Re: Phil-Asia Care Plans, Inc.

February 5, 2009 SEC NOTICE TO THE PUBLIC Notice is hereby given that PHIL-ASIA CARE PLANS, INC., a pre-need company, has up to the present failed to comply with all the SEC requirements for the sale of pre-need plans. Therefore, it is not authorized to sell pre-need plans to the public. ESaITA The "CERTIFICATION" issued by this Department last 14 October 2008 still stands. The approval of the company's "Increase of the Capital Stock" by the SEC last 15 December 2008 is only with respect to its compliance with the provisions of SEC Memorandum Circular No. 4, Series of 2002 on "Paid-Up Capital Requirements for Existing Pre-Need Companies." Said approval does not in any way authorize PHIL-ASIA CARE PLANS, INC. to sell pre-need plans to the public. The SEC filed criminal cases against PHIL-ASIA Care Plans, Inc./Vicente Afulugencia Sr., et al. which are now pending before the Regional Trial Court, Branch 211 of Mandaluyong City for violation of Section 16 of Securities Regulation Code, docketed as MC03-6766-6769 and before the Metropolitan Trial Court, Branch 60 also of Mandaluyong City for falsification of private document, docketed as Criminal Case No. 102020. Mandaluyong City, February 5, 2009. (SGD.) JOSE P. AQUINO Acting Director ATTACHMENT Republic of the Philippines SECURITIES AND EXCHANGE COMMISSION SEC Building, EDSA, Greenhills, Mandaluyong City Non-Traditional Securities and Instruments Department Date Name and Address of Pre-Need Corporation Attention: Name President Gentlemen : This refers to your application, filed in our Office on (Date of Application) , for the closure of your Branch Office located at (Address of branch office) . aASEcH Your company, having substantially complied with the requirements under Rule 34.2 of the New Pre-Need Rules, we hereby signify our approval on the closure of the aforementioned branch office applied for, which is to take effect on 31 December 200__. Very truly yours, Director JOSE P. AQUINO Acting Director for NTD ANNEX A REPUBLIC OF THE PHILIPPINES COURT OF APPEALS MANILA FORMER EIGHTH DIVISION [CA-G.R. SP No. 73009. September 12, 2008.] PHIL-ASIA CARE PLANS, INC., represented by the president Mr. Vicente R. Afulugencia , petitioner , vs . SECURITIES AND EXCHANGE COMMISSION (SEC), HON. CHAIRMAN LILIA R. BAUTISTA, HON. ASSOCIATE COMMISSIONERS FE ELOISA C. GLORIA, JOSELIA J. POBLADOR, JUANITA E. CUETO, JESUS ENRIQUE G. MARTINEZ, NON-TRADITIONAL SECURITIES AND INSTRUMENTS DEPARTMENT DIRECTOR EMILIO B. AQUINO and COMPLIANCE AND ENFORCEMENT DEPARTMENT (CED) DIRECTOR JOSE TOMAS C. SYQUIA , respondents . D E C I S I O N CRUZ , J p : Phil-Asia Care Plans, Inc. (or "'petitioner") is a domestic corporation engaged in the business of selling pre-need plans, particularly life and memorial plans. On December 28, 1990, the Securities and Exchange Commission (or "SEC") issued a Certificate of Permit to Offer Securities for Sale allowing petitioner to sell life plans worth P3 Million. On March 14, 1991, the SEC authorized petitioner as dealer of pre-need plans until December 31, 1991. On October 31, 1991, the SEC authorized petitioner to sell additional life plans worth P1.8 Million. Petitioner's authority to act as dealer of pre-need plans was renewed for 1992 and 1993 on April 6, 1992 and February 26, 1993, respectively. On July 26, 1993, the SEC issued to petitioner a Certificate of Permit to Offer Securities for Sale authorizing it to sell memorial plans worth P900,000.00. On February 4, 1994, the SEC issued a Certificate granting petitioner's salesmen, counselors or solicitors the authority to sell pre-need plans until December 31, 1994. On October 17, 2000, petitioner applied with the SEC for increase of its capital stock from P3 Million to P20 Million. However, the SEC allegedly failed to act on its application. On September 27, 2000, Vicente R. Afulugencia (or "Afulugencia") bought petitioner's shares of stock from its stockholders by way of a Deed of Assignment of Shares of Stock. On May 28, 2002, the SEC issued a Cease and Desist Order (or "CDO") enjoining petitioner from selling or offering for sale pre-need plans and from collecting amortizations in order to protect the interests of investors and the public in general. It was stated in the CDO that in March 2002, the SEC's Compliance and Enforcement Department (or "CED") received a complaint from planholders and petitioner's former salesmen that petitioner was selling pre-need plans and collecting payments thereon without the appropriate license or authority from the SEC; and that petitioner had no (i) pre-need plans available for sale since 1993, (ii) dealer's license since 1996, (iii) salesmen's permit and (iv) authority to operate a branch; that petitioner was advised that it may, pursuant to Sec. 643 of Rep. Act No. 8799 (Securities Regulation Code, or "SRC") file a request to lift the CDO within five (5) days from receipt thereof. aETAHD On August 19, 2002, petitioner filed an application with the SEC for increase of capital stock from P3 Million to P150 Million. On August 29, 2002, the SEC's Company Registration and Monitoring Department (or "CRMD") wrote to petitioner returning the latter's application for increase of capital stock upon instructions of the SEC en banc and motion of its CED. Upon the CED's Motion for Permanency of CDO and Closure for Violation of CDO, the SEC issued an order dated September 3, 2002 (or "assailed order"), the dispositive portion of which reads: "WHEREFORE, premises considered, movant's Motion for Permanency of CDO and Closure For Violation of CDO is GRANTED. Pursuant to the authority of the Commission, the Cease and Desist Order dated 28 May 2002 is hereby declared PERMANENT. Respondent corporation, its officers, directors, representatives, salesmen, agents and any and all persons claiming and acting for and in their behalf and under their authority are hereby PERMANENTLY ENJOINED from further engaging in activities of selling, offering for sale pre-need plans and to refrain from further collecting amortizations in order to protect the interest of investors and the public in general. The Commission further orders the immediate physical closure of all offices of respondent corporation. This is without prejudice to citing Respondent Corporation or its responsible officers in contempt and for enforcing the appropriate penalty and administrative sanctions pursuant to Sections 53.4 and 54 of the Securities Regulation Code (SRC). It appearing that Phil-Asia continue to sell pre-need plans and collecting amortizations in violation of the CDO, Phil-Asia Care Plans, Inc. is hereby ordered to SHOW CAUSE within fifteen (15) days from receipt hereof why its certificate of registration should not be revoked for violation of Section 6 (1) (3) of P.D. 902-A, as amended; and Rules 3, 15.1 and 33.1 of the New Rules on the Registration and Sale of Pre-Need Plans under Section 16 of the Securities Regulation Code. SO ORDERED." Meantime, petitioner opposed the SEC's denial of its application for increase of capital stock. Petitioner essentially argued that it was denied the right to due process when the SEC returned its application without giving it the opportunity to present its side. IcaEDC On September 18, 2002, petitioner filed a Manifestation of Offer of Settlement pursuant to Sec. 55 of the SRC. On the same date, petitioner wrote SEC Associate Commissioner Juanita E. Cueto (or "Cueto") reiterating its settlement offer and seeking reconsideration of the assailed order. On September 19, 2002, the SEC, through CED Director Jose Tomas C. Syquia (or "Syquia") advised petitioner that the SEC en banc rejected the latter's offer of settlement on the grounds that it was "formally defective and that the act of knowingly and willingly selling unlicensed pre-need plans is a serious and grave offense, and a settlement offer would not be in the best interest of the public." Aggrieved, petitioner filed a petition before this Court against the SEC, Commissioner Lilia Bautista, Associate Commissioners Fe Eloisa C. Gloria, Joselia J. Poblador, Cueto and Jesus Enrique G. Martinez, Non-Traditional Securities and Instruments Department (or "NTSID") Director Emilio B. Aquino and Syquia (or "respondents", when collectively) imputing grave abuse of discretion to them for issuing the CDO and the assailed order. Petitioner argues that said orders were issued without giving them the opportunity to be heard; and that the SEC merely relied on its CED's motion which was anchored on the unsubstantiated complaint of certain disgruntled salesmen and employees of petitioner. Petitioner also assails the SEC for (i) denying its application to increase its capital stock from P3 Million to P150 Million and (ii) rejecting its settlement offer without the benefit of a hearing. On October 4, 2002, We dismissed the petition because: (i) petitioner did not file a motion for reconsideration of the CDO; (ii) petitioner resorted to certiorari , instead of appeal; (iii) Afulugencia signed the certificate of non-forum shopping without a board resolution showing his authority to sign the same; (iv) the relief portion of the petition did not identify the orders, resolutions or letters being questioned; and (v) the annexes are not certified true copies/duplicate originals, except Annexes "I", "J" and "P". On October 10, 2002, petitioner filed a motion for reconsideration of Our resolution dated October 4, 2002. On November 13, 2002, petitioner moved for issuance of a temporary restraining order ("TRO") and/or writ of preliminary injunction. On November 14, 2002, We deferred action on petitioner's motion for reconsideration pending amendment of the petition by curing the defects noted in Our resolution of October 4, 2002. On December 27, 2002, petitioner filed an amended petition for certiorari praying that the following be vacated: (i) the CDO and the assailed order; (ii) the SEC's letter dated August 29, 2002 which returned/denied petitioner's application for increase of capital stock; and (iii) the SEC's letter dated September 19, 2002 which rejected petitioner's settlement offer. ISCDEA On March 5, 2003, We reinstated the petition and required respondents to comment on the amended petition. On May 9, 2003, We issued a resolution setting for hearing on May 28, 2003 petitioner's application for TRO and preliminary injunction. For their part, respondents, through the Office of the Solicitor General, maintain that certiorari is not the proper remedy to question the CDO, assailed order and letters dated August 29, 2002 and September 19, 2002; and that petitioner should have appealed before this Court the challenged SEC orders and letters under Rule 43 of the 1997 Rules of Civil Procedure. Respondents assert that the petition for certiorari , assuming it was the proper remedy, was belatedly filed. They point out that under Rule 65, id. , a petition for certiorari should be filed within sixty days from notice of the judgment, order or resolution; that petitioner received the CDO and the August 29, 2002 and September 19, 2002 letters on May 31, 2002 and September 5 and 19, 2002, respectively; that except for the assailed order of the SEC which made the CDO permanent, petitioner never moved for reconsideration of the assailed rulings of the SEC; and that, consequently, the sixty-day period had lapsed from the time petitioner received the assailed rulings until the filing of the amended petition (on December 27, 2002). Respondents also maintain that the SEC had sufficient basis to issue the CDO; that petitioner violated the SRC when it (i) sold life plan agreements without first securing a license from the SEC and (ii) established five branch offices in Cavite without prior approval of the SEC; that the SEC had valid grounds to make the CDO permanent considering its CED's report that despite petitioner's receipt of the CDO, the latter continued to sell pre-need plans and collected amortizations from its planholders. Moreover, respondents argue that Sec. 64 of the SRC allows the issuance of a CDO without prior hearing; and that the petition is defective because. (i) the certificate of non-forum shopping was signed by Afulugencia without a board resolution showing his authority to sign the same on behalf of petitioner and (ii) petitioner's counsel failed to state his Roll of Attorney's number pursuant to the Supreme Court's resolution dated November 12, 2002 in Bar Matter No. 1132. On July 3, 2003, petitioner's application for TRO and/or preliminary injunction was heard, during which the counsel for the parties argued their respective claims. On July 15, 2003, petitioner filed a reply to respondents' comment, to which the latter filed a rejoinder on July 31, 2003. On August 29, 2003, We issued a resolution granting petitioner's application for preliminary injunction, viz. : "WHEREFORE, the application for preliminary injunction is GRANTED. Upon petitioner's posting of a bond in the amount of P1,000,000.00 to answer for all damages which respondents may sustain by reason of the preliminary injunction if this Court should finally decide that petitioner was not entitled thereto, let a writ of preliminary injunction execution (sic) issue enjoining respondents, their agents or anybody acting in their behalf, from enforcing or implementing the orders of the Securities and Exchange Commission dated May 28, 2002 and September 3, 2002, insofar as said orders prohibit petitioner from (i) selling or offering for sale pre-need plans covered by the Certificates of Permit to Offer Securities for Sale dated December 28, 1990, October 31, 1991 and July 26, 1993, (ii) collecting amortizations and (iii) conducting those activities at its principal office located at 12 D 12th Floor Belvedere Tower, San Miguel Avenue, Ortigas Center, Pasig City. TDAcCa It is understood, however, that the re-opening of said principal office and resumption of the aforesaid business activities are conditioned on petitioner's compliance with the requirements on transfer of a corporation's principal office. SO ORDERED." On September 12, 2003, respondents filed a motion for reconsideration of Our resolution dated August 29, 2003. On September 17, 2003, petitioner manifested that its principal office in Pasig City was closed by the owner/manager of St. Catherine Holdings Corporation and, therefore, prayed that it be allowed to reopen its office at No. 1004 B and C 10th Floor, Summit One Condominium, 530 Shaw Boulevard, Mandaluyong City. On October 6, 2003, petitioner moved to cite respondents in contempt because of an article published in the Philippine Star's issue of September 27, 2003. The article, entitled "SEC renews warning vs. Phil-Asia Care", which was allegedly, published upon the "behest of the respondents", claims that petitioner tried but failed to stop the implementation of the CDO. On October 29, 2003, petitioner filed its comment on respondents' motion for reconsideration of Our resolution dated August 29, 2003. On November 12, 2003, petitioner having posted the required bond, this Court issued the writ of preliminary injunction. On January 15, 2004, respondents filed their comment on petitioner's motion to cite them in contempt, to which petitioner filed a reply. On July 13, 2004, We denied: (i) respondents' motion for reconsideration of Our resolution dated August 29, 2003; and (ii) petitioner's motion to cite respondents in contempt. On November 11, 2004, We issued a resolution directing petitioner to submit "a list of pre-need plans covered by its Certificates of Permit to Offer Securities (for) Sale dated December 28, 1990, October 31, 1991 and July 26, 1993, which it intends to sell and/or has sold since August 29, 2003 (when the resolution granting its application for preliminary injunction was issued)." By way of "compliance" with the directive, petitioner submitted on December 17, 2004, a list of pre-need plans labeled as "Plans Sold year 2002, 2003 and 2004". Commenting on the list, respondents argued, among others, that the same does not show whether the plans sold in 2002, 2003 and 2004 are covered by the abovementioned Certificates, thereby indicating that the plans sold were not covered by said Certificates and that petitioner over-issued plans as early as years 1993. TCIDSa We dismiss the petition. Stripped of non-essentials, the principal issue in this case is whether the SEC gravely abused its discretion in issuing the CDO and the assailed order without the benefit of a hearing. Sec. 64 of the SRC expressly authorizes the SEC to issue a CDO without necessity of a hearing, viz. : "Section 64. Cease and Desist Order . 64.1 The Commission, after proper investigation and verification, motu proprio, or upon verified complaint by any aggrieved party, may issue a cease and desist order without the necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause grave and irreparable injury or prejudice to the investing public. 64.2 Until the Commission issues a cease and desist order, the fact that an investigation has been initiated or that a complaint has been filed including the contents of the complaint, shall be confidential. Upon issuance of a cease and desist order, the Commission shall make public such order and a copy thereof shall be immediately furnished to each person subject to the order. 64.3 Any person against whom a cease and desist order was issued may, within five (5) days from receipt of the order, file a formal request for a lifting thereof. Said request shall be set for hearing by the Commission not later than fifteen (15) days from its filing and the resolution thereof shall be made not later than ten (10) days from the termination of the hearing. If the Commission fails to resolve the request within the time herein prescribed, the cease and desist order shall automatically be lifted" (Emphasis supplied). The records of this case show that the SEC complied with the procedure prescribed under the aforecited rule. As shown, the SEC's CED and NTSID received complaints in March 2002 regarding petitioner's act of selling pre-need plans without appropriate licenses from the SEC. While the SEC records show that petitioner had no pre-need plans available for sale since 1993, no dealer's license since 1996, no salesmen's permit and no authority to operate a branch, the complainants former salesmen, employees and planholders submitted evidence which prove that petitioner sold pre-need plans and collected amortizations from planholders beyond the year 1996. However, at the July 3, 2003 hearing on petitioner's application for TRO and preliminary injunction, its counsel prayed that the CDO be lifted to enable it (i) to service existing planholders; (ii) to sell or offer for sale pre-need plans covered by the Certificates of Permit to Offer for Securities for Sale dated December 28, 1990 (life plans worth P3,000,000.00), October 31, 1991 (life plans worth P1,800,000.00) and July 26, 1993 (memorial plans worth P900,000.00) allegedly because these pre-need plans had not yet been exhausted. Petitioner's counsel then committed to submit to this Court a list of those pre-need plans to determine if they were indeed covered by such earlier permits, thus: aDSIHc "JUSTICE CRUZ: All right. It seems that there is not (sic) question that I mean the parties had an agreement that the petitioner may sell pre-need plans provided that those plans are still within the coverage of the earlier permit. So now, the question now is, can petitioner submit to this Court those pre-need plans which you intend to sell and which you claim to be still covered by the earlier permit so that the respondent may, in turn, comment and find out if those are really covered by the permit. ATTY. GUNIGUNDO: Together with our Reply, your Honor, in amplification of the oral argument, we will submit the corresponding documentation. xxx xxx xxx JUSTICE CRUZ: So, this Reply you would submit would also contain the list of pre-need plans your client intend, to sell? ATTY. GUNIGUNDO: Yes, your Honor, in accordance with our undertaking in open Court", (T.s.n., July 3, 2003, pp. 45-46, 55) Although petitioner submitted a list of plans it sold in the years 2002, 2003 and 2004, the same does not indicate whether those plans are covered by the Certificates of Permit to Offer Securities for Sale dated December 28, 1990, October 31, 1991 and July 26, 1993. Such omission gives rise to the inescapable conclusion that the plans sold are not covered by the aforesaid Certificates and that as of 1993, petitioner has already overissued plans beyond those covered by said Certificates. It is noteworthy that in a memorandum dated March 4, 2005, the SEC's NTSID updated the director of the CED on the status of petitioner, as follows: "This has reference to your memorandum dated February 21, 2005 updating us on the status of the subject-company. We noted that on paragraph 5 of said memo the Court of Appeals (CA) required PACPI to submit a list of pre-need plans covered by is (sic) Certificate of Permit to Offer Securities for Sale dated December 28, 1990, October 31, 1991 and July 26, 1993 , which it intends to sell and/or sold since August 29, 2003. In compliance to the requirements, PACPI submitted a list of total plans sold per plan type for the year 2002, 2003 and 2004 for aggregate of P26.62 million. Please be informed, however that a memo of then brokers and Exchange Department (BED) dated May 2, 1995 (see attached) discloses that as of December 31, 1993, PACPI already has an overissuance of plans worth P61,000.00. On the same memo, it was reflected that the company was requesting the Commission for exemption from the required paid-up capital to facilitate their application for additional securities. Existing SEC records, however, do not show any approval of such request. Hence, we believe that the submitted schedule of actual sales made by PACPI is not responsive to the requirement of the Court. It is also to be noted that per our records, the company has registered and licensed to sell memorial plan securities in the amount of P3 million only. It appears that the submitted sales records of PACPI from year 2002-2004 is way above the amount of securities that the previous owner of PACPI, Mr. Ruben Canlas, was authorized to sell. cSTCDA For your information and further action." Attached to the memorandum dated March 4, 2005 is a copy of a memorandum dated May 2, 1995 for the SEC, submitted by Specialist Bellaflor A. Togonon, which shows that as of December 31, 1993, petitioner had an overissuance of plans worth of P61,000.00. Curiously, petitioner has not denied the truthfulness of the contents of the aforementioned memoranda. By engaging in the abovementioned activities without securing the requisite licenses from SEC, petitioner violated Secs. 16 (registration of pre-need plans) and 26 (fraudulent transactions) of the SRC and Rules 15 (registration of dealers, agents and salesmen) and 33 (operating a branch) of the Rules on the Registration and Sale of Pre-Need Plans. Thus, the SEC properly issued the CDO against petitioner pursuant to Sec. 64.1 of the SRC. Parenthetically, the CDO was personally served on petitioner thru a certain Jean C. Garcia (or "Garcia"). Under Sec. 64.3 of the SRC, petitioner had a period of five days from receipt of the CDO within which to file a formal request for the lifting thereof. However, no such request was filed by petitioner allegedly because it did not receive a copy of the CDO. It argued that "respondent failed to identify who Jean C. Garcia is and her relationship to or position with, the petitioner"; and that it became aware of the CDO only through newspaper reports and after it sent a representative to the SEC to get a copy thereof. Petitioner's contention is untenable. Even assuming that Garcia is not connected with it, petitioner should have promptly moved for the lifting of the CDO after it became aware of its issuance. But petitioner made no such request. On the other hand, the CED discovered that petitioner continued to sell unregistered pre-need plans and collected amortizations from planholders. This flagrant violation of the CDO justified the issuance the assailed order which made the CDO permanent pursuant to SEC Circular No. 4, Series of 2001 (553-571). Petitioner also questions the SEC's denial of its application for increase of capital stock and rejection of its settlement offer. However, We find no cogent reason to re-examine the findings of facts of the SEC as they are well supported by the evidence on record. This is in accord with the settled rule that factual findings of quasi-judicial agencies like the SEC, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect but at times even finality if such findings are supported by substantial evidence ( Pilipinas Loan Company, Inc. vs. SEC, 356 SCRA 193). Having established that the petition has no substantive merit, it is no longer necessary to delve into the other issues raised by respondents. WHEREFORE, for lack of merit, the instant petition is DISMISSED. Accordingly, the writ of preliminary injunction heretofore issued is hereby DISSOLVED. aTCAcI SO ORDERED. (SGD.) CONRADO M. VASQUEZ, JR. Presiding Justice (SGD.) NOEL G. TIJAM Associate Justice ANNEX B REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE SECURITIES AND EXCHANGE COMMISSION SEC Building, EDSA, Greenhills City of Mandaluyong, Metro Manila NON-TRADITIONAL SECURITIES AND INSTRUMENTS DEPARTMENT CERTIFICATION This is to certify that PHIL-ASIA CARE PLANS, INC., a registered pre-need company failed to comply with all the SEC requirements up to present and therefore is not authorized to sell pre-need plans. The company: 1. Has already sold all its registered securities available for sale in 1993. Hence, it has no more pre-need plans available for sale to the public up to present; 2. Has not been issued a License to Operate as a Dealer of Pre-Need Plans since 1996 to present; 3. Has no salesmen's permit since 1995 to present; and 4. Has no authority to operate branch/es anywhere in the Philippines since 1996 to present. Corollary to its failure to secure said permits and/or licenses and to register additional securities for sale, PHIL-ASIA CARE PLANS, INC. and its agents are not authorized to engage in the solicitation, sale and/or offer for sale of pre-need plans to the public. This certification is issued upon the request of the Compliance and Enforcement Department for whatever legal purpose it may serve. DIHETS 14 October 2008 at Mandaluyong City, Philippines. (SGD.) JOSE P. AQUINO Director