Goodgold Realty and Development Corp. v. Guy

August 9, 2018 SEC EN BANC CASE NO. 05-10-201 Cancellation of Registration of STB GOODGOLD REALTY AND DEVELOPMENT CORPORATION , appellant , vs . GILBERT G. GUY , appellee . DECISION For the consideration of the En Banc is the Memorandum on Appeal filed on 27 May 2010 by GOODGOLD REALTY AND DEVELOPMENT CORPORATION (GOODGOLD), which seeks to reverse the Order dated 29 April 2010 of the Commission's COMPANY MONITORING AND REGISTRATION DEPARTMENT (CRMD) . The CRMD cancelled the registration of GOODGOLD's 17 September 1998 Stock and Transfer Book (1998 STB) and affirmed the validity of its previously-registered 6 June 1988 Stock and Transfer Book (1988 STB). ANTECEDENTS The 1988 and 1998 STB Registrations GOODGOLD is a corporation duly-registered (SEC Reg. No. 151962) with the Commission on 6 June 1988 . Its incorporators include Petitioner-Appellee GILBERT G. GUY (Gilbert), 1 viz .: Name of Subscriber Nationality No. of Shares Amount Subscribed FRANCISCO GUY CO CHIA Filipino 130,000 P13,000,000.00 GILBERT G. GUY Filipino 519,997 51,999,700.00 BENJAMIN C. LIM Filipino 1 100.00 PAULINO DELFIN PE Filipino 1 100.00 SIMNY G. GUY Filipino 1 100.00 On the same day, the 1988 STB was registered with the Commission . The 1988 STB bears the names and signatures of CRMD employees, as authenticated by CRMD in the original case. CAIHTE On 17 September 1998 , the 1998 STB was registered with the Commission by GOODGOLD , which claims no knowledge of any STB being registered before this time. GOODGOLD further claims that it received a letter from the Commission reminding it to submit an STB because it had none on file. However, this alleged letter was not attached to any of GOODGOLD's pleadings. On 22 July 2009 , Gilbert filed with the CRMD a Petition for Revocation of the 1998 STB . He claimed that the 1988 STB is still existing and has not been revoked. Meanwhile, the 1998 STB contained a different set of shareholders, viz .: Name of Subscriber Nationality No. of Shares FRANCISCO GUY CO CHIA Filipino 195,000 GILBERT G. GUY Filipino 65,000 SIMNY G. GUY Canadian 195,000 GERALDINE G. GUY Canadian 65,000 GRACE G. CHEU Canadian 65,000 GLADYS G. YAO Canadian 65,000 Gilbert argued that the Supreme Court ruling in the case of Provident International Resources Corporation v. Joaquin T. Venus, et al. , G.R. No. 167041, 17 June 2008 (Provident case) is applicable to the circumstances of this case. In this case, the Supreme Court that it is proper for the Commission to decide which, among two purported STBs, is valid and authentic. On 17 September 2009 , Respondent-Appellant GOODGOLD filed its Answer arguing essentially that: (1) the Petition should be dismissed because it puts in issue the ownership of shares, which makes it an Intra-Corporate Dispute outside the jurisdiction of the Commission ; and (2) the Petition is barred by the pendency of an Intra-Corporate case, involving the same parties and issues. To show identity of parties and issues, GOODGOLD called attention to GILBERT's allegation of fraud in the preparation of the 1998 STB, which is significant because GILBERT also alleges in the related intra-corporate dispute that GOODGOLD resorted to fraud in the transfer of shares . GOODGOLD also argued that the instant case is dismissible under the 2006 SEC Rules of Procedure, pursuant to rule against willful forum shopping, especially since the courts had already ruled that GILBERT was filing harassment cases against his parents and siblings before different courts, involving the same transfer of shares. DETACa The Related Intra-Corporate Dispute The alleged pending Intra-Corporate Dispute was filed in the Regional Trial Court of Mandaluyong (RTC Mandaluyong) and docketed as SEC-MC08-112 . It was filed by Gilbert against his mother and sisters as individual shareholders of GOODGOLD, claiming that his shares were fraudulently transferred to them and thus praying for the annulment of stock certificates bearing his endorsement. However, Gilbert impleaded neither GOODGOLD nor his father, who was also a shareholder. At the time this Appeal to the En Banc was filed (2010), the RTC Mandaluyong case was on appeal to the Court of Appeals. Later, it was brought before the Supreme Court. On 5 September 2012 , the Supreme Court ruled that SEC-MC08-112 was a nuisance suit and ordered its immediate dismissal . On 26 March 2013 , the Supreme Court Decision in SEC-MC08-112, along with all the factual findings therein, was made part of the record of the instant Revocation of STB case through a Manifestation filed by GOODGOLD . As narrated by the Supreme Court, Gilbert had previously filed essentially the same Intra-Corporate Dispute in 2004 before the Regional Trial Court of Makati (RTC Makati) against his mother and sisters (Simny, et al.), claiming that his shares were fraudulently transferred to them and thus praying for the annulment of stock certificates bearing his endorsement. Gilbert claimed that he paid for his shares at the time of GOODGOLD's incorporation, but never received nor asked for stock certificates because it was merely a family corporation. Nevertheless, he claims to have been a stockholder "in the books of the corporation." Gilbert denies that he ever agreed to transfer his shares to Simny, et al., or that he ever signed any endorsement to that effect. Gilbert withdrew the 2004 RTC Makati case after the National Bureau of Investigation (NBI) authenticated his endorsement at the back of the stock certificates presented by Simny, et al., who claimed that these had been in their possession ever since Gilbert signed them at the time of incorporation . Simny, et al., claimed that, at the time, Gilbert was financially dependent on his parents (Francisco and Simny) and that it was they who actually paid for the subscription. It was also Francisco and Simny who made sure that Gilbert executed endorsements of his stock certificates in blank, as a security measure. The stock certificates bearing Gilbert's authentic endorsement were in their undisturbed possession from GOODGOLD's incorporation up to the time of the Supreme Court Decision . The Supreme Court also noted that Francisco and Simny, to whom these endorsements in blank were delivered, had the right to complete them, viz .: It did not escape us that Gilbert, instead of particularly describing the fraudulent acts that he complained of, just made a sweeping denial of the existence of stock certificates by claiming that such were not necessary, GOODGOLD being a mere family corporation. As sweeping and bereft of particulars is his claim that he "is unaware of any document signed by him that would justify and support the transfer of his shares to herein petitioners." Even more telling is the contradiction between the denial of the existence of stock certificates and the denial of the transfer of his share of stocks "under his name in the books of the corporation." 2 xxx xxx xxx Notably, Gilbert, during the entire controversy that started with his 2004 complaint, failed to rebut the NBI Report which authenticated all the signatures appearing in the stock certificates. 3 aDSIHc xxx xxx xxx With Gilbert's failure to allege specific acts of fraud in his complaint and his failure to rebut the NBI report, this Court pronounces, as a consequence thereof, that the signatures appearing on the stock certificates, including his blank endorsement thereon were authentic . With the stock certificates having been endorsed in blank by Gilbert, which he himself delivered to his parents, the same can be cancelled and transferred in the names of herein petitioners. 4 (Emphasis supplied) In 1999, Francisco and Simny used these previously-signed endorsements in blank to redistribute the shares of GOODGOLD between themselves, as majority shareholders, and their children who would each hold an equal number of shares. The Assailed CRMD Order On 29 April 2010 , the CRMD issued the assailed Order stating essentially that the issue of authenticity of STB can be separated from the issue of ownership of shares, which is outside the jurisdiction of the Commission, viz .: Moreover, the pending intra-corporate case does not affect the instant Petition considering that the issue here is only on the validity of the registration of the two Stock and Transfer Books and not the validity of the contents or entries on the names of directors/officers and recording of the transfer of shares of stock in question . Besides, the ruling [in] this case is not intended to favor any of the parties, but to determine the responsibilities of the corporation as mandated by the Corporation Code of the Philippines. (Emphasis supplied) All stock corporations are required to register their Stock and Transfer Books within thirty (30) days from the date of registration of their Articles of Incorporation as provided in existing Guidelines for the Verification of the Paid-Up Capital (Cash) of Corporations dated June 25, 1975, as amended. In the instant case, the Commission registered the new STB upon application of the respondent because of its mistaken belief that no stock and transfer book had been previously registered in 1988. However, the evidence presented clearly reveal that the old STB is in fact registered, still exists and is not actually lost in contemplation of law that will justify registration of a new one. The original registered STB is in [the] possession of the petitioner and is not actually lost or missing. Thus, there would be no cogent reason to register the new STB. It is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered (Article 1189[2], Civil Code of the Philippines). 5 Moreover, the old STB was presented by the petitioner for evaluation and verification during the conference on October 21, 2009. After careful examination of the said STB, it has been observed that the subject STB was properly registered and approved by then Atty. Asterio H. Pagilinan, Division Chief of the defunct Supervision and Monitoring Department (SMD) of the Commission. The corresponding fee of P25.00 was paid under O.R. No. 5748398 on June 07, 1988 at the time of registration. x x x (Emphasis supplied) xxx xxx xxx The allegations [in] the Answer of the respondent do not constitute valid reasons for the registration of a new STB for the respondent. As argued in the instant Petition, the evidence on record shows that indeed the old STB is actually registered, has not been revoked and cancelled, and is [in fact] in [the] possession of [the] petitioner. Registration of another STB is deemed unnecessary inasmuch as the original thereof has been registered and has not been lost or destroyed . (Emphasis supplied) Anent the arguments of the respondent on the authority of the person who caused the registration of the old STB, it is assumed that the person who [registered] it is authorized by the corporation, considering the fact that on the same day when the certificate of incorporation was approved by the Commission, the registration of the old STB was also filed. 6 ETHIDa The Instant Appeal On 27 May 2010 , GOODGOLD filed its Memorandum on Appeal , essentially reiterating that (1) the validity of an STB is inseparable from the ownership of shares, which is Intra-Corporate in nature and is outside the jurisdiction of the Commission, and also (2) that the instant case is barred by a pending Intra-Corporate Dispute. Gilbert filed four (4) Motions for Extension of Time the first on 11 June 2010 , the second on 21 June 2010 , the third on 2 July 2010 , and on the fourth and last on 22 July 2010 . This prompted GOODGOLD to file a Motion to Resolve on 23 July 2010 on account of Gilbert's failure to file a timely Comment and Opposition . On 13 September 2010 , Gilbert filed his Comment and Opposition , arguing that the CRMD Order was a correct application of the ruling in the Provident case. On 4 October 2010 , GOODGOLD filed a Reply which reiterated the arguments in its Memorandum on Appeal "without prejudice to appellant's Motion to Resolve." On 26 March 2013 , GOODGOLD filed a Manifestation that the pending Intra-Corporate Dispute was finally decided by the Supreme Court in its favor. The ruling held that Gilbert endorsed in blank his stock certificates and delivered the same to his parents, Francisco and Simny, who thereafter redistributed the shares. The Supreme Court also declared that SEC-MC08-112 filed in 2008 with the RTC of Mandaluyong is a nuisance suit that should be immediately dismissed, and that it is a mere rehash of a 2004 case filed with the RTC of Makati which had long been dismissed. Hence this appeal . DISCUSSION The sole issue in this case is whether or not it was proper for the CRMD to rule on the validity of the older STB, considering there was, at the time, an ongoing dispute as to the ownership of the shares. We hold that the ruling of CRMD was proper. While GOODGOLD is correct in arguing that the validity of transfers of shares is an Intra-Corporate Dispute, we hold that the authenticity of an STB can be determined separately by the Commission. As correctly stated by the CRMD: "[T]he pending intra-corporate case does not affect the instant Petition considering that the issue here is only on the validity of the registration of the two Stock and Transfer Books and not the validity of the contents or entries on the names of directors/officers and recording of the transfer of shares of stock in question." Otherwise stated, the issue of ownership is totally severable from the issue of authenticity of the STBs. The Commission notes that the Supreme Court has ruled conclusively, in the related Intra-Corporate Dispute, that Gilbert has been filing nuisance suits regarding the validity of the transfer of shares. In the instant case, however, the CRMD gave no credence to GILBERT's allegations that the 1998 STB is "fraudulent" because it contains the transfer of shares from himself to his parents and sisters. Rather, the 1998 was revoked solely on account of redundancy, with no regard to the entries therein. The CRMD ruling did not pronounce the transfers recorded in the 1998 STB as fraudulent or void, for that would have been completely outside the jurisdiction of the Commission. Otherwise stated, the Supreme Court ruling in SEC-MC08-112 that GILBERT is no longer the owner of the shares as recorded in the 1988 STB, having transferred the same to his parents and sisters, is binding on the Commission , and this ruling that the 1988 STB is authentic gives rise to a purely ministerial obligation to compel the recording of the aforesaid transfer of shares in the authenticated 1988 STB. cSEDTC Furthermore, the ruling in the Provident case is applicable here, because the issue is merely which of the two purported STBs should be declared valid. In the Provident case, there was both an intra-corporate issue as to ownership and an administrative issue as to the authenticity of the STBs, which is precisely the case here, viz .: To resolve the issue of jurisdiction, it would be good to look at the powers and functions of the SEC. The Securities Regulation Code (Republic Act No. 8799) provides: SEC. 5. Powers and Functions of the Commission . 5.1. The Commission shall act with transparency and shall have the powers and functions provided by this Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions: (a) Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises and/or a license or permit issued by the Government; xxx xxx xxx (d) Regulate, investigate or supervise the activities of persons to ensure compliance; xxx xxx xxx (n) Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws. From the above, it can be said that the SEC's regulatory authority over private corporations encompasses a wide margin of areas, touching nearly all of a corporation's concerns. This authority more vividly springs from the fact that a corporation owes its existence to the concession of its corporate franchise from the state. Under its regulatory responsibilities, the SEC may pass upon applications for, or may suspend or revoke (after due notice and hearing), certificates of registration of corporations, partnerships and associations (excluding cooperatives, homeowners' associations and labor unions); compel legal and regulatory compliances; conduct inspections; and impose fines or other penalties for violations of the [Securities Regulation Code], as well as implementing rules and directives of the SEC, as may be warranted. (Emphasis supplied) Considering the SEC, after due notice and hearing, has the regulatory power to revoke the corporate franchise from which the corporation owes its legal existence the SEC must likewise have the lesser power of merely recalling and canceling an STB that was erroneously registered . (Emphasis supplied) xxx xxx xxx As the administrative agency responsible for the registration and monitoring of STBs, it is the body cognizant of the STB registration procedures, and in possession of the pertinent files, records and specimen signatures of authorized officers relating to the registration of STBs. The evaluation of whether an STB was authorized by the SEC primarily requires an examination of the STB itself and the SEC files . This function necessarily belongs to the SEC as part of its regulatory jurisdiction. Contrary to the allegations of respondents, the issues involved in this case can be resolved without going into the intra-corporate controversies brought up by respondents . (Emphasis supplied) SDAaTC As the regulatory body, it is the SEC's duty to ensure that there is only one set of STB for each corporation . The determination of whether or not the 1979-registered STB is valid and of whether to cancel and revoke the August 6, 2002 certification and the registration of the 2002 STB on the ground that there is already an existing STB is impliedly and necessarily within the regulatory jurisdiction of the SEC. (Emphasis supplied) Under the circumstances of the instant case, we find no error in the exercise of jurisdiction by the SEC. All that the SEC was tasked to do, and which it actually did, was to evaluate the 1979 STB presented to it. In ruling that the 1979 STB was validly registered, the SEC Hearing Officer explained and ruled thus: After careful examination of the 1979 stock and transfer book, it has been observed that subject book was properly presented and stamped received by the then SEC employee in charge of registration. xxx xxx xxx WHEREFORE, premises considered and finding the 1979 stock and transfer book authentic and duly executed, the Commission hereby [recalls] the certification issued on 6 August 2002 and [cancels] the stock and transfer book registered on October 2002. According, the stock and transfer book registered on 25 September 1979 shall remain valid. SO ORDERED. We find the above ruling proper and within the SEC's jurisdiction to make. GOODGOLD argues that the instant case is different from Provident because here there is a doubt as to who filed the older STB. The implication is that authorized persons applied for GOODGOLD's incorporation but, on the very same day, an unknown person registered the STB. This is contrary to human experience and cannot negate positive evidence that an officer of the Commission duly registered the same STB in 1988. Thus, the En Banc agrees with the CRMD that the persons who filed for incorporation must have also registered the 1988 STB. Apart from GOODGOLD's bare denial, this case is essentially the same as the Provident case. Moreover, there is nothing that prevents the Commission from compelling the corporation to record in the authenticated STB the very transactions confirmed by the Supreme Court. This is because it is likewise within the Commission's regulatory powers to compel the faithful recording of transaction in the STB , especially because the Supreme Court has left no doubt as to the present ownership of the shares of GOODGOLD. To fully rectify the situation, it is prudent to both (1) pronounce the older STB as authentic, and (2) compel the recording of the share transfers which have already been confirmed as fact by the courts. WHEREFORE , premises considered, the 29 April 2010 CRMD Order is hereby AFFIRMED WITH MODIFICATION. The 1998 STB is revoked and cancelled on account of redundancy, without regard to the validity of the entries therein, while the 1988 STB is declared authentic. In light of the judgment of the Supreme Court in SEC-MC08-112 regarding the ownership of shares, GOODGOLD is hereby directed to immediately record the transfer of shares, as presently recorded in the revoked 1998 STB, into the authenticated 1988 STB. SO ORDERED. Pasay City, Philippines, August 9, 2018. acEHCD (SGD.) EMILIO B. AQUINO Chairperson On Official Business. ANTONIETA F. IBE Commissioner (SGD.) EPHYRO LUIS B. AMATONG Commissioner (SGD.) JAVEY PAUL D. FRANCISCO Commissioner Footnotes 1. Articles of Incorporation of GOODGOLD REALTY DEVELOPMENT CORPORATION. 2. Simny Guy, et al. v. Gilbert Guy , G.R. Nos. 189486 and 189699 (consolidated), 5 September 2013 . 3. Id. 4. Id. 5. CRMD Order dated 29 April 2010 at 6-7. 6. Id. at 7.