Estanislao v. Pridisons Realty Corp.

[SEC-SICD * CASE NO. 4247. May 17, 1996.] CARLOS H. ESTANISLAO , petitioner , vs .PRIDISONS REALTY CORPORATION, ET AL. , respondents . D E C I S I O N Filed before this Commission is a verified petition for the issuance of a temporary restraining order/writ of preliminary injunction and writ of attachment by petitioner Carlos H. Estanislao, alleging inter alia: that respondents Pridisons Realty Corporation ("Pridisons") and Ivory Crest Realty Development, Inc. ("Ivory Crest") are realty corporations duly established and existing under the laws of the Philippines and registered with the Securities and Exchange Commission with address at 50 Gilmore Street corner 11th Street, New Manila, Quezon City; that respondents Antonio B. Gonzales, Cipriana B. Gonzales, Emiliana B. Gonzales, Tadeo B. Gonzales and Ma. Rita G. Prado are the directors/officers of respondents Pridisons and Ivory Crest which have an interlocking directorship; that likewise, respondent Times Surety and Insurance Company, Inc.;is a non-life insurance corporation duly organized and existing under Philippine laws, with address at ABC Development Corporation Bldg.,2251 Pasong Tamo, Makati, Metro Manila. llcd. Petitioner further alleged, that respondents Pridisons and Ivory Crest through its officers/directors are actively engaged, up to now, in abetting and aiding each other, in repeatedly defrauding the public through a palpably fraudulent scheme with the aid of respondent Times Surety and infringed on their rights in violation of the Revised Securities Law, the PD 957 and its implementing rules, P.D. 1096, R.A. 337 and CB Circulars, and the Comprehensive Zoning Ordinance, and other laws to the great detriment and prejudice of the defrauded/injured parties and the public; that in 1981, when respondent Pridisons increased its capital stock from P1M to P5M, 1.5 M subscriptions thereof were paid by way of a deed of assignment dated August 26, 1980 where 12 lots were transferred to respondent Pridisons by Pricillana Gonzales and respondent Buyson Gonzales where the subject condominium lot is one of those swapped as payment for the increased capitalization subscription; that on February 25, 1981, the subject lot TCT No. 276613, consisting of an area of 1,989 square meters, was issued in the name of respondent Pridisons by the Registry of Deeds of Quezon City; that the individual respondents, as part of a massive fraudulent scheme hereunder more particularly described later on, embarked on a string of statutory violations, formed another corporation, respondent Ivory Crest which was issued SEC Certificate of Registration No. 174818 on March 15, 1990; that to insure absolute control of its corporate affairs, the stockholdings of the two (2) respondent realty corporations were limited only to a single family; that the Gonzales stockholdings and directorship thereof were patently interlocking; that on March 19, 1990, respondent Pridisons assigned the lot in TCT No. 276613 to respondent Ivory Crest; that by means of "public documents falsifications" that deceive the public, the annotated entry in TCT No. (276613) RT-1160 however, merely shows that the assignment to respondent Ivory Crest was Unit IX only (a condominium unit), that in juggling their properties and further confusing the public for their fraudulent purposes, the aforesaid deed of assignment was cancelled on July 10, 1991; that on July 29, 1991, respondent Pridisons spin off the aforesaid property (TCT No. 276613) into twelve (12) condominium units, as follows: Ivory Crest Mansions Condominium Condominium Unit No. Certificate of Title No. 1. Unit I CCT No. 2081 2. Unit II CCT No. 2082 3. Unit III CCT No. 2083 4. Unit IV CCT No. 2084 5. Unit V CCT No. 2085 6. Unit VI CCT No. 2086 7. Unit VII CCT No. 2087 8. Unit VIII CCT No. 2088 9. Unit IX CCT No. 2089 10. Unit X CCT No. 2090 11. Unit XI CCT No. 2091 12. Unit XII CCT No. 2092 That while the mother title, TCT No. (276613) RF-1160 states that the Master Deeds with Declaration of Restriction was executed on March 19, 1990 and annotated on March 18, 1991, through fraudulent means, the Master Deeds on file with the Register of Deeds and that being distributed by Ivory Crest to the public is dated August 19, 1991 or almost a month after the condominium project was created by virtue thereof; that contrary to the respondents' representation to the public, respondents have not yet registered the Master Deed and Declaration of Restrictions, not yet obtained the necessary SEC registration/license, clearance from the HLURB/MMRA and other government entities and made false representations in the deeds of sale covering the condominium units/securities; that Pridisons Master Deed named the Condominium project "Ivory Crest Mansions",as part of its fraudulent scheme, being a confusing idem sonams of the corporate name of respondent "Ivory Crest (Realty Development Corporation);that the same Master Deed further declared that the condominium corporation, to be named "Ivory Crest Mansions Corporations",shall be organized; that contrary thereto, the SEC records show that there is no such registered corporation known by that name. Moreover, petitioner averred that when he and his wife asked why the property being sold by Ivory Crest was in Pridisons name, respondent Gonzales, through deceit/machinations, made them believe that they are one and the same; that the interlocking directorships, intermingling/juggling of corporate properties/funds, violations/circumvention of the law(s) to perpetuate their fraudulent designs, convergingly compel piercing the corporate veils of respondents Ivory Crest and Pridisons; that the corporate cloak of fiction of both respondents Pridisons and Ivory Crest may be disregarded, if the stockholders confuse their affairs and assets, or when they are guilty of fraud, bad faith or abuse of their authority; that the modus operandi/actions of the individual respondents were intended to defeat public convenience, justify wrong, protect fraud or defend their crimes, circumvent the law to avoid liabilities and suppress the vindication of the wrong committed on the public/victims, as declaration lifting the corporate skirts of both respondent Pridisons and Ivory Crest for them to be treated as one, for the purpose of this particular situation and the reliefs prayed for is warranted and proper; that all respondents, except respondent Times Surety, confederating and abetting each other violated Section 19 of the Revised Securities Act (B.P. Blg. 178); that under the Condominium Law (R.A. No. 4726), the Condominium corporation is a non-stock corporation, where membership therein is acquired by owning a condominium unit thereat. Under Sec. 5 (7) of the Revised Securities Act, the condominium unit is an indispensable part of a "security" covered under the said law as it is a "security" exempted from registration, to wit: LibLex "7) Any security covering any right or interest or real property, including a subdivision lot or a condominium unit ,where the sale or transfer of such security is subject to the supervision and regulation of the Ministry of Human Settlement or any of its authorized constituent or attached agencies (HLURB)" Respondents Pridisons, Ivory Crest, Ma. Rita Prado, Antonio, Emiliana, Cipriana and Tadeo, all surnamed Gonzales, are neither registered with the SEC as a dealer, broker, issuer or salesman of securities; that respondents have sold/caused to be sold the "condominium unit securities" without the "requisite prior SEC registration" of the respondents in violation of Section 19 nor notified the SEC of its information to sell the same; that the sale of the said condominium units securities were made in the course of known repeated and successive fraudulent transactions in a short span of time by the respondents, who in concert with each other, gave repeated flagrant misrepresentation upon the buying public to perpetuate their crimes as follows: Condominium Name of Buyers Date of Purchase Unit No. I R. Hore January 1991 Bormaheco, Inc. February 1991 V. Gonzales August 1991 Sibal October 1991 III Bormaheco, Inc.` February 1991 A. Dado April 1991 IV Bormaheco, Inc. February 1991 Baset August 1991 R. Valenzuela March 1991 V Bormaheco, Inc. February 1991 Pio Co C. Ong Lee July 1991 F. Silang September 1991 Gelmar Gutierez VII Lavadia December 1991 Bormaheco, Inc. February 1991 Estanislao June 1991 Valenzuela Flaminiano October 1991 VIII A. Santos 1989 Valenzuela January 1991 J. Santos 1991 Bormaheco, Inc. February 1991 IX A. Mape August 1990 X Bormaheco, Inc. February 1991 A. Mape March 1991 C. Magsaysay May 1991 T. Chua Tak August 1991 XII Bormaheco, Inc. February 1991 Gunabe Realty March 1991 That these double or multiple sales have unmitigatedly swindled their victims wholesale and in mass; that as one of the many defrauded victims, petitioner is the third (3rd) purchaser of condominium unit VII or the 4th purchaser with a Contract of Sale with Buy-Back Option, dated May 9, 1991, in favor of Romeo Valenzuela also refers to Unit II; that after signing petitioners' Contract of Sale with Buy Back Option, dated June 13, 1991, of Condominium Unit VII without respondents' prior registration/licensed, petitioner only recently came to know of the respondents' massive fraud, committed on the public and their continuous and flagrant violations of the Revised Securities Act, SEC Rules, the Revised Penal Code and other laws as follows: LLpr a.) In fraud of the public and contrary to law, said respondents, in conspiracy with each other, have been selling the condominium unit securities, even while the seller is not the owner thereof. b.) As it now appears to be so and in fraud of the public, without the requisite MB License and without observing CB Circulars, said respondents have been performing quasi banking functions by obtaining sizeable funds from more than twenty (20) persons through repurchase agreements to be able to purchase its own obligations or have acted as a financial intermediary by investing the large amounts of equities acquired by them, in violation of the General Banking Act and CB Circulars; c.) In fraud of the buying unit owners, and in violation of the Condominium Act, said respondents have even mortgaged the entire condominium project to (Ms. Magsaysay and Montinola) including the common areas thereof, fraudulently concealing to the public which they have been soliciting in violation of laws and the fact that the condominium unit securities and the common areas have been already sold or are no longer free from lien; and d.) In fraud of the public, respondents had been selling condominium units without registering the condominium project with the HLURB nor obtaining the prior license to sell in violation of Sections 4 and 5 of P.D. 957, nor obtained a prior locational clearance and the necessary approvals in violation of P.D. 1096 and the Comprehensive Zoning Ordinance. Respondents Pridisons, Ivory Crest and the corporate officers are planning of further mortgaging to banks the condominium securities which said respondents have already offered to sell; that worse, said respondents plan to further defraud the public by putting up additional condominium units on the sale lot and again offer them for sale in violation of laws; that the grounds for the issuance of a writ of attachment abound against all the abetting/conspiring respondents, as follows: 1. Respondents are guilty of fraud in incurring the obligation/contracting the debt; 2. Respondents are also guilty of willful violations of duty, and 3. Respondents are still disposing of their property with intent to defraud their creditors. Furthermore, petitioner asserted that respondent Times Surety knew beforehand of the fraud to be committed, yet consented to be a tool for their unlawful purpose of defrauding the public; that in violation of the Insurance Code, it has further committed massive unfair insurance practices on these particular securities, among other statutory violations that convergingly show its fraud; that clearly a sufficient cause of action exists against respondents and petitioner is entitled to recover what he seeks to herein recoup which is above any counterclaim, if any at all, and yet there is no known sufficient security for the claims sought to be enforced in this action against the respondents, faced with their huge multi-million obligations to the many, many victims/claimants whom respondents have defrauded not paid/given what is due them; that this petition is verified, thus, takes the stature of an affidavit and petitioner is able and willing to post an attachment bond in an amount as may be required by this Commission to answer for any damage sustain by reason of the attachment. On July 5, 1992, the Hearing Panel issued a Writ of Attachment. The said writ was discharged against defendant Times Surety & Insurance Company, Inc. pursuant to the Order dated 27 April 1973. Hearings were conducted wherein petitioner presented evidence, testimonial and documentary to substantiate all of the above allegations, which were not controverted by respondents, who in fact, manifested the waiver of their cross-examination, by subsequently abandoning the proceedings. On November 11, 1994, respondents were declared to have waived their right to present evidence. From the facts narrated in the petition and the evidence on record, we find that petitioner was able to prove by clear and convincing evidence his right to the reliefs prayed for. Upon the other hand, considering that respondents (except defendant Times Surety & Insurance Company, Inc.) abandoned their defense, for all intents and purposes they have no evidence at all and the evidence for the petitioner remain unrebutted. As regards respondent Times Surety & Insurance Company, Inc.,the allegation of negligence is self serving and it is not sufficient to prove prima facie that it has committed fraud. Besides, it is a matter of record that it merely issued the surety bond in the furtherance of its business. prcd Further, it is worth mentioning to note as shown in the records that defendant Antonio B. Gonzales has been convicted by the Regional Trial Court of Makati, Branch 48 of the crime of Estafa and violation of Batas Pambansa Bilang 22 involving the sale of the subject property. In fact, an Alias Warrant of Arrest has been issued by the said court against defendant Antonio B. Gonzales. WHEREFORE, considering the foregoing, judgment is hereby rendered as follows: 1. Declaring the corporate veil of fiction of respondents Ivory Crest and Pridisons pierced and treating them as one and the same; 2. Declaring the respondents' transactions, devices schemes and modus operandi as fraudulent, or as a deceptive contrivance/device that would operate as a fraud upon any person. 3. Ordering respondents Ivory Crest Realty Development, Inc. and Pridisons Realty Corporation (except Times Surety & Insurance Company, Inc.) as well as the individual respondents to solidarily pay P3.3M, to petitioner's claim arising out of the absolute Deed of Sale. 4. Ordering respondents (except Times Surety & Insurance Company) to solidarily pay petitioner, legal interest at 12% per annum on their unpaid obligation by reason of the repurchase clause in the Deed of Absolute Sale until fully paid; 5. Ordering respondents (except Time Surety & Insurance Company) to solidarily pay petitioner moral and exemplary damages in the amount of P50,000.00. 6. Ordering respondents (except Times Surety and Insurance Company, Inc.) to solidarily pay petitioner attorney's fees in the amount of P20,000.00; 7. Enjoining respondents from selling encumbering, any or all subject twelve (12) condominium units. Costs of the suit. SO ORDERED. (SGD.) ENRIQUE L. FLORES, JR. Hearing Officer (SGD.) ELPIDIO S. SALGADO Hearing Officer