Babel Holdings, Inc. v. Espeleta

June 7, 2022 SEC EN BANC CASE NO. 03-22-494 BABEL HOLDINGS, INC.,MANUEL M. LAZARO, MICHELLE B. LAZARO, ROMMEL M. SANTIAGO, AND PHILIPE T. ACQUINO , n appellants , vs. DINDO A. ESPELETA and KAREN M. ESPELETA , appellees . DECISION Before this Commission is the Appeal Memorandum filed on 16 March 2022 by BABEL HOLDINGS, INC.,Manuel M. Lazaro, Michelle B. Lazaro, Rommel M. Santiago, and Philipe T. Aquino, assailing the Order dated 10 February 2022 (the "Assailed Order") issued by the Company Registration and Monitoring Department, which revoked the Certificate of Incorporation of BABEL HOLDINGS, INC.,on the basis of a finding that the same was fraudulently procured, the dispositive portion of which reads: "WHEREFORE, in view of the foregoing, the Certificate of Registration of BABEL HOLDINGS, INC.,registered on 12 February 2016 under SEC Reg. No. CS201603004, is hereby REVOKED. Moreover, the issuance of a permanent cease-and-desist order has been rendered moot and academic." THE PARTIES BABEL HOLDINGS, INC. (BHI) is a stock corporation duly organized and existing under the laws of the Republic of the Philippines, having been issued a Certificate of Incorporation bearing Company Registration No. CS201603004. Its principal office address is at the 19th Floor Chatham House Bldg.,116 Valero cor. V.A. Rufino Street, Salcedo Village, Makati City, Philippines. Appellants Manuel M. Lazaro, Michelle B. Lazaro, Rommel M. Santiago, and Philipe T. Aquino (the "Individual Appellants"),and Appellees Dindo A. Espeleta and Karen M. Espeleta, are the incorporators and stockholders of BHI whose shareholdings therein, based on the latest filed General Information Sheet (2018),are as follows: NAME SHARES SUBSCRIBED AND PAID NUMBER OF SHARES AMOUNT (IN PHP) % DINDO A. ESPELETA 25,000 25,000,000.00 25 KAREN M. ESPELETA 25,000 25,000,000.00 25 MANUEL M. LAZARO 41,000 41,000,000.00 41 MICHELLE B. LAZARO 3,000 3,000,000.00 3 ROMMEL M. SANTIAGO 3,000 3,000,000.00 3 PHILIPE T. AQUINO 3,000 3,000,000.00 3 RELEVANT FACTS Sometimes around 15 October 2015, Appellees Dindo A. Espeleta and Karen M. Espeleta, and the Individual Appellants agreed in principle to form a corporation, and pool their money in the amount of One Hundred Million Pesos (PhP100,000,000.00),for the purpose of acquiring Mausonon Island in Palawan (the "Island"). 1 On 12 February 2016, the Commission approved the application of BHI and issued its Certificate of Incorporation. CAIHTE On 5 July 2016, BHI purchased the Island from Mariano V. Araneta, Jr.,Emmanuel L. Regio, Demetrio P. Sonza, Angel L. De Leon, Jr.,Esteban V. Tajanlangit III (collectively, the "Seller"),where they opened an Escrow Agreement Account with Eastwest Bank for One Hundred Twenty-Six Million Pesos (PhP126,000,000.00),which was paid to the Seller by Appellee Dindo Espeleta on behalf of BHI. 2 On 29 September 2021, Appellees Dindo A. Espeleta and Karen M. Espeleta filed with the Company Registration and Monitoring Department (CRMD) of this Commission a Petition for Revocation of Company Registration (with Application for the Issuance of Cease and Desist Order), an administrative action seeking the revocation of the Certificate of Registration of BHI for having been allegedly obtained through fraud, invoking Sec. 5 (i) [1] of PD 902-A, 3 as amended. In support thereof, Appellees Dindo A. Espeleta and Karen M. Espeleta alleged that the Individual Appellants, who obtained the registration of BHI from the Commission, 4 made serious and deliberate misrepresentations in the documents that were submitted as part of BHI's application for incorporation. 5 Specifically, Appellees declared that Karen M. Espeleta's signature in the Treasurer's Affidavit was forged as she did not sign the said document, 6 and that the representations in BHI's Articles of Incorporation (AoI) on the company's paid-up capital are false and fraudulent, because the Individual Appellants did not pay the shares that they fully subscribed to. 7 Appellees Dindo A. Espeleta and Karen M. Espeleta substantiated the foregoing with the bank statement issued by BPI Alabang Prime Center where the alleged lone bank account of BHI was lodged. 8 Relative to their prayer for the issuance of a Cease and Desist Order (CDO),Appellees Dindo A. Espeleta and Karen M. Espeleta posited that the same is warranted to prevent BHI and the Individual Appellants from further defrauding and misrepresenting to the public, by making it appear that the company had sufficient capitalization and has a stellar financial condition to transact a wide array of business. 9 Specifically, Appellees Dindo A. Espeleta and Karen M. Espeleta argued that BHI and Individual Appellants should be enjoined from conducting shareholders' meetings, which are venues where Individual Appellants transfer and reorganize their equity participation and capital assets in various companies, i.e. ,Copperstar Holdings, Inc.,Eagle II Holdco, Inc.,and Eagle I Landholdings, Inc. 10 On the basis of the authority granted by the Commission En Banc 11 in a Resolution dated 5 October 2021, the CRMD issued ex parte a CDO directing BHI to immediately cease and desist from transferring, selling, disposing, and/or conveying its properties, securities, shares of stock, and other real/personal properties, and from transacting any, and all business involving the funds in its depositary bank. The CRMD also issued a Summons dated 6 October 2021, directing BHI and Individual Appellants to file their verified Answer within a period of fifteen (15) days from receipt thereof. In their Entry of Appearance with Answer, BHI and the Individual Appellants prayed for (a) the dismissal of the Petition for its failure to show with clear and convincing evidence, the alleged falsity and/or fraud, and (b) the recall and setting side of the CDO, which was allegedly issued without basis and/or with abuse of discretion. BHI and the Individual Appellants countered with the argument that the incorporation documents of BHI, specifically its Articles of Incorporation (AoI),which provide for the full subscription and payment of the authorized capital stock of the corporation, enjoy a presumption of regularity being a notarized document, which can only be overturned by clear and convincing evidence. 12 They further argued that Appellees Dindo A. Espeleta and Karen M. Espeleta have not denied executing the AoI, which estops them from claiming that the shares that were subscribed to by BHI's incorporators were not fully paid. 13 Finally, BHI and the Individual Appellants maintained that the purchase by BHI of the Island belies the allegation of Appellees that BHI was not funded. 14 Hence, the transactions and the documents that were executed by BHI, through Appellee Dindo Espeleta, in his capacity as President and incorporator, show to the public that the corporation was in a stellar financial condition, because its capital stock has been fully subscribed and paid. 15 The Assailed Order which imposed the penalty of revocation of BHI's Certificate of Registration led to the filing of the instant Appeal. In their Appeal, BHI and the Individual Appellants maintained that the CRMD committed reversible error in revoking BHI's Certificate of Incorporation, on the basis of the finding that the registration documents were improperly notarized and did not thus enjoy the presumption of regularity, because Appellees did not deny signing BHI's AoI. 16 BHI and the Individual Appellants posit that the requirement of notarization is merely formal, and a defect in the notarization of the registration documents does not affect the validity or enforceability of the transaction; nor can the same be used as basis in determining if there was fraud in the procurement of the certificate of registration. 17 With Appellees Dindo A. Espeleta and Karen M. Espeleta having admitted that they personally signed the AoI, BHI and the Individual Appellants argued that the declaration relating to the parties' full payment of the shares that they subscribed were not false. 18 BHI and the Individual Appellants also pointed out that other than the Treasurer's Affidavit, there is nothing in the previous Corporation Code and in the RCC that require a corporation to deposit cash in a bank account registered under its name. 19 Hence, they argued that CRMD's reliance on the bank certificate submitted by Appellees as conclusive proof that BHI's paid-up capital was only Five Million Pesos (PhP5,000,000.00) is questionable, as it disregarded the documentary evidence showing the contrary which was submitted by BHI and the Individual Appellants. Moreover, BHI and the Individual Appellants also emphasized that the transactions which BHI entered into, through Appellee Dindo Espeleta, during the span of five (5) years from its incorporation in 2016, show that BHI was fully capitalized and was validly incorporated. 20 Finally, BHI and the Individual Appellants reiterated their argument that Appellants Dindo A. Espeleta and Karen M. Espeleta should not be allowed to benefit from their own wrongdoing based on the doctrine of unclean hands. DETACa On 8 April 2022, Appellees Dindo A. Espeleta and Karen M. Espeleta filed their Comment/Opposition praying for the full affirmation of the Assailed Order, and the dismissal of the Appeal. They argued that the act of Individual Appellants in having the AoI and the Treasurer's Affidavit of BHI notarized, despite the physical absence of the former, will never amount to substantial compliance with the requirements under Sections 14 and 15 of the Corporation Code, because the same constitutes a false statement in the acknowledgement. 21 Appellees Dindo A. Espeleta and Karen M. Espeleta further maintained that the forgery of the signature of the latter in the Treasurer's Affidavit was proven by substantial evidence, which merits the revocation of BHI's Certificate of Incorporation. 22 The Commission is not estopped from revoking BHI's Certificate of Incorporation which was fraudulently procured, because there is a positive law which sanctions such revocation. 23 In relation to the paid-up capital of BHI, Appellees Dindo A. Espeleta and Karen M. Espeleta maintained that the same only stood at Five Million Pesos (PhP5,000,000.00),based on the documentary records submitted, and not One Hundred Million Pesos (PhP100,000,000.00) as stated in BHI's AoI. This shows that the statements in the AoI and Treasurer's Affidavit of the Corporation were false, 24 and that the incorporation of BHI was fraudulently made. In compliance with the Order dated 7 April 2022 issued by the Commission, through the Office of the General Counsel, BHI and the Individual Appellants filed their Position Paper on 28 April 2022, while Appellees Dindo A. Espeleta and Karen M. Espeleta filed their Position Paper on 22 April 2022. The Parties basically reiterated their respective arguments embodied in their earlier pleadings. ISSUE The sole issue presented to this Commission is whether the revocation of the Certificate of Incorporation of BHI on the ground of fraud in its procurement was correct based on the records and evidence. RULING The Appeal is impressed with merit. The corporate medium, being endowed with a personality separate and distinct from the stockholders/members composing it, is recognized practically in all jurisdictions as the preferred vehicle in conducting, maintaining, developing, and growing a business enterprise, because of the legal, operational and practical advantages that accompany it, compared to other business media. Under Batas Pambansa Blg. 78 or the Corporation Code of the Philippines, 25 the law in effect when BHI was incorporated, a corporation has, among others, a right of succession 26 which facilitates its continued existence independently of its shareholders, and the powers expressly granted by law, 27 its Articles of Incorporation (AoI),and/or incident to its existence. This was explained by the Supreme Court in University of Mindanao, Inc. vs. Bangko Sentral ng Pilipinas , 28 to wit: "Corporations are artificial entities granted legal personalities upon their creation by their incorporators in accordance with law. Unlike natural persons, they have no inherent powers. Third persons dealing with corporations cannot assume that corporations have powers. It is up to those persons dealing with corporations to determine their competence as expressly defined by the law and their articles of incorporation. A corporation may exercise its powers only within those definitions. Corporate acts that are outside those express definitions under the law or articles of incorporation or those "committed outside the object for which a corporation is created" are ultra vires . The only exception to this rule is when acts are necessary and incidental to carry out a corporation's purposes, and to the exercise of powers conferred by the Corporation Code and under a corporation's articles of incorporation. This exception is specifically included in the general powers of a corporation under Section 36 of the Corporation Code." It is in this context that the grant of corporate existence is conditioned on the applicant's full compliance with the requirements of the Corporation Code which the State, as the creator of corporations, has prescribed. Stated otherwise, incorporation is not a right that persons can demand from the State, but a mere privilege granted to those that are able to show, to the satisfaction of the Commission, which administers and implements the Corporation Code, that all the statutory/regulatory requirements have been complied with. Sections 10 to 14 of the Corporation Code, 29 embody the requirements that all applicants for incorporation must comply. It is the Commission's duty to verify and ensure, that all the requirements and information prescribed therein, are provided/contained in the Articles of Incorporation (as well as the other supporting documents) submitted to it. aDSIHc Relative thereto, it is settled in jurisprudence that in the exercise of its regulatory functions, 30 the Commission is mandated to determine if the statutory requirements that have been complied with, and the Commission may even be compelled by mandamus to act on a matter presented/filed with it considering that the same does not involve the exercise of discretion. The Commission has therefore no authority to waive compliance with any requirement prescribed by law. Thus, in Gamboa vs. Teves , 31 the Supreme Court affirmed the authority of the Commission to disapprove the AoI of any corporation that falls short in complying with the requirements prescribed under the Constitution and/or the laws, to wit: "This Court has held that the SEC "has both regulatory and adjudicative functions." Under its regulatory functions, the SEC can be compelled by mandamus to perform its statutory duty when it unlawfully neglects to perform the same. Under its adjudicative or quasi-judicial functions, the SEC can be also be compelled by mandamus to hear and decide a possible violation of any law it administers or enforces when it is mandated by law to investigate such violation. Under Section 17(4) of the Corporation Code, the SEC has the regulatory function to reject or disapprove the Articles of Incorporation of any corporation where "the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution ." Thus, the SEC is the government agency tasked with the statutory duty to enforce the nationality requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public utilities .This Court, in a petition for declaratory relief that is treated as a petition for mandamus as in the present case, can direct the SEC to perform its statutory duty under the law, a duty that the SEC has apparently unlawfully neglected to do based on the 2010 GIS that respondent PLDT submitted to the SEC." (Emphasis supplied) In addition to the substantial requirements earlier mentioned, Section 14 of the Corporation Code also prescribes that the AoI, which is duly signed by the incorporators, be acknowledged. This is a formal requirement that all applicants need to comply. The absence of any of the information required under Sections 10 to 14 of the Corporation Code, which may result in the failure of the applicant to fully accomplish all the items in the prescribed form of the AoI provided in Section 15, will justify the denial or rejection by the Commission of the application for incorporation. In the same manner, a fully accomplished and signed AoI will be similarly denied if the same is not acknowledged. It should be emphasized though, that the Corporation Code took into consideration the possibility that from the time of the filing of the application for incorporation/amendment and its approval, circumstances may transpire that will require the modification of, and/or the submission of additional documents, for the applicant to fully comply with all the statutory/legal requirements. Also, circumstances may transpire from the filing of the application until the issuance of the certificate of incorporation, or within a reasonable time thereafter, that will require full disclosure by the applicant and/or the filing of an appropriate action by interested party(ies), which will allow the Commission to address and act on the matter properly. Thus, Section 17 of the Corporation Code specifically directs the Commission to give incorporators a reasonable time, within which to fully comply with and/or correct, or modify objectionable portions of the articles of incorporation, to wit: " Section 17 . Grounds when articles of incorporation or amendment may be rejected or disapproved . The Securities and Exchange Commission may reject the articles of incorporation or disapprove any amendment thereto if the same is not in compliance with the requirements of this Code: Provided, That the Commission shall give the incorporators a reasonable time within which to correct or modify the objectionable portions of the articles or amendment .The following are grounds for such rejection or disapproval: 1. That the articles of incorporation or any amendment thereto is not substantially in accordance with the form prescribed herein; 2. That the purpose or purposes of the corporation are patently unconstitutional, illegal, immoral, or contrary to government rules and regulations; 3. That the Treasurer's Affidavit concerning the amount of capital stock subscribed and/or paid is false; 4. That the percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution. No articles of incorporation or amendment to articles of incorporation of banks, banking and quasi-banking institutions, building and loan associations, trust companies and other financial intermediaries, insurance companies, public utilities, educational institutions, and other corporations governed by special laws shall be accepted or approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency to the effect that such articles or amendment is in accordance with law." (Emphasis supplied) Section 17 of the Corporation Code is very important because instead of an outright denial of an application which does not comply with the statutory and/or regulatory requirements, the law specifically gives applicants an opportunity to rectify/modify their application documents within a reasonable time, for them to fully comply with all the requirements prescribed by law, rules and regulations. It is thus incumbent upon applicants to promptly inform the Commission of any circumstance or event that relates to, or affects their compliance with the statutory and/or regulatory requirements, under pain of denial of their application. This is important because it will enable the Commission to act properly on the issue/matter, and determine if a reasonable time should be given to allow the applicant to correct any error/deficiency in his/her application, and/or to address violations, considering that the Commission's action is dependent on the information/declarations contained in the documents submitted. CAIHTE The foregoing notwithstanding, the approval of the application for incorporation and the issuance of the certificate of incorporation based on the documents presented, is not a guarantee that such certificate will no longer be questioned or assailed for failure to comply with the statutory requirements. Stated otherwise, the obligation of a corporation to comply with the statutory/regulatory requirements commences from the time that its incorporators file the application for incorporation; continues after the certificate is issued, and while it exists as a corporate entity. The Commission is mandated to ensure and exact full compliance with all statutory/regulatory requirements. Thus, if the Commission subsequently finds, motu proprio or through a complaint, that a corporation has violated any law, rule or regulation and/or failed to comply with the same during the said period, it is duty-bound to impose the appropriate penalties, including the ultimate penalty of revocation, if warranted. In this regard, the Commission was granted ample power and authority to properly, fully and effectively perform its mandate. Relative thereto, Section 6 (i) (1) of Presidential Decree No. 902-A categorically granted the Commission the power and authority to revoke the certificate of registration of corporations found to commit any of the grounds provided therein, one of which is fraud in the procurement thereof, to wit: " Section 6 . In order to effectively exercise such jurisdiction, the C ommission shall possess the following powers : xxx xxx xxx i) 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 : 1. Fraud in procuring its certificate of registration; 2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public; 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; 4. Continuous in operation for a period of at least five (5) years; 5. Failure to file by-laws within the required period; 6. Failure to file required reports in appropriate forms as determined by the Commission within the prescribed period; x x x" The issue presented in the instant case involves the proper interpretation and implementation of fraud in the procurement of the certificate of registration of BHI, in relation to Sections 13 and 14 (8) of the Corporation Code, as a ground to validly revoke the same. A careful examination of the Assailed Order will show that the CRMD imposed to supreme penalty of revocation of the certificate of incorporation of BHI, on the basis of a finding that its AoI, together with the Treasurer's Affidavit, were improperly notarized, i.e. , they were notarized in violation of Sections 1 and 6 of Rule II of A.M. No. 02-8-13-SC (the "2004 Rules on Notarial Practice"), and did not therefore enjoy the presumption of regularity. The CRMD found that while the Acknowledgement portion of the AoI of BHI and the notarial portion (jurat) of the Treasurer's Affidavit provide that Appellees Dindo A. Espeleta and Karen M. Espeleta personally appeared before the Notary Public, this was however specifically denied by Appellees. The CRMD forthwith concluded that "it is highly and substantially more probably to be true than not that the Articles of Incorporation and Treasurer's Affidavit are spurious and falsified." The CRMD is in effect saying that an AoI, by-laws and/or other incorporation documents submitted to the Commission in support of an application for incorporation should be considered spurious and falsified, notwithstanding the fact that they were signed and executed by the incorporators, if their notarization were made in violation of the 2004 Rules on Notarial Practice. Stated otherwise, it is the CRMD's position that a Notary Public's violation of the 2004 Rules on Notarial Practice should operate to nullify or render fatally infirm the AoI notarized by him/her, and penalize the parties thereto even if the due execution thereof was admitted. Corollarily, the CRMD is equally saying that a certificate of incorporation, issued on the basis of the AoI and other incorporation documents that are improperly notarized, should be revoked on the ground of fraud in the procurement thereof under Sec. 6 (i) (1) of PD 902A as they do not enjoy the presumption of regularity and are not prima facie evidence of the truth of the facts stated therein. 32 The Commission does not agree with CRMD. DETACa This Commission has consistently held that for purposes of Section 6 (i) (1) of P.D. 902-A, fraud as ground for the revocation of a certificate of registration refers to fraud attendant in the registration, and must be contained or connected with the documents or papers presented to the Commission, for purposes of registration. The use of the word "fraud" in its generic and unqualified sense means that it includes not only actual fraud but also, by reason of public policy, includes constructive fraud. 33 It should be emphasized that the purpose and policy of the law in including fraud in the procurement of the certificate of registration, as a ground for its revocation, is to ensure that every corporation established under the Corporation Code, which is entitled to enjoy the rights and privileges granted by the State, is truthful in each and every declaration and disclosure that it makes, and thus, ensures the protection of the public from the creation of fictitious, bogus, or sham corporations. This is inconsistent with the mandate of the Commission in promoting the development of the capital market and in protecting investors, 34 among others. The articles of incorporation is the basic corporate contract which is accorded with reverence by the law and the courts, as manifested by the stringent rules for its registration, and the manner by which any part thereof may be amended. It is a contract between the corporation and the State, the stockholders and the state, and the corporation, and its stockholders, 35 the terms and contents of which are prescribed by law. Thus, any material statement made in the AoI by the incorporators (or any of the incorporators) that turns out to be a falsehood, as determined by the Commission, based on substantial evidence presented in a petition for revocation, is thereby considered fraudulent regardless of the incorporators' intent or knowledge of such falsehood, and makes the corporation a nullity. This is particularly relevant especially in the context of the fact that in the application for the issuance of certificate of registration, the Commission has to rely only on what is stated in the AoI and documents submitted by the applicant-corporation, and assumes that the entries and declarations made therein are true and correct. In Care Best International, Inc. vs. SEC , 36 the Supreme Court sustained the revocation of the certificate of registration of a corporation on the basis of a finding that three (3) of its incorporators did not use their real names in the AoI, and affirmed the ratio decidendi of Court of Appeals that such act rendered it difficult, if not impossible for the Commission to determine if the requirements of Section 10 of the Corporation Code were complied with. More importantly, such act tended to confuse and defeat whatever claims the other corporate stakeholders, including the general public, may have against them. These circumstances, according to the Court, effectively placed the authenticity of the AoI under a "cloud of doubt." We can infer or deduce from the foregoing doctrine that for an information or declaration in the AoI to be considered fraudulent that would justify the revocation of the primary franchise of the corporation, the same must be false and/or calculated to misrepresent, because the same clearly constitutes fraud upon the public, who might have the occasion to deal with the entity concerned, and/or will facilitate the evasion of legal obligations, and duties, and/or will result in difficulties of administration and supervision over corporations. Hence, this submission/entry of false TIN in the AoI has been held as an act that constitutes fraud in the procurement of the certificate of registration, because the incorporators know (or ought to know) and are duty-bound to provide their correct TIN. 37 Experience tells us that the submission of fake TIN is made for no other purpose, but to defraud the State and the public, make a mockery of the regulatory process, evade responsibility, and accountability, and compromise or defeat public interest and policy. In the same manner and for the same reason, the use of false/fictitious names or aliases in the AoI was also held as covered by acts constituting fraud in the procurement of the certificate of registration, that warrants the revocation thereof. 38 In relation to the instant Appeal, Sections 13 and 14 (8) of the Corporation Code specifically provides, to wit: " Section 13 . Amount of capital stock to be subscribed and paid for the purposes of incorporation . At least twenty-five percent (25%) of the authorized capital stock as stated in the articles of incorporation must be subscribed at the time of incorporation, and at least twenty-five (25%) per cent of the total subscription must be paid upon subscription, the balance to be payable on a date or dates fixed in the contract of subscription without need of call, or in the absence of a fixed date or dates, upon call for payment by the board of directors :Provided, however, That in no case shall the paid-up capital be less than Five Thousand (P5,000.00) pesos." " Section 14 . Contents of the articles of incorporation . All corporations organized under this code shall file with the Securities and Exchange Commission articles of incorporation in any of the official languages duly signed and acknowledged by all of the incorporators, containing substantially the following matters ,except as otherwise prescribed by this Code or by special law: xxx xxx xxx (8) If it be a stock corporation, the amount of its authorized capital stock in lawful money of the Philippines, the number of shares into which it is divided, and in case the share are par value shares, the par value of each, the names, nationalities and residences of the original subscribers, and the amount subscribed and paid by each on his subscription ,and if some or all of the shares are without par value, such fact must be stated; x x x" The afore-quoted provisions require that an applicant must be compliant with the prescribed minimum capitalization, subscription and paid-up requirements of the Corporation Code, not only at the time of the filing of the application for incorporation, but also at the time of the issuance of the certificate of incorporation. The relevance and importance of the date of the approval by the Commission, 39 relates to the performance of its mandate in ensuring that only those who have complied with statutory/regulatory requirements are granted a franchise, the same being a privilege granted by the State. The evil sought to be avoided by the law in requiring that the prescribed percentage of the authorized capital stock be subscribed and paid-up is the violation of the trust fund doctrine which was explained by the Supreme Court in Turner vs. Lorenzo Shipping Corporation , 40 to wit: aDSIHc "The requirement of unrestricted retained earnings to cover the shares is based on the trust fund doctrine which means that the capital stock, property and other assets of a corporation are regarded as equity in trust for the payment of corporate creditors .The reason is that creditors of a corporation are preferred over the stockholders in the distribution of corporate assets. There can be no distribution of assets among the stockholders without first paying corporate creditors. Hence, any disposition of corporate funds to the prejudice of creditors is null and void. Creditors of a corporation have the right to assume that so long as there are outstanding debts and liabilities, the board of directors will not use the assets of the corporation to purchase its own stock ." (Emphasis supplied) On the basis of the foregoing disquisitions, and after a meticulous and incisive examination of the evidence on record, this Commission finds and so holds that BHI has fully complied with the requirements prescribed by the Corporation Code, and that its certificate of incorporation was not procured through fraud. To begin with, the AoI complied with the capitalization as well as the minimum subscription (25% of ACS) and paid-up (25% of the total subscription) requirements prescribed in Sections 13 and 14 (8) of the Corporation Code. This is shown in Articles SEVENTH, EIGHTH and NINTH of BHI's AoI which states that its authorized capital stock of One Hundred Million Pesos (divided into 100,000 common shares with a par value of P1,000/share) has been fully subscribed and paid for by the incorporators. Besides, under the regime of the old Corporation Code, 41 stock corporations, except certain identified corporations, were only required to have a paid-up capital of at least Five Thousand Pesos (PhP5,000.00). 42 Thus, while lending corporations, for example, are required to have a minimum paid-up capital at incorporation of PhP1,000,000.00 43 pursuant to Republic Act No. 9474, there is no such law prescribing a similar requirement on holding companies, which include BHI. In this regard, it is equally important to emphasize that unlike corporations that are required under special laws to submit a bank certificate to show that it has complied with the minimum paid-up requirement, the Commission does not require the same for other companies. Under the Revised Corporation Code, 44 in order to facilitate the ease of doing business in the Philippines, consistent with the state policies embodied in Republic Act No. 11032, 45 it provides under Section 12 thereof that stock corporations (like herein BHI) shall NOT be required to have a minimum capital stock, except as otherwise specifically provided by special laws. Further, Section 13 of the former Corporation Code which provided for the old 25%-25% rule prescribing a minimum subscribed capital stock and minimum paid up capital stock, had already been deleted for purposes of incorporation. In relation to the due execution of the AoI which is required under Section 14 of the Corporation Code, the evidence on record shows that the Individual Appellants, and Appellees Dindo A. Espeleta and Karen M. Espeleta who are the incorporators and stockholders of BHI all complied with the same. The minutes of the 2nd clarificatory conference conducted by the CRMD disclose that the Individual Appellants, and Appellees Dindo A. Espeleta and Karen M. Espeleta all admitted having personally signed the AoI .This fact is duly reflected in Assailed Order. 46 As regards the acknowledgement requirement which is also prescribed under Section 14 of the Corporation Code, this Commission similarly finds and so holds that BHI was able to comply with the same. The fact that the AoI submitted by BHI was not notarized, is not disputed; and there is nothing on record which shows that the Notary Public denied having notarized such AoI. As such, the same should enjoy the presumption of regularity, and should be considered prima facie evidence of the truth of the facts stated therein and a conclusive presumption of its existence and due execution. 47 This rendered BHI compliant with the formal requirement of the law. There is nothing in the foregoing set of factual circumstances, which is supported by substantial evidence, that will place (or has placed) the authenticity of the AoI of BHI under a cloud of doubt, because all incorporators who are contracting parties in the said document have expressly admitted having signed and executed the same. In Lanuza vs. Court of Appeals , 48 the Supreme Court emphasized that binding effect of the contents of the AoI of a corporation on its shareholders, which in this case, are Individual Appellants, and Appellees Dindo A. Espeleta and Karen M. Espeleta, to wit: " There is no gainsaying that the contents of the articles of incorporation are binding ,not only on the corporation, but also on its shareholders. In the instant case, the articles of incorporation indicate that at the time of incorporation ,the incorporators were bona fide Stockholders of seven hundred (700) founders' shares and seventy-six (76) common shares. Hence, at that time, the corporation had 776 issued and outstanding shares ." (Emphasis supplied) In fact, the records show that after its incorporation, BHI forthwith carried out its business and transacted with the public in pursuit of, and consistent with the primary purpose embodied in Article SECOND of its AoI. Relative thereto, BHI entered into and executed the following contracts: ETHIDa (a) The Memorandum of Agreement executed on 06 May 2016 (the "MOA") covering the acquisition by BHI of the MAUSONON Island for the amount of Pesos: Three Hundred Sixty Million (P360,000,000.00); (b) The Deed of Absolute Sale executed on 5 July 2016 covering the acquisition by BHI of a parcel of land covered by TCT No. 065-2011000821 for the amount of Pesos: One Hundred Twenty-Six Million Nine Hundred Eleven Thousand Seven Hundred Nineteen (P126,911,719.00);and (c) The Escrow Agreement which facilitated a compliance by BHI and the Seller of their respective obligations under the MOA. The foregoing establishes not only the legitimacy of the operations of BHI, but also its capacity and capability to conduct and operate its business, and to comply with the various obligations that it has assumed. This, to the mind of the Commission, negates the allegation that BHI was established and operated by its incorporators, which include Appellees Dindo A. Espeleta and Karen Espeleta, to defraud the State and the public. If at all, they affirm and bolster the entries in AoI relating to the financial capacity and capability of BHI. Interestingly, it does not escape the Commission's attention that appellee Dindo A. Espeleta has, in his capacity as President, represented BHI and signed acquisition documents, and entered into transactions for and on its behalf. These, We think, contradicts and belies Appellees' allegation and claim, that BHI was not adequately funded to carry out its business, and that the entries in the AoI relating to its capitalization are false and fraudulent. Had this been true, experience tells us that Appellee Dindo A. Espeleta would not have signed such documents, because he is aware that BHI cannot simply comply with its obligations. Also, the Annual Financial Statements covering the years 2017 up to 2020 which BHI submitted to the Commission (which the latter can take administrative notice of) contains an express declaration that the authorized capital stock of the corporation was fully subscribed and paid-up. This is consistent with and affirms the statements in Articles SEVENTH, EIGHTH and NINTH of BHI's AoI .More importantly, the Statement of Management's Responsibility for Financial Statements for these relevant years which were likewise filed by BHI together with the relevant AFS were signed by Appellee Dindo Espeleta (President),and Rommel Santiago (Treasurer),who both declared therein that (a) the management of BHI is responsible for the preparation and fair presentation of the financial statements, " in accordance with the prescribed financial reporting framework indicating therein ,and for such internal controls as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error ," and (b) the management is responsible for assessing BHI's ability to continue as a going concern. Again, had the entries in the AFS been false, the Commission seriously doubts that Appellee Dindo A. Espeleta would have signed such documents knowing that the statements and declarations therein are false, and would expose him to the risk of administrative and even criminal liability. Moreover, this Commission cannot give its imprimatur to the position of CRMD that the notarization of the articles of incorporation, which was made in violation of the 2004 Rules on Notarial Practice, specifically on the failure of the Notary Public to require the presence of the parties, constitutes fraud in the procurement of the certificate of incorporation, because notarization per se ,has nothing to do with the entries and declarations made in the AoI. It bears emphasis that it is the incorporators, and not the Notary Public, that prepares and provides the information required for the applicant corporation to fully comply with the statutory/regulatory requirements. In our jurisdiction, an acknowledgment has been held as an act of one who has executed a deed in going before some competent officer or court, and declaring it to be his act or deed. 49 The requirement prescribed in Section 14 of the Corporation Code that the AoI must be acknowledged, was intended to facilitate convenience and to exact accountability from the authors thereof. Considering that notarization converts a document from a private to a public one, an AoI, once notarized becomes admissible in evidence without further proof of its authenticity, and is entitled to full faith and credit. 50 Consequently, the Commission, through the CRMD, accords faith and credence to a notarized AoI that is submitted by applicants. This process spares the government from wasting time in verifying and/or authenticating the entries/information provided in the AoI, which will be required if the same is not notarized. It is in this context that the 2004 Rules on Notarial Practice imposes upon all Notaries Public the duty to strictly comply with the provisions thereof, which include, among others, the requirement to verify the identity of the persons who are seeking to have their document(s) notarized. In the case of Patenia-Kinatac-an vs. Patenia-Decena , 51 the Supreme Court emphasized that the 2004 Rules on Notarial Practice prohibits a Notary Public, under pain of administrative sanction, from notarizing a document whose signatory is not in his presence, to wit: "As explained in Miranda, Jr. v. Alvarez, Sr.25 and Gaddi v. Atty. Velasco , the 2004 Rules on Notarial Practice provides that a notary public should not notarize a document unless the signatory to the document is in the notary's presence personally at the time of the notarization, and personally known to the notary public or otherwise identified through competent evidence of identity. At the time of notarization, "the signatory shall sign or affix with a thumb or mark the notary public's notarial register." The purpose of these requirements is to enable the notary public to verify the genuineness of the signature and to ascertain that the document is the signatory's free act and deed. If the signatory is not acting of his or her own free will, a notary public is mandated to refuse to perform a notarial act." If the Notary Public nonetheless decides to notarize a document without its signatory appearing personally before him, in violation of the 2004 Rules on Notarial Practice, it is the Notary Public, and not the signatories to the documents being notarized, that are held administratively liable . The reason for this is that the 2004 Rules on Notarial Practice was issued to regulate the notarial practice in keeping with the ethical standards of the legal profession, for the promotion and protection of public interest. Thus, the Supreme Court has sustained not only the suspension/revocation of the Commission of Notaries Public, but also their suspension/disbarment for violation of the relevant provisions of the 2004 Rules on Notarial Practice. In Roabuenafe vs. Lirazan , 52 the Supreme Court explained the main reason for exacting from Notaries Public strict compliance with the 2004 Rules on Notarial Practice, to wit: cSEDTC "The act of notarization is impressed with public interest. A notary public is mandated to discharge with fidelity the duties of his office, such duties being dictated by public policy. Moreover, a lawyer commissioned as a notary public has a responsibility to faithfully observe the rules governing notarial practice, having taken a solemn oath under the Code of Professional Responsibility (Code) to obey the laws and to do no falsehood or consent to the doing of any." Interestingly, there is nothing in the 2004 Rules on Notarial Practice that provides for the legal effect on the document(s) that are notarized in violation of the 2004 Rules on Notarial Practice. This is the reason why the Commission has consistently held that notarization is merely a formal requirement, because the AoI is prepared by the incorporators who represents to the Notary Public that the same is their free and voluntary act and deed. The Notary Public has no participation in the execution of the AoI. The Supreme Court has in fact sustained the revocation of a certificate of incorporation of a corporation, whose incorporators submitted a notarized AoI, on the basis of the finding that the contents thereof were clearly false and fraudulent. 53 In such cases, it was only the incorporators and/or the corporation, and not the Notary Public, who were made liable and were penalized for submission of a notarized AoI that is found to contain false statements and/or fraudulent. In fact, it bears emphasis that the Commission has issued Memorandum Circular No. 16, series of 2020, where it already dispensed with the notarization requirement as far as the incorporation documents are concerned. To facilitate the ease of doing business in the country, the certificate of authentication (which is also not required to be notarized) signed by all incorporators in the prescribed form, now suffices. This policy has in fact definitively affirmed the principle that the notarization requirement prescribed in the Corporation Code is merely a formal requirement, which can be dispensed with, to promote ease of doing business and economic growth and development. Relative thereto and for purposes of the instant Appeal, this Commission finds it necessary to reiterate and apply its position in In re Singfil Hydro Builders Corp., 54 to wit: "Sufficient evidence establishes that Tay See Lee and Tay Hock Jin, Alvin were not or cannot be in the country on 18 August 2010 when the Articles of Incorporation was notarized because based on the Certification issued by the Bureau of Immigrations, the two arrived and departed in the Philippines on 21 August 2010. There is therefore a defect in the notarization of the Articles of Incorporation . Which leads to the question: what is the effect of a defective notarization and more particularly, how does it affect the document notarized? The case of Meneses vs. Venturozo enunciates that a defect in the notarization will strip the document of its public character and reduce it into a private instrument. In Tigno vs. Spouses Aquino ,a case involving a Deed of Sale notarized by a person who does not have the capacity to do so, the Supreme Court held that such defect will not result to the avoidance of the sale of the property involved. The Court pointed out that the requirement that certain documents be in a public instrument under Article 1358 of the New Civil Code is for convenience and not for validity or enforceability of the transaction involved .Therefore, a document with a defective notarization is reduced to a private document and the presumption of regularity in its execution is removed. However, it will not result to rendering void the transaction subject of the document notarized. The requirement of notarization is merely formal and not substantive as it does not affect the validity or enforceability of the transaction involved. Applying the said rationale to the requirement of notarization under Sections 14 and 15 of the Corporation Code leads to the conclusion that the notarization of the Articles of Incorporation is considered as a formal requirement, not a substantive one. It must be pointed out that there was in fact an acknowledgement in the present case although the same is defective due to the absence of the two Singaporeans on the date of the Articles of Incorporation's notarization but such fact alone does not warrant the revocation of the Certificate of Incorporation. Section 6 (i) (1) PD 902-A empowers the Commission to revoke certificates of incorporation fraudulently procured. A defect in the notarization of the Articles of Incorporation, in the absence of any other finding that material statements made in the document were false and misleading cannot be considered as fraudulent to warrant the revocation of Singfil's Certificate of Incorporation . xxx xxx xxx In the case of Singfil other than the non-appearance of the two Singaporeans during notarization there is no factual misstatement in the Articles of Incorporation itself. No less than the Supreme Court said, "liberal construction of the Rules may be invoked in cases where there may be some formal deficiency or error in a pleading, provided that the same does not subvert the essence of proceedings and connotes at least a reasonable attempt to comply with the Rules ." (emphasis supplied) Apropos the notarized Treasurer's Affidavit which Appellee Karen Espeleta claimed to contain a forged signature, we likewise find that there is nothing therein which will show, even remotely, that BHI failed to fully comply with the subscription and paid-up requirements prescribed under the Corporation Code. In fact, the tenor of the Treasurer's Affidavit is consistent with and affirms BHI's compliance with Section 14 of the Corporation Code. Moreover, We find that the Bank Certificate showing that BHI had only P5,000,000.00 in its BDO account did not sufficiently establish that shares subscribed by its incorporators were not fully paid, especially that the AFS and the contracts executed by BHI show otherwise, i.e. ,that BHI is adequately funded and capable of carrying out its business. SDAaTC It is worth pointing out that under the Revised Corporation Code, the submission of a Treasurer's Affidavit is no longer a general requirement for incorporation purposes. This Commission is cognizant of the unwavering and unabated commitment of the CRMD, in performing its mandate, and ensuring that only those applicants which, based on its evaluation, have fully complied with the statutory requirements are allowed to enjoy the rights and privileges of running a business through the corporate vehicle. Hence, the Commission has, in the past, sustained numerous decisions of the CRMD revoking the certificates of registration of corporations found to have procured the same through fraud. This underscores that both the CRMD, as an operating department, and the Commission En Banc are guided by the same principles and policies embedded in the provisions of the RCC, and relevant jurisprudence. Nonetheless, the decision of the En Banc is warranted by the unique set of attendant facts and circumstances that militates against or does not justify the revocation of BHI. To set aside these facts and circumstances might set a dangerous precedent, where the existence of a corporation, which is a going concern, will be at the mercy of any of its disgruntled incorporators or shareholders who can conveniently cause its demise. This is anathema to a regime that promotes widest participation of ownership in enterprises, enhances the democratization of wealth, develops the capital market and protects investors 55 which are among the core mandates of this Commission. Before We write finis to this Decision, the Commission is not unmindful of the clean hands doctrine which the courts have consistently applied to justify the denial of the relief sought by persons who went to court with unclean hands. 56 As extensively discussed earlier, considering that it is the incorporators (which included Appellees Dindo Espeleta and Karen Espeleta) who have executed the AoI, and had access to all the relevant information on the circumstances relating to the incorporation of BHI and its subsequent operations, it behooves Appellees to have questioned the alleged forgery of the signature of Karen Espeleta in the Treasurer's Affidavit, and/or to have disclosed the same, at the earliest opportune time, to the Commission. The records, however, show that Appellees, apparently aware of such purported forgery (or is presumed to be aware of the same) since it involved the signature of Karen Espeleta, have nonetheless decided not to act on the same, and Appellee Dindo Espeleta took the front seat and accepted the responsibility of managing BHI as its President, where they have benefited from its operations for a considerable period of time. This Commission cannot therefore grant Appellees the relief sought in the instant Appeal, applying the clean hands doctrine. WHEREFORE ,premises considered, the Memorandum on Appeal is hereby GRANTED .The Order dated 10 February 2022 of the CRMD is hereby REVERSED and SET ASIDE . SO ORDERED. Pasay City, Philippines, June 7, 2022. (SGD.) EMILIO B. AQUINO Chairperson (SGD.) JAVEY PAUL D. FRANCISCO Commissioner (SGD.) KELVIN LESTER K. LEE Commissioner (SGD.) KARLO S. BELLO Commissioner (SGD.) MCJILL BRYANT T. FERNANDEZ Commissioner Footnotes 1. Par. 4 of the Appeal. 2. Par. 7 of the Appeal. 3. Par. 12 of the Petition cited Part I, Rule II, Section 2-2 (a) (1) (a) of the 2016 Rules of Procedure of the Securities and Exchange Commission, which grants the CRMD the jurisdiction over petitions for revocation of certificates of incorporation on the ground of fraud in the procurement thereof. 4. Par. 7 of the Petition. 5. Par. 14 of the Petition. 6. Pars. 15 and 16 of the Petition. 7. Pars. 17, 18 and 21 of the Petition. 8. Par. 19 of the Petition. 9. Par. 29 of the Petition. 10. Pars. 30 and 31 of the Petition. 11. To determine whether the issuance of a CDO is warranted based on the allegations and evidence on record. 12. Pars. 15 and 18 of the Answer. 13. Par. 16 of the Answer. 14. Par. 33 of the Answer. 15. Par. 31 of the Answer. 16. Par. 10 of the Appeal. 17. Pars. 15 and 16 of the Appeal. 18. Pars. 20, 35, 36, and 39 of the Appeal. 19. Pars. 27, 29 of the Appeal. 20. Pars. 30, 33 and 34 of the Appeal. 21. Pars. 7 and 10 of the Comment/Opposition. 22. Pars. 28 and 29 of the Comment/Opposition. 23. Par. 32 of the Comment/Opposition. 24. Pars. 38, 39, 48 of the Comment/Opposition. 25. Repealed by Republic Act No. 11232 or the Revised Corporation Code (see Section 187). 26. Section 2 of the Corporation Code. 27. Sections 36 to 44 of the Corporation Code. 28. G.R. Nos. 194964-65, January 11, 2016. 29. " Section 10. Number and qualifications of incorporators . Any number of natural persons not less than five (5) but not more than fifteen (15),all of legal age and a majority of whom are residents of the Philippines, may form a private corporation for any lawful purpose or purposes. Each of the incorporators of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock of the corporation. Section 11. Corporate term . A corporation shall exist for a period not exceeding fifty (50) years from the date of incorporation unless sooner dissolved or unless said period is extended. The corporate term as originally stated in the articles of incorporation may be extended for periods not exceeding fifty (50) years in any single instance by an amendment of the articles of incorporation, in accordance with this Code: Provided, That no extension can be made earlier than five (5) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be determined by the Securities and Exchange Commission. Section 12. Minimum capital stock required of stock corporations . Stock corporations incorporated under this Code shall not be required to have any minimum authorized capital stock except as otherwise specifically provided for by special law, and subject to the provisions of the following section. Section 13. Amount of capital stock to be subscribed and paid for the purposes of incorporation . At least twenty-five percent (25%) of the authorized capital stock as stated in the articles of incorporation must be subscribed at the time of incorporation, and at least twenty-five (25%) per cent of the total subscription must be paid upon subscription, the balance to be payable on a date or dates fixed in the contract of subscription without need of call, or in the absence of a fixed date or dates, upon call for payment by the board of directors: Provided, however, That in no case shall the paid-up capital be less than Five Thousand (P5,000.00) pesos." 30. "Administrative agencies possess two kinds of powers, the quasi-legislative or rule-making power, and the quasi-judicial or administrative adjudicatory power. The first is the power to make rules and regulations that results in delegated legislation that is within the confines of the granting statute and the doctrine of non-delegability and separability of powers. The issuance of the assailed A.O. No. 00-05, Resolution No. 03-211 and the other issuances by the PCSD was in the exercise of the agency's quasi-legislative powers. The second is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law .The administrative body exercises its quasi-judicial power when it performs in a judicial manner an act that is essentially of an executive or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it." ( The Chairman and Executive Director, Palawan Council for Sustainable Development vs. Ejercito Lim, G.R. No. 183173, August 24, 2016) 31. G.R. No. 176579, June 28, 2011. 32. See page 12 of the Assailed Decision. 33. "Fraud can be classified as either actual or constructive. Actual or positive fraud proceeds from an intentional deception practiced by means of the misrepresentation or concealment of a material fact. Constructive fraud is construed as a fraud because of its detrimental effect upon public interest, and public or private confidence, even though the act is not done with an actual design to commit positive fraud or injury upon other persons. Since Section 6 (i) (1) of PD 902-A simply speaks of fraud without limiting its use of the term, then the section must include not only actual fraud, but constructive fraud as well. Since the provision is not concerned with a crime or a felony, criminal intent or intent to deceive is not essential. Consequently, even assuming that incorporators Evita and Solivio were in good faith does not detract from the undisputed commission of the falsity when they used fictitious names in petitioner's Articles of Incorporation." ( Care Best International, Inc. vs. Securities and Exchange Commission ,G.R. No. 215510, October 5, 2015). 34. See Section 2 of the Securities Regulation Code. 35. See Government of the Philippine Islands v. Manila Railroad Co. ,G.R. No. 30646, [January 30, 1929],52 PHIL. 699-703. 36. G.R. No. 215510, March 16, 2015. 37. See In the Matter of Maypajo J.P. Rizal Public Market Vendors Association, Inc. (SEC Admin Case No. 07-10-120). 38. See In the matter of: Zanjera de Cabarambanan, Inc. (Admin case no. 11-06-84), and Care Best International, Inc. vs. SEC (G.R. No. 215510). 39. "Corporate existence begins only from the moment a certificate of incorporation is issued." ( Seventh Day Adventist Conference Church of Southern Philippines, Inc. vs. Northeastern Mindanao Mission of Seventh Day Adventist, Inc. ,G.R. No. 150416, July 21, 2006). 40. G.R. No. 157549, May 30, 2011. 41. See Section 12 of BP Blg. 68. 42. See Section 13 of BP Blg. 68. 43. "SEC. 5. Capital . The minimum paid in capital of any lending company which may be established after the effectivity of this Act shall be One million pesos (P1,000,000.00) : Provided, however ,That lending companies established and in operation prior thereto shall comply with the minimum capitalization required under the provisions of this Section within such time as may be prescribed by the SEC which time shall, in no case, be less than three years from the date of effectivity of this Act and: Provided, further ,That the SEC may prescribe a higher minimum capitalization if warranted by circumstances." 44. See Section 12 of the RCC. 45. The Ease of Doing Business and Efficient Government Service Delivery Act of 2018. 46. See page 7 of the Assailed Order. 47. Gatan vs. Vinarao ,(G.R. No. 205912, October 18, 2017). 48. G.R. No. 131394, [March 28, 2005],494 PHIL. 51-67. 49. Tigno v. Spouses Aquino , (G.R. No. 129416, November 25, 2004). See also Rule II, Section 1 of the 2004 Rules on Notarial Practice. 50. See Roabuenafe vs. Lirazan (A.C. No. 9361, March 20, 2019). 51. G.R. No. 238325, June 15, 2020. 52. A.C. No. 9361, March 20, 2019. 53. See Care Best International, Inc. vs. SEC (G.R. No. 215510, March 16, 2015). 54. SEC AC No. 06-15-176, [January 24, 2019] 55. Section 2 of the SRC. 56. "The Bank and Tala are in pari delicto ,thus, no affirmative relief should be given to one against the other. The Bank should not be allowed to dispute the sale of its lands to Tala nor should Tala be allowed to further collect rent from the Bank. The clean hands doctrine will not allow the creation or the use of a juridical relation such as a trust to subvert, directly or indirectly, the law. Neither the Bank nor Tala came to court with clean hands; neither will obtain relief from the court as the one who seeks equity and justice must come to court with clean hands." (Ty v. Banco Filipino Savings and Mortgage Bank, G.R. No. 188302, [June 27, 2012], 689 PHIL. 603-614) . n Note from the Publisher: Also referred to as "Aquino" in some portions of the document.