In The Matter of The Revocation of The Certificate of Registration of Seacraft International Corp.

[SEC-SICD * CASE NO. 3610. August 20, 1990.] IN THE MATTER OF THE REVOCATION OF THE CERTIFICATE OF REGISTRATION OF SEACRAFT INTERNATIONAL CORPORATION, PROSECUTION AND ENFORCEMENT DEPARTMENT, SECURITIES AND EXCHANGE COMMISSION , petitioner . D E C I S I O N This case involves a petition for Revocation of the Certificate of Registration of Seacraft International Corporation. The Prosecution and Enforcement Department, under Sec. 6, Presidential Decree No. 902-A, as amended, having, subject to the control and supervision of the Commission, the exclusive authority to file and prosecute in accordance with law, rules and regulations issued by the Commission, and in appropriate instances, the corresponding civil case before the Commission or the proper court or body upon a prima facie finding of violation of any laws, rules or regulations, administered and enforced by the Commission and to perform such other functions and powers as may be provided by law or duly delegated to it by the Commission, has commenced the filing of the above-cited petition alleging, inter alia: that SEACRAFT INTERNATIONAL CORPORATION (Seacraft, for brevity) is a stock corporation registered with the Commission on March 4, 1986; that after incorporation, it was unravelled that a certain Mr. Leonard La Pierre, a Canadian national, appears to be the person directing the business operations of Seacraft, although records on file with the Commission show that he is neither a stockholder nor an incorporator thereof; that said Leonard La Pierre, even before the incorporation of Seacraft, has, on several occasions, represented himself as President and in some transactions had signed as such for the corporation; that Melanie C. Tijam and Alfredo C. Lim, who among themselves own majority of the subscribed capital stock of Seacraft, are allegedly mere dummies of La Pierre; that Cesar Caramay, Operations Manager of Seacraft, takes direct orders from La Pierre which tend to show that the latter has absolute control of Seacraft's business affairs and that the former is a mere dummy of La Pierre; that the fraudulent act of the corporation committed through its incorporators/directors in securing its certificate of registration constitute violation of Sec. 6(i) of P.D. 902-A, as amended, by making it appear that all incorporators are Filipinos while in truth and in fact the payment of their subscriptions were actually paid and financed by La Pierre, a foreigner, who thus acquired the unlimited right to manage Seacraft's operations. Summons were served upon the corporation thru its incorporating directors/stockholders, but despite proper service of summons respondent failed to answer, neither did it participate in the subsequent proceedings. Before a declaration of default of respondent could be made, however, a Motion for Intervention was filed by one John M. Cooney, alleging that having acquired properties of Seacraft, he has every right and interest in the matter. The Commission, in its Order of February 12, 1990, found his motion to be without merit for the instant petition is for revocation and/or cancellation of Certificate of Registration of Seacraft International Corporation on the allegation that fraudulent acts were committed by the incorporators/directors in securing the Certificate of Registration. Intervenor's motion is anchored on the fact that he acquired properties of Seacraft by means of decisions of the appropriate court and legitimate contracts entered into by him and Seacraft. His claim have nothing to do with the issue at bar. Only the incorporators, directors or officers of Seacraft can be a party to the issue of being a dummy in this case, and not an outsider, like intervenor Cooney, who is neither a stockholder nor a director nor officer of the said corporation. While intervenor Cooney may have an interest in the assets or property of the corporation by virtue of a judgment from appropriate courts rendered in his favor or legitimate contracts entered by the corporation in his favor, his interest, however, may have to wait and should be submitted to the Receiver that may be appointed by the Commission in the event final judgment will be rendered revoking and/or cancelling the Certificate of Registration of Seacraft International Corporation, thereby dissolving said corporation. Intervenor Cooney filed a Motion for Reconsideration of the Order dated February 12, 1990 but the same was not acted upon because the said motion was considered a "mere scrap of paper" as it does not contain a notice of hearing. (Santos vs . Phil. Reconstructions Corp. 40 O.G. 183) Besides, the said motion was filed beyond the reglementary period to file the same as provided for under Section 7, Rule X of the Revised Rules of Procedure in the SEC . In view of the fact that when service on the corporation through its officers were made and none of them attempted to answer, the Motion to Declare Seacraft International Corporation (and the Other Respondents) in Default and to Allow Petitioner to Present Evidence was granted, and the case was set for hearing for the reception of evidence for the petitioner ex-parte to prove the allegations of the petition. The primordial question that confronts us in the resolution of this case is whether or not SEACRAFT International Corporation is guilty of fraud in procuring its certificate of registration. Corollary to this, is the determination of whether petitioner has sufficiently established the commission of fraud by the corporation's incorporators in securing the certificate of registration, as charged, since this case was conducted ex-parte. We were cognizant of the fact that cases of this nature carry a "built-in defect" in the sense that the fraud cannot be proven by evidence directly pointing to fraud, as such, perforce, we had to take the laborious route of sifting and assaying the facts surrounding the corporation's inception and pondered on the developments of the corporation after its incorporation. The evidence adduced indubitably underscored the calculated design of one Leonard La Pierre to form a dummy corporation abetted by the following incorporating directors: NAMES No. of Shares Amt. of Cap. Amt. Paid subscribed Stock Subs. on Subs. Marcelino L. Go 1 100 100 Alfredo C. Lim 1,500 150,000 37,500 Reynaldo M. Directo 1 100 100 Justiano L. De Guzman 1 100 100 Melanie C. Tijam 3,497 349,700 87,200 The most telling factor to which we cannot turn a blind eye is that scrap of proof (Exh. "E") that evidenced a transmittal of funds, together with a statement of La Pierre to the effect that he had supplied the amount of US$8,670.00 to Atty. Alfredo C. Lim, one of the majority stockholders, "for the paid-up capital to incorporate SEACRAFT". Converting the amount to Philippine Currency will not require a genius to deduce that the total tallies with the amount needed for incorporating SEACRAFT. The hidden purpose for this deception, to our mind, is clear. It appears that SEACRAFT was incorporated to enable Mr. La Pierre, a Canadian citizen, to manufacture ships, vessels and yachts, which activity is under the coverage of P.D. 660. For as early as 1985, Mr. La Pierre has repeatedly represented himself as president and owner of SEACRAFT (Exh. "S") whereas, SEACRAFT acquired juridical existence only on March 6, 1986 (Exh. A-9). In a letter written by La Pierre to J.A. Development Corporation dated August 5, 1986 (Exh. "R") La Pierre admitted that PAN Pacific International Corporation was just a temporary name and that they have now registered Seacraft International with the SEC and the latter is their new name. Exh. "R-1" showed the contract of lease entered into by J.A. Development and Pan Pacific International Corporation, represented by its President La Pierre, as early as July 18, 1985, clearly showing the continuity of La Pierre's activities. While the Registration Certificate enumerated the directors of the corporation, Mr. La Pierre who was mentioned therein was the one personally funding the expenses of SEACRAFT (Exh. "B", "C", "D" and "E") and the one who gives instructions, hires and pays SEACRAFT personnel (Exh, "A-13", "A-14", "A-15", "A-16", "A-17", "A-18", "A-19", "A-25" and Exh. "V"). It is even curious to see that he is the one authorizing Atty. Lim who is a reported director, to act in his behalf and secure a Bill of Lading for the shipment of diesel engines consigned to SEACRAFT. (Exh. "Y" and "Y-1") Subsequent to incorporation, Atty. Alfredo C. Lim, in his letter dated October 22, 1987 to the Commission (Exh. "A-10"), admitted that he was merely holding the 1,500 shares in his name in trust for Leonard La Pierre, the real owner thereof. Minutes of the Annual Meeting of Stockholders on April 13, 1987 (Exh. "A-11") reflect the fact that Leonard La Pierre now holds the 1,500 shares previously held by Alfredo Lim. It was also proven that the other principal stockholder of SEACRAFT, a certain Melanie C. Tijam was working in said law office of Atty. Alfredo C. Lim (Exh. "W", "X" and "X-1"). Further, affidavits of knowledgeable employees and other people dealing with Seacraft were presented wherein it is stated categorically that Seacraft was a mere dummy of La Pierre and that La Pierre is the real owner of SEACRAFT. (Exh. "A-21", "A-22", "A-23" and "A-24") A perspicacious and exhaustive consideration of the foregoing unequivocably convinced us that SEACRAFT INTERNATIONAL CORPORATION must be divested of its franchise or Certificate of Registration. Ample proof has been presented that while all the incorporators are Filipinos, in truth and in fact their payments of subscriptions were actually paid or financed by La Pierre, a foreigner, who thus acquired the unlimited right to manage Seacraft's operations. Evidently, fraud was indeed used in procuring the approval of the certificate of registration of subject corporation (Seacraft) for which, under the law, the Commission has the power to revoke or cancel its Certificate. Thus Sec. 6(i) of P.D. 902-A, provides: "SECTION 6. In order to effectively, exercise such jurisdiction, the Commission shall possess the following powers: "xxx xxx xxx (1) To suspend or revoke , after proper notice and hearing, the franchise or certificate of registration of corporations, partnership or associations, upon any of the grounds provided by law, including the following: 1. Fraud in procuring its certificate of registration ; . . . " (Emphasis Supplied) Wherefore, in view of the foregoing, judgment, is hereby rendered revoking the franchise or certificate of registration of SEACRAFT INTERNATIONAL CORPORATION. Accordingly, by virtue of the dissolution of Seacraft International Corporation, let a Receiver be appointed pursuant to Rule 59 of the Revised Rules of Court, upon posting of a bond in the amount of Fifty Thousand Pesos (P50,000.00), to liquidate the corporate affairs of the said dissolved corporation in accordance with Section 122 of the Corporation Code. Relative thereto, petitioner is hereby directed to nominate a Receiver within ten (10) days from receipt hereof. cdlex Let copy of this decision be furnished the Legal Department and Records Division of this commission for their information and guidance. SO ORDERED. (SGD.) JUANITO B. ALMOSA, JR. Hearing Officer (SGD.) KIRTH S. BANSUELO Hearing Officer