In the Matter of Community Associates Habitat Foundation (CAHAFI), Inc.

June 11, 2015 SEC-OGC CASE NO. 12-11-140 IN THE MATTER OF COMMUNITY ASSOCIATES HABITAT FOUNDATION (CAHAFI), INC. ENFORCEMENT AND PROSECUTION DEPARTMENT , petitioner . FOR : Revocation of Certificate of Incorporation DECISION This resolves the Petition for Revocation of the Certificate of Registration (Petition) of Community Associates Habitat Foundation, Inc. (CAHAFI), dated December 5, 2011, filed by the then Enforcement and Prosecution Department (EPD), now Enforcement and Investor Protection Department, of the Commission on December 7, 2011 based on serious misrepresentation as to what the corporation can do as provided under Section 6, par. (l), sub-paragraph (2) of Presidential Decree 902-A, 1 as amended. The relevant facts, as alleged by the EPD in its Petition , are as follows: CAHAFI is a non-stock non-profit foundation duly registered with the Commission on June 4, 2003 with Company Registration No. CN200312692. 2 As indicated in its Articles of Incorporation, the primary purposes of the corporation are, among others, as follows: " To organize or tap already landless Urban Poor and Labor Unions/Associations to include low income earner Government employees such as Teacher, member of the AFP and PNP and employees of Municipal Government unit, to acquire their own house and lot at a very affordable monthly amortization . To assist families who are already living on an area for a number of years but still their security of land tenure is uncertain due to lack of knowledge to deal with their problem concerning the land acquisition and development, or maybe a simple example of " Bahala na " attitude. To create a research and documentation committee/group to scout for an unutilized parcel of lands and negotiate with its owners to reach an agreement for a possible land acquisition , it may through the Community Mortgage Program (CMP) of the National Home Mortgage and Finance Corp (NHMFC) or through an affordable short term direct financing scheme . xxx xxx xxx To do and perform all other acts and deed as may be necessary convenient and appropriate for the accomplishment of the foregoing purposes." On July 15, 2010, Mr. Ricardo H. Canlas filed before the EPD a Sworn "Salaysay", dated July 15, 2010. In his Salaysay, Mr. Canlas avers that he was employed by the Respondent as a Liason and Documentation Officer from April 1, 2005 until July 2, 2010. He asserts that CAHAFI is not a foundation but a family corporation which sells real estate properties to its supposed members. Moreover, he alleges that the foundation has no permit from local and national government agencies . Finally, Mr. Canlas describes the business transactions of CAHAFI as follows: Rosario Teatro, a representative of CAHAFI, approaches landowners and convinces them to sell to CAHAFI their property. As soon as landowners agree to the terms of the purchase, the property will be offered by CAHAFI for "pre-selling" to interested buyers. CAHAFI will then look for an organizer who will in turn convince buyers to be members of the "Foundation". CAHAFI collects certain membership fees in addition to the contract price for the purchase of subdivided lots. No development, however, was made on the project area, and no title was issued to the buyers/members. To confirm the facts stated in the affidavit of Mr. Canlas, the EPD issued Summons directing him to appear before it on September 2, 2010. At the hearing, Mr. Canlas affirmed what he has declared in his sworn statement. Thereafter, he submitted several pieces of documentary evidence, 3 together with Affidavits 4 of CAHAFI's members or buyers, to corroborate and prove his claims. Acting on Mr. Canlas' complaint, the EPD conducted an investigation on the business transactions of the CAHAFI. It went to the Office of the Social Housing Finance Corporation 5 (SHFC) on October 4, 2010 to investigate and verify whether the CAHAFI is accredited to engage in Community Mortgage Program (CMP). In response to Petitioner's inquiry, the SHFC issued a Certification 6 declaring that CAHAFI has no pending application for accreditation as an Originator or Community Coordinator under the CMP. DHITCc The EPD also secured from the HLURB Region V Office 7 a Certification 8 stating that, although CAHAFI has applied for Certificate of Registration (CR) and License to Sell (LS) for its projects, 9 HLURB has not issued a CR and/or LS. According to EPD's Field Investigation Report, 10 Mr. Leonid Gaitera 11 declared that it appears from CAHAFI's applications that it was acting as a Developer and not as an Originator or a Community Coordinator in a CMP. Likewise, HLURB, in its letter 12 to CAHAFI, required it to submit several documents, otherwise, CAHAFI's application for CR/LS will be included in an inactive file. On October 29, 2010, the EPD conducted an ocular inspection of Santol 1 and 2, two of the existing projects of CAHAFI in Tanza Cavite. The EPD's investigators interviewed Ms. Tolentino 13 and Mr. Numeriano Veleraina. 14 They declared that they have fully paid the purchase price of the lots they bought from CAHAFI as evidenced by a Certification of Full Payment. They further stated that although CAHAFI allowed them to construct their houses by virtue of such certificate, CAHAFI failed to undertake developments of the necessary roads, electrical and water facility at Santol 1 and 2. On November 5, 2010, the EPD gave CAHAFI an opportunity to be heard and to explain its side by serving Subpoenas Duces Tecum and Ad Testificandum to its officers namely, (a) Marlon Miran; (b) Janett D. Miran; (c) Lilibeth Dardo; (d) Rochelle H. Morales; and (e) Facundo G. Dardo, Jr. However, its officers failed to appear before the Petitioner despite the Subpoenas . Thus, another set of Subpoenas were served upon them. Again, despite proper receipt of thereof, none of the CAHAFI's officers and trustees appeared. The EPD, on the basis of the evidence on record and its own investigation, resolved that CAHAFI, as a foundation, cannot engage in activities or operate business for profit, hence, its operation is beyond the purpose for which it was incorporated. The EPD likewise found that CAHAFI misrepresented to the public that its program and activities are being undertaken as a CMP pursuant to Republic Act No. 7279 (RA 7279), otherwise known as the Urban Development Housing Act of 1992. Thus, the EPD filed the instant Petition praying that the Commission revoke the Certificate of Incorporation of CAHAFI. In the meantime, the EPD prays that a Cease and Desist Order be issued against CAHAFI, its trustees, officers, members, salesmen, agents, representatives and any and all persons claiming and acting for and in its behalf, and directing them to immediately cease and desist from offering and selling lots to its members and the public. Acting on the Petition , the Commission issued Summons, dated July 16, 2013, directing CAHAFI and its Officers to enter their appearances and file their Answer to the Petition within fifteen (15) days from receipt thereof. On July 19, 2013, the Commission's designated process server tried to serve summons on CAHAFI. However, according to the sister-in-law of its President, Ms. Joan Dardo, CAHAFI no longer holds office at its principal office, while all its officers cannot be located. Thus, on April 6, 2015, a copy of the Alias Summons was served on the Respondent's Corporate Secretary, through Myra M. Tapia. Issue Whether or not the Certificate of Registration of CAHAFI should be revoked, on the basis of Section 6, paragraph (l), sub-paragraph (2) of PD 902-A 15 and the evidence on record. Ruling Despite the substituted service of Summons directing CAHAFI to file its Answer to the Petition , it has yet to file the same. Thus, pursuant to Section 3-12 16 of the 2006 Rules of Procedure of the Commission, it is considered as in default. As a consequence, the Commission shall render judgment on the basis of the Petition and the evidence on record. We now resolve the case on the merits. CAHAFI is not acting as an Originator or a Community Coordinator under the CMP. CAHAFI represents to the public, particularly to its alleged members and/or buyers in their Kasunduan , 17 that it has an obligation to undertake housing projects for them through the CMP under RA 7279. Under Article VIII of RA 7279, 18 the CMP is one of the programs which assist legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership. The primary objective of the CMP is to assist residents of blighted or depressed areas to own the lots they occupy or where they choose to relocate to and eventually improve their neighborhood and homes to the extent of their affordability. 19 Section 33 of RA No. 7279 provides that "associations organized pursuant to this Act may collectively acquire and own lands covered by this Program." In Edna Eugenio vs. Sta. Monica Riverside Homeowners' Association , 20 the Supreme Court held that: "CMP, as a mode of land acquisition was introduced by Republic Act No. 7279, 'An Act to Provide for a Comprehensive and Continuing Urban Development and Housing Program, Establish the Mechanism and for its Implementation and other purposes.' Section 33 of the Act specifies that 'beneficiaries of the Program shall be responsible for their organization into associations to manage their subdivisions or places of residence, to secure housing loans under existing Community Mortgage Program and such other projects beneficial to them .' The mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC) assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership. Under the CMP, the landowner executes a contract to sell the property in favor of the community association. In turn, the community association executes an agreement with the SHFC for the collection and remittance of shares in monthly amortization from its member-borrowers, and is under obligation to keep tab of paid and unpaid amortization of its member-borrowers . In the event a member-borrower defaults, the community association has the responsibility to find a qualified substitute who shall assume the obligations of the member-borrower in default." 21 The CMP is a financing scheme granted by the government through SHFC that assists and enables informal settlers, slum dwellers or residents of blighted areas, in purchasing, through their duly registered Community Associations (CA), the land they occupy or the land where they will be relocated. The loan is secured by a first mortgage on the undivided tract of land initially under the community ownership of the beneficiaries. Later on, the property is subdivided with individual mortgages per beneficiaries. cEaSHC A Community Coordinator (CC) is tasked to assist informal settlers in organizing themselves into a CA. The CC may either be a Local Government Unit, a National Government Agency, Bureau or Corporation, or a Non-Government Organization (NGO) or a Cooperative duly registered with the SEC/CDA. 22 The SHFC requires that the CC and CA, be duly accredited with it in order for such organization to be able to participate in the CMP. To be accredited, CC and CA 23 must submit an application letter and other documents 24 to SHFC before they are granted accreditation. From the foregoing, the following are the elements of CMP, as a mode of land acquisition, to wit: 1. The beneficiaries of the CMP are informal settlers, slum dwellers or residents of blighted areas; 2. These informal settlers must organize themselves as a CA, on their own or with the assistance of a CC; 3. The CC and CA must secure accreditations from the SHFC; 4. Upon organization and accreditation, the CA, with the assistance of the CC, negotiates with the land owners for the purchase of the land they occupy or the land where they will be relocated; 5. The landowner executes a Contract to Sell (CTS) for the undivided track of land in favor of the CA; 6. The CA, as represented by a CC, must submit to the SHFC the CTS, for the latter to approve the CMP loan. 7. The CA executes a loan agreement with the SHFC for the purchase of the land under community ownership; 8. The loan agreement is secured by a first mortgage on the undivided tract of land; 9. During the term of the loan, the CA is under obligation to collect the monthly amortization of its members and remit the said amortization to SHFC; 10. In the event a member-borrower defaults, the community association has the responsibility to find a qualified substitute who shall assume the obligations of the member-borrower in default. In the case at bar, CAHAFI's business operation is not in accordance with the above-stated elements and Sections 31 and 33 of RA 7279. CAHAFI scouts for private lands in the rural areas of Cavite Batangas, and other far flung areas such as Cagayan de Oro, Tacloban and Bukidnon. Then, it enters into Memorandum of Agreements (MOAs) with private landowners for the purchase of their agricultural lands on installments. Under the MOA pertaining to the Santol properties, CAHAFI pays for the down payment directly to the landowner and undertakes to convert the agricultural land into a residential land for distribution to its members. Subsequent to the purchase of agricultural land, CAHAFI recruits the alleged members of the foundation who are interested in buying the subdivided lots at an alleged low price. Upon the alleged member's acceptance of the terms and conditions of the purchase of the land, a "Kasunduan" is executed between CAHAFI, as seller, and buyers, providing for the mode of payment which may be in cash or through monthly installments. When buyers fully pay the agreed purchase prices of the subdivided lots, CAHAFI issues Certificates of Completion of Payment in their favor. Stated otherwise, there is no community association that is first formed in order that it may negotiate and eventually acquire a lot for its members. Based on records, CAHAFI is not an association of and organized by informal settlers, slum dwellers or resident of blighted areas. Thus, CAHAFI's recruited buyers did not acquire the Santol properties under community ownership. It is only when a person buys a portion of the lot that he becomes a member of CAHAFI or any neighborhood association. Neither did CAHAFI nor its alleged buyers secured a first mortgage on the undivided tract of land for the benefit of the latter. Instead, CAHAFI indiscriminately acquires properties located in different provinces for the purpose of developing them into residential subdivisions. Then, CAHAFI subdivided the Santol properties into smaller lots for resale to the general public. During said operation, CAHAFI did not file an application for either CC or CA accreditation under the CMP. This fact is clear from SHFC's Certification, 25 dated October 5, 2010, declaring that CAHAFI has no pending application for accreditation under the CMP. The foregoing considered, CAHAFI is not a CA or CC accredited by the SHFC to participate in the CMP. Rather, CAHAFI is acting as a developer of residential lots for resale to the general public pursuant to Section 2 (d) and (e) of Presidential Decree 957. 26 "d) Subdivision project. "Subdivision project" shall mean a tract or a parcel of land registered under Act No. 496 which is partitioned primarily for residential purposes into individual lots with or without improvements thereon, and offered to the public for sale, in cash or in installment terms. It shall include all residential, commercial, industrial and recreational areas as well as open spaces and other community and public areas in the project. e) Subdivision lot. "Subdivision lot" shall mean any of the lots, whether residential, commercial, industrial, or recreational, in a subdivision project." CAHAFI is not acting as a foundation but is engaged in a real estate business for profit. A foundation 27 is defined as "a non-stock, non-profit corporation established for the purpose of extending grants or endowments to support its goals or raising funds to accomplish charitable , religious, educational, athletic, cultural, literary, scientific, social welfare or other similar objectives ." In the instant case, CAHAFI was registered with the Commission as a foundation. It was purportedly organized for noble and philanthropic purposes such as, among others: (1) to organize or tap already landless Urban Poor and assist them in acquiring their own house and lot at a very affordable monthly amortization, (2) to assist families who are already living in a property that they do not own and help them deal with their problem concerning the land acquisition, and (3) to create a research and documentation committee/group to scout for an unutilized parcel of lands and negotiate with its owners to reach an agreement for a possible land acquisition, which may be through the CMP. CTIEac Pursuant to its primary purpose, CAHAFI represented to the Commission, through the Sworn Statement of Funds 28 of its President and Treasurer, dated August 12, 2007, 29 that its sources of funds are limited to membership dues and donations and it has an on-ongoing lot distribution project in Santol, Tanza Cavite, to wit: "2. That the source of Funds of the Foundation during the Fiscal Year 2006 are from the following: a. Membership dues from members PhP407,000.00 b. Donation & Contribution from donor 36,650.00 c. Training & Consulting from donors 406,147.00 d. Vehicle Sale Proceeds 95,000.00 3. That the following are the activities of the Foundation in the preceding year: a. Planned Sponsorship of medical mission and livelihood seminars. b. Accomplished . . . c. On-Going Project Lot distribution Project to Members-beneficiaries of the foundation located at Barangay Santol Tanza Cavite." However, the evidence presented by EPD clearly show that CAHAFI's actual business transactions, i.e. , real estate development, contradict the nature of a foundation and/or non-stock non-profit corporation and the purposes for which it is organized. 30 CAHAFI does not distribute lots to its members-beneficiaries in Barangay Santol, Tanza Cavite. To the contrary, the following pieces of evidence show that CAHAFI sells residential house and lots, as a real estate developer, to the public for profit, to wit: 1. The Memorandum of Agreement 31 (MOA) and Deed of Conditional Sale (DCS), 32 demonstrate that CAHAFI bought a property, 33 from Numeriana Herrera Iruguin Hines. 34 Thereafter, CAHAFI subdivided the said property and sold 35 the subdivided lots to its alleged members. 2. Paragraph 2 of the Kasunduans 36 stipulate that CAHAFI distributes the subdivided property to its alleged members under the "Direct-Buy Scheme." The alleged members are required to pay land commitment, membership and survey fees 37 in addition to the contract price of around PhP900 to PhP1,668 per square meters. These fees and revenues reveal that CAHAFI earns a gross profit of PhP600 to Php1,418 per square meters. 4. The Affidavits 38 of CAHAFI's members consistently aver that although the above-mentioned MOA provides CAHAFI will distribute the lots in accordance with the CMP, they did not acquire their parcels of land through the CMP of the NHMFC considering that they directly and exclusively transacted with and remitted all their payments and other fees to CAHAFI. CAHAFI is not licensed by the HLURB to sell lots as a developer. Records show that CAHAFI applied for CR/LS with the HLURB for its residential development projects. However, the HLURB certified that it has not issued a CR and/or LS. Thus, CAHAFI has been selling subdivided lots and even houses to the general public without the required CR/LS. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public. From the foregoing evidence, it is indubitable that CAHAFI misrepresented itself to the public, particularly to its alleged members and/or buyers, that is validly engaged in CMP and that it has an authority to undertake housing projects for them within the ambit of RA 7279. Further, it misrepresented itself as a foundation when its actual business operations clearly show that it is engaged in the real estate development business. Worse, SHFC and the HLURB have certified that CAHAFI is neither licensed as a Community Coordinator or Originator nor as a developer. These constitute serious misrepresentation as to what the corporation can do or doing to the great prejudice to the general public. As such, CAHAFI's operations are contrary to its primary purpose as stated in its Articles of Incorporation. It is also worth mentioning that CAHAFI failed to improve its buyers' neighborhood at its Tanza Cavite project, despite its representation that it will provide electric and water distribution infrastructure and will develop the property pursuant to the provisions set forth in the aforementioned DOA and Kasunduan . WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Certificate of Incorporation of COMMUNITY ASSOCIATES HABITAT FOUNDATION (CAHAFI), INC. is hereby REVOKED, for violating Section 6 (l) sub-paragraph 2 of Presidential Decree No. 902-A. Let the Company Registration and Monitoring Department be furnished a copy of this Decision for its appropriate action. SO ORDERED. Mandaluyong City, June 11, 2015. (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ANTONIETA F. IBE Commissioner (SGD.) EPHYRO LUIS B. AMATONG Commissioner (SGD.) BLAS JAMES G. VITERBO Commissioner Footnotes 1. "SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx l) 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: xxx xxx xxx 2) Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public;" 2. Records, p. 272. 3. Petition, Annexes "G" to "N", "R" to "V", and "II" to "NNN", Records, 198-205, 181-192, 157-98, respectively. 4. Ibid , Annexes "OOO" to "CCCC", Records, pp. 3-97. 5. A subsidiary of the National Home Mortgage Finance Corporation. 6. Dated October 5, 2010, Annex "Q" of the Petition, Records, p. 193. 7. Southern Tagalog Region. 8. Dated October 28, 2013, Annex "W" of the Petition, Records, p. 181, Note 2, supra . Petition. 9. CAHAFI HOMES located in Indang and Santol, Tanza Cavite, and Balayan Batangas. 10. Petition, Annex "X" Summary Report of Field Investigation, Records, p. 179. 11. Records Officer of HLURB, Region IV Office, Records, p. 180. 12. Dated June 16, 2006, Annex "NNN", Records, p. 98. 13. President of the Homeowners' Association of CAHAFI, Records, p. 266. 14. House owner in Santol 1 Project, Note 12, supra . 15. Note 1, supra . 16. SEC. 3-12. Effect of Failure to Answer. If the respondent fails to answer the complaint within the above stated period, he shall be considered as in default . The hearing Panel or Officer shall, motu proprio , proceed to render judgment granting the complainant such relief as the complaint may warrant, unless the Hearing Panel or Officer determines that the complainant should be required to submit ex parte additional evidence. 17. As an attachment to Annexes "D", "NN", "PPP", "QQQ", "ZZZ", "BBBB", and "CCCC". 18. Otherwise known as the "Urban Development and Housing Act of 1992". 19. Section 31, Note 17, supra . 20. G.R. No. 187751, November 22, 2010. 21. Underlines ours. 22. SHFC's Fast Fact on Community Mortgage Program, Annex "EEEE". 23. "I. COMMUNITY COORDINATORS' (CC) ACCREDITATION, Records, p. 1. A. Application letter for CC Accreditation (CMP-001) B. CC Information Sheet (CMP-002) 1. For Private CCs a. SEC/CDA Registration and Articles of Incorporation/Code of By-laws b. Bio-data of officers indicating past and present positions held in relation to their involvement in community-based economic/social development projects. (Please include references) c. Board Resolution or Secretary's Certificate (Re: community coordinating activities on the project) d. Track record in CMP and/or social housing development projects, i.e. , summary of CMP and/or social housing development projects undertaken xxx xxx xxx II. COMMUNITY ASSOCIATION (CA)/COOPERATIVE A. CMP Loan Application B. HLURB registration with Articles of Incorporation/Code of By-Laws (HLURB certified true copy) C. Secretary's Certificate on list of current officers and members of the Board of Directors D. CA's Board Resolution: 1. To purchase property (description and owner/s) 2. To obtain loan from SHFC-CMP to finance the acquisition of property 3. To mortgage the property as security for the loan to be obtained E. Masterlist of Beneficiaries with Loan Apportionment (MBLA) F. MOA between the CA and CC G. Background or profile of each beneficiary to support their eligibility for CMP loan, i.e. : 1. Name, date/place of birth, civil status, education, children, etc. 2. Source of livelihood, average income, place of work, etc. 3. Place of origin before the present address and length of stay 4. Membership with Pag-IBIG, SSS and GSIS H. Lease Purchase Agreement (LPA) (in new format) I. Savings account for at least one (1) year and has a maintaining balance equivalent to six (6) months loan amortizations J. Proof of pre-payment of MRI/Documentary Stamp tax" 24. Annex "EEEE", Checklist of Requirements for Community Mortgage Program. 25. Records, p. 193, Annex "Q", Petition. 26. "Regulating the Sale of Subdivision Lots and Condominiums, providing Penalties for violation thereof", as amended by PD No. 1216. 27. Section 1 of SEC Memorandum Circular No. 8, Series of 2006 (SEC MC No. 8), Revised Guidelines of Foundations. 28. Dated August 12, 2007. 29. Filed with the Commission on September 11, 2007. 30. Note 15, supra . 31. Dated October 7, 2003, Annex "II", Records, p. 157. 32. Dated 1 March 2004, Annex "MM", Records, p. 148. 33. 35,000 square meter property located in Barangay Santol, Municipality of Tanza, Cavite bought at Php8,750,000.00 or Php250/sq.m. , Records, p. 147. 34. Represented by Silvina H. Bautista. 35. Annexes "NN" to "KKK", Records, pp. 101-144. 36. As an attachment to Annexes "NN", "PPP", "QQQ", "ZZZ", "BBBB", and "CCCC". 37. Paragraph 4, thereof. 38. Annexes "OOO" to "CCCC", Records, pp. 3 to 97.