions for Extension of Time to File Answer filed by the group of Ms. Ligtas on 07 March 2016 and 05 April 2016, respectively, for being pleadings prohibited under the SEC Rules, and expunging said motions from the records of the case. A Motion to Admit Answer (with attached Answer) dated 27 April 2016 was filed by Atty. Flores-Diesta on behalf of the group of Ms. Ligtas/Mr. Pichay. By virtue of the abovementioned Order dated 08 April 2016, the Answer can no longer be admitted. The 2006 SEC Rules of Procedure provides that "should one be filed, said prohibited pleadings or submissions shall be automatically expunged from the records of the case." However, assuming arguendo that the Answer ( i.e. , the case being an intra-corporate controversy and should be referred to the regular courts) will be considered, this Order will not discuss matters involving intra-corporate issues. The issue that will be resolved is confined only on the questioned Certificates of Approval of Increase of Capital Stock and Certificates of Filing of Amended Articles of Incorporation. Failing to receive a proof of service to the group of Mr. Calo, the CRMD sent a letter dated 11 April 2016 to the post office in Agusan del Sur seeking assistance to retrieve the registry return cards as proof of service of summons to Mr. Calo, et al. As said letter remains unanswered, the CRMD made a personal delivery of the summons and orders to the Manila Law Office to Atty. Gener Sansaet, the Corporate Secretary of the group of Mr. Calo, on 27 April 2016. On 05 May 2016, the CRMD received an email from the Complainant, through CCIL Mining & Mineral Resources Corp., informing the Commission that the group of Mr. Calo has received the SEC summons on 23 February 2016 by a certain Ms. Lella Moscosa. The following documents have been attached: (1) Scanned copy of the Certification from the Bayugan City, Agusan del Sur Post Office dated 04 May 2016; (2) Scanned copy of the Bayugan City Post Office's logbook/receiving copy; and (3) Scanned copy of the receipt of Certification Fee from the Philippine Postal Corporation (PHLPOST). The CRMD made a validation from the PHLPOST on 05 May 2016. PHLPOST's Regional Office Area 8 in Cagayan de Oro City confirmed that the signatory to the Certification is the Acting Postmaster of the Bayugan City Post Office and that said receipt is an Official Receipt of the PHLPOST. SEC Office Order No. 242, series of 2013 Guidelines for Applications for Amendment of the Articles and/or By-Laws Where There is More Than One Set of General Information Sheet (GIS) is Filed with the Commission provides that if the case indicates an intra-corporate dispute or question of legitimacy between the directors, officers and stockholders of the corporation, the Commission shall mark the GIS in question as "DISPUTED" until after final resolution of said controversy. Likewise, said Order provides that with the existence of an intra-corporate dispute, the Commission shall continue to defer action on the applications for amendment of the Articles of Incorporation and/or By-Laws until the dispute is resolved by the appropriate courts or injunctive relief is obtained against the order of deferment. DETACa An Order for Marking of the GIS and Certificate of Approval of Capital Stock as "Disputed" pending the final resolution of the complaint was issued by the CRMD on 10 February 2016. We find that the Complaint is meritorious. Section 5, Chapter II of the Republic Act (RA) No. 8799, otherwise known as The Securities Regulation Code states that: "Sec. 5. Powers and Functions of the Commission. 5.1. . . . . Pursuant thereto the Commission shall have, among others, the following powers and functions: (c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications; xxx xxx xxx." A careful scrutiny of the documents pertaining to the Increase of Capital Stock submitted by Ms. Ligtas, et al. reveals that the cover sheets attached to the applications for amendment of the Articles of Incorporation and increase of capital stock bear the SEC Registration No. "200701881" and not "ASO95-001246" which is the true and correct SEC Registration No. of CMDC. Further review of the records of the Commission shows that "CS200701881" is the SEC Registration No. of HENHAO EQUIPMENTS CORPORATION (formerly with the name identical to CLAVER MINERAL DEVELOPMENT CORPORATION). Said corporation has the same primary purpose with CMDC and its Articles of Incorporation state Ms. Ligtas as one of the incorporators. Further review of the records of the Commission shows that the registration of HENHAO EQUIPMENTS CORPORATION (under CLAVER MINERAL DEVELOPMENT CORPORATION with SEC Registration No. CS200701881) was granted considering that the information of filing of the Petition to Set Aside the Order of Revocation of CMDC before the SEC Cagayan de Oro Extension Office and the issuance of the Order dated 29 August 2006 setting aside the Order of Revocation was not available in the Commission's database. In compliance with the SEC En Banc Decision dated 15 January 2008, a change of name to HENHAO EQUIPMENTS CORPORATION was filed and subsequently approved by the SEC Main Office on 12 March 2015. Moreover, a verification from the SEC Cagayan de Oro Extension Office on the records of the corporation with SEC Registration No. "CS200701881" , it was found out that the group of Ms. Ligtas filed an application for change of name from CLAVER MINERAL DEVELOPMENT CORPORATION (with SEC Registration No. CS200701881) to EARTH POWER MINING & DEVELOPMENT CORPORATION, which was approved by the Extension Office on 16 April 2014. The original Certificate of Filing of Amended Articles of Incorporation remains unclaimed. It appears that the group of Ms. Ligtas filed for change of name twice: one at the SEC Cagayan de Oro Extension Office and one at the SEC Main Office; making the Commission believe that they are the legitimate directors and officers of the CMDC by confusing CMDC with the other corporation, HENHAO EQUIPMENTS CORPORATION. The increase in capital stock was approved by CRMD considering that the group of Ms. Ligtas was able to comply with all the required documents and there was no Temporary Restraining Order issued by the Court against the Commission restraining the same to approve any application filed by the subject corporation. The CRMD relied on the Secretary's Certificate submitted by the group of Ms. Ligtas certifying that the corporation had no intra-corporate issue. In a series of clarificatory conferences 1 conducted by CRMD with the three (3) sets of directors and officers of the subject corporation, the groups of Calo and Cezar manifested that there is a pending intra-corporate dispute between the two (2) groups, which is already the subject of on-going proceedings before the court. Ms. Ligtas had knowledge of such intra-corporate case as evidenced by her filing of a Motion for Intervention. Such act of Ms. Ligtas, et al. of submitting documents with false statements is tantamount to actual fraud with the intention to deceive the Commission, considering that the SEC heavily relies on the said submissions to issue the Certificates. SEC Admin. Case No. 07-10-120 2 explains fraud as follows: "There are two types of fraud: actual and constructive. To constitute actual fraud there must be such fraud as affects the conscience i.e. , there must be the element of deceit or intentional deception. However, in constructive fraud, the intention is immaterial. There is constructive fraud for as long as the act done or omitted constitutes a misrepresentation, which in the contemplation of the courts and tribunals is tantamount to a fraud because of its detrimental effect on public interest." aDSIHc With regard to the issue as to the legitimate directors and officers of the subject corporation, such is not within the jurisdiction of the Commission as expressly provided in Section 5.2. of RA No. 8799 in relation to Section 5 of Presidential Decree 902-A. Based on the foregoing, it appears that the increases in authorized capital stock and the amendments to the Articles of Incorporation approved by the Commission on 23 December 2014 and 02 October 2015 are tainted with fraud and are filed and approved while there was an existing intra-corporate dispute among the directors and officers of CLAVER MINERAL DEVELOPMENT CORPORATION. Hence, the Directors' Certificate submitted as part of the application for the increases of the capital stock cannot be relied upon considering the existence of an intra-corporate controversy involving the subject corporation. Likewise, said Certification is not a reliable basis of compliance with the required votes of the directors and the stockholders as prescribed in Section 16 in relation to Section 38 of the Corporation Code of the Philippines. WHEREFORE, premises considered, the Certificate of Approval of Increase of Capital Stock and the Certificate of Filing of Amended Articles of Incorporation (amending Articles III and VII thereof) both approved on 23 December 2014 and the Certificate of Approval of Increase of Capital Stock and the Certificate of Filing of Amended Articles of Incorporation (amending Article VII thereof) approved on 02 October 2015 are hereby REVOKED. Let a copy of this Order and copies of the Complaint and Supplemental Complaint in relation to the revocation of the subject corporation's Certificate of Approval of Increase of Capital Stock and Certificate of Filing of Amended Articles of Incorporation (amending Articles III and VII thereof) approved on 23 December 2014 and the Certificate of Approval of Increase of Capital Stock and Certificate of Filing of Amended Articles of Incorporation (amending Article VII thereof) approved on 02 October 2015, be furnished the Corporate Filing and Records Division of the Company Registration and Monitoring Department for inclusion to its corporate records on file and for marking of the term "REVOKED" on the face of the said documents on file with the Commission. SO ORDERED. May 6, 2016, Mandaluyong City. (SGD.) ATTY. MARY ANNE V. MORALES-LAGURA Handling Officer (SGD.) ATTY. SHEARA L. LUPANGO-TAMAYO Handling Officer (SGD.) ATTY. FERDINAND B. SALES Director Footnotes 1. 04 January 2016 for the group of Ms. Ligtas; 02 February 2016 for the group of Mr. Calo; and 04 February 2016 for the group of Mr. Cezar. 2. In the Matter of Maypajo J.P. Rizal Public Market Vendors Association, Inc., For: Revocation of Certificate of Incorporation.