In re Chip Development Corp.

April 22, 2008 SEC EN BANC CASE NO. 08-07-0151 IN THE MATTER OF CHIP DEVELOPMENT CORPORATION, (SEC REG. NO. 1000601) , petitioner. SETTING ASIDE ORDER OF REVOCATION O R D E R For consideration of the Commission en banc is the Petition dated 24 July 2007 praying that the Order of Revocation issued against the petitioner be set aside. The facts of the case, as culled from the records, are narrated below. Petitioner CHIP DEVELOPMENT CORPORATION is a stock corporation registered with the Commission on 12 July 1989. 1 Petitioner was organized to acquire and to own, hold, improve, develop, manage and operate real estate properties. 2 Its principal office is located at Sitio Paet, Barangay Batuan, La Carlota City, Negros Occidental. On 29 September 2003, petitioner's Certificate of Registration No. 1000601 was revoked by virtue of SEC Order dated 20 August 2003 for non-compliance with the Commission's reportorial requirements. The said order was published in a newspaper of general circulation on 28 August 2003. Petitioner seeks reconsideration of the Order revoking petitioner's registration stating that it failed to file its reports with the Commission because of lack of interest to file the annual reports of its stockholders due to losses incurred by petitioner. 3 Despite the incurred losses, however, petitioner intends to continue prosecuting its business since it owns real estate properties. As proof of its intent to continue its operation, petitioner submitted copies of the following: 1. 2006 Audited Financial Statements stamped received by the Bureau of Internal Revenue; 2. 2006 Annual Income Tax Return; and 3. 2007 General Information Sheet. Petitioner further alleges that it has no intention to violate the law and henceforth, commits to comply with the rules and regulations of the Commission regarding the submission of reports. As a matter of fact, petitioner already paid the penalty in the amount of ELEVEN THOUSAND PESOS (Php11,000.00) on 25 July 2007 as evidenced by Official Receipt No. 547318C. Paul Michael Perez, on the other hand, opposes the instant petition on the ground that the filing of the same is not authorized by the stockholders and is not filed by the proper party. The oppositor alleged that he and his brother were not informed of the stockholders' meeting that was held on 08 January 2007. Since not all the stockholders were informed of the meeting where the petition to set aside the revocation order was approved, the petition was not filed by the proper party. On 29 August 2007, this Commission through the Office of the General Counsel issued an Order directing the petitioner to file its reply to the opposition within a given period and the oppositor to file rejoinder, if necessary. In compliance to the Order, petitioner filed its Reply dated 15 October 2007 traversing the grounds for the opposition. For one, petitioner claims that not all the stockholders need to approve the filing of the petition but only a majority of the directors and stockholders need to do so. Second, petitioner has no personality to file the opposition and is a complete stranger to the petitioner. Oppositor Perez stated in his Rejoinder dated 15 November 2007 that he was questioning the composition of the registered owners of petitioner and of the current members of the Board of Directors considering that his (oppositor) late father was not included in the 2007 General Information Sheet as a stockholder. No proof was also shown if indeed Isidro Manuel G. Perez has disposed of his shareholdings. The issue before this Commission is whether there is a valid ground to set aside the order revoking petitioner's certificate of registration. Before going into the crux of the matter, we first resolve whether the petition complied with the formal requirements as laid down by this Commission. We confirm that the formal requisites have been complied with. Majority of the stockholders and of the directors of petitioner assented to the filing of the instant petition. This does not equate, however, to a ruling on the issue of stock ownership of the parties involved considering that the same must be ventilated in a proper forum, that is the court of general jurisdiction. Having settled the procedural aspect of the instant petition, we now go to the crux of the matter. Corporations are viewed not merely as entities established for private gain but effective partners of the National Government in spreading the benefits of capitalism for the social and economic development of the nation. 4 The harsh penalty of corporate death should not be imposed where there is no injury to the public. 5 In foreign jurisdiction, forfeiture of corporate charter is not warranted where no prejudice to anyone is shown to have resulted and the public good would not be subserved by the forfeiture. 6 Petitioner's certificate of registration with the Commission was revoked for its failure to submit the reportorial requirements. Petitioner nevertheless is continuously prosecuting its business as borne by the records. A house and lot owned by the petitioner situated at No. 24 Madrid Street, Merville Park Subdivision, Paraaque City, are being leased for the period of two years commencing from 01 April 2007 to 31 March 2009. 7 Petitioner's financial statements would likewise show that it is operating its business and in fact had contracted a sugar crop loan with the PNB-Republic Planters Bank as of 31 December 2006. 8 The said circumstances would, to our mind, suffice to justify the setting aside of the revocation order. Anent the issue concerning the shareholdings of Isidro Perez, it need not be delved into since the same falls within the ambit of "intra-corporate controversies." To consider a dispute as an intra-corporate controversy, two elements must concur, viz. : (1) the status or relationship of the parties; and (2) the nature of the question that is the subject of their controversy. The Supreme Court elucidated on these elements in these wise: "The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and the corporation, partnership or association of which they are stockholders, members or associates between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively, and between such corporation, partnership or association and the State insofar as it concerns their individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy." 9 The determination of whether oppositor is a stockholder of petitioner by virtue of his being a legal heir of Isidro Perez would necessitate the reception of evidence and must be settled in the proper forum. WHEREFORE, premises considered, the Order of the Commission dated 20 August 2003 revoking the Certificate of Registration of CHIP DEVELOPMENT CORPORATION is hereby SET ASIDE. Petitioner is, however, ordered to submit its 2008 Mayor's Permit within fifteen (15) days from receipt of this Order. Failure on the part of the petitioner to comply with this directive shall result to the instant recall of this Order. Let a copy of this Order be furnished the Company Registration and Monitoring Department and the Economic Research and Information Department of this Commission for their appropriate action. SO ORDERED. Mandaluyong City. April 22, 2008. (SGD.) FE B. BARIN Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) JESUS ENRIQUE G. MARTINEZ Commissioner (SGD.) RAUL J. PALABRICA Commissioner (SGD.) THADDEUS E. VENTURANZA Commissioner Footnotes 1. Petitioner's Certificate of Registration. 2. Petitioner's Articles of Incorporation, 2nd Article. 3. Petition, p. 1. 4. H. S. De Leon. The Corporation Code of the Philippines: Annotated 13 (2002). 5. 16A Fletcher Cyc Corp (Perm Ed) 159. 6. 16A Fletcher Cyc Corp (Perm Ed) 159 citing State v. United States Endowment & Trust Co., 140 Ala 610, 37 So 442. 7. Contract of Lease Notarized on 23 March 2007. 8. Note 2 of the Financial Statements. 9. Speed Distributing Corp., et al. v. Court of Appeals, et al., G.R. No. 149351, March 17, 2004. <http://www.supremecourt.gov.ph/jurisprudence/2004/mar2004/149351.htm>