SEC En Banc Case No. 07-16-408 In the matter of AZ 17/31 Realty, Inc., Respondent-Appellant, -versus- Azucena Locsin-Garcia, Complainant-Appellee.

Republic of the Philippines

Securities and Exchange Commission Department of Finance

IN THE MATTER OF AZ 17/31 REALTY, INC. Respondent-Appellant,

versus : SEC En Banc Case No. 07-16:408

AZUCENA LOCSIN-GARCIA

Complainant-Appellee!

DECISION

Pending before the Commission En Banc is an Appeal filed on 28 June 2016 by AZ 17/31 Realty, Inc. (Appellant) assailing the Order dated 30 May 2016 (Assailed Order) issued by the Company Registration and Monitoring Department (CRMD). The pertinent portion of the disposition of the Assailed Order reads as follows:

"WHEREFORE, premises considered, the Certificate of Registration of AZ 17/31 Realty Inc. (sic) registered on 23 April 2008, under SEC Registration No. CS200805443 is hereby REVOKED."

Appellant is a stock corporation duly registered with the Commission on 23 April 2008 under Company Registration No. CS200805443.2 Its primary purpose is to:

develop, subdivide, sell, mortgage, exchange, lease, develop, and hold for investment "To acquire by purchase, donation, lease or otherwise, and to own, use, improve,

of buildings, houses, apartment, and other structures of whatever kind, together or otherwise, real estate of all kinds, whether improve, manage or otherwise dispose with their appurtenances."3

Its incorporators are the following: 1.) Antonio de Zuzuaregui Jr.; 2.) Enrique de Zuzuaregui; 3.) Pacita Javier; 4.) Antonette S. Rosca; 5.) Anthony de Zuzuaregui; 6.) Antonette de Zuzuaregui; and 7.) Maria Edna de Zuzuaregui.4

3 Appellant's Articles of Incorporation. 2 Appellant's Certificate of Incorporation 4 bid Dated I4 June 2016

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the revocation of Appellant's Certificate of Registration. Azucena Locsin-Garcia (Appellee) is the complainant who initiated a complaint for

Factual Antecedents

Certificate of Registration with the Commission's Enforcement and Investor Protection Department (EIPD). Appellee alleges that one of Appellant's incorporators, Pacita Javier, In a Letter dated 09 January 2016, Appellee filed a complaint to revoke Appellant's

had long been deceased at the time of Appellant's incorporation. She claims that Pacita of fraud. Javier died on 17 August 2004, whereas the Appellant was incorporated in 2008. Thus. Appellee prays for the revocation of Appellant's certificate of incorporation on the ground

copy of the latter's death certificate with the National Statistics Office5 (NSO). The Death Certificate with Registry No. 2004-483 revealed that Pacita Javier, at the age of 90 years Acting on the letter-complaint, EIPD verified the death of Pacita Javier by obtaining a

Metro Manila. The informant was Enrique de Zuzuaregui. Thereafter, EIPD referred the old, died on 17 August 2004 at the Cardinal Santos Medical Center, Greenhills, San Juan,

complaint to the CRMD since the latter has jurisdiction over the subject matter.

Answer, refuting all the allegations in the complaint and presenting its affirmative defenses 23 March 2016, Appellant filed its Answer and on 14 April 2016, it filed its Supplemental Then, CRMD directed the Appellant to file its Answer to the Appellee's complaint. On

On 30 May 2016, CRMD issued the Assailed Order, which states that:

Act is the capacity to do acts with legal effects. Juridical capacity can exist without the capacity to act, but the existence of the latter implies that of the former. They do not always coincide. Hence, upon a person's death, his capacity to enter into an incorporating agreement is likewise extinguished. Considering. therefore, that Respondent Corporation in the year 2008. Pacita Javier passed away in the year 2004, then her capacity to effectively enter into any legal relation was likewise extinguished at the same time. It is legally impossible, therefore, for her to be part of the incorporation of "Juridical capacity is the fitness to be the subject of legal relations, while Capacity to

deceased at the time of incorporation, someone must have signed for and in behalf of a dead person. It was, thus, made to appear that Pacita Javier was That the incorporators of the Respondent Corporation had no intention to deceive or defraud the public runs counter to their acts. Since Pacita Javier was already

5 Now the Philippine Statis tics Office.

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still alive for the purpose of deceiving the Commission into approving the Articles of Incorporation.

Respondent Corporation's intent to deceive is bolstered by the fact that one of the incorporators, Enrique Zuzuaregui is the informant of the death of Pacita Javier, as stated in the NSo Death Certificate. A comparison of the signatures of Enrique in the Articles of Incorporation and the Death Certificate shows that they are the same.

Hence, it cannot be denied that fraud was committed in procuring Petitioner's (Appellant) Certificate of Incorporation. Had the Commission been aware of such falsities, the registration of the Articles of Incorporation would not have been approved.

Likewise, Respondent Corporation did not deny the fact that Pacita Javier was already deceased at the time of incorporation; hence, such is deemed admitted.

In view of the fraud and misrepresentation in the procurement of the certificate of registration, the same is rendered non-compliant with the requirements of the Corporation Code on incorporation. x x x"

Aggrieved, Appellant filed the instant appeal.

Appellant claims that the other incorporators are unaware of the fraud which was perpetrated only by Antonio de Zuzuaregui, when the latter included Pacita Javier as one of the incorporators of the corporation.6 Appellant contends that they should not be burdened or faulted by the misrepresentations of Antonio de Zuzuaregui since they have no participation whatsoever on the alleged fraud.7 Appellant also argues that since Antonio de Zuzuaregui and Pacita Javier already passed away, there is no compelling reason to go after the corporation administratively. Appellant claims that there are other businesses that

it is one of the top taxpayers in Quezon City and of the National Government.10 It avers that will be disenfranchised if the subject corporation would be revoked.9 Appellant claims that the penalty of revocation is too harsh and extreme of a punishment.

Assailed Order: Appellant further alleges that CRMD committed following errors11 in issuing the

incorporation; 1 The CRMD erred in ordering the revocation of Appellant's certificate of

1 page 3 of the Memorandum of Appeali. 6 Page 5 of the Memorandum of Appeal. 7 Paqe 6 of the Mermorandum of Appeal id 10 d Page 7 of the Memorandum of Appeal

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E The CRMD erred when it ruled that the rules against Forum Shopping should be applied liberally in this case as strict application would not work to the best interest if the public; 3. The CRMD erred when it did not address the issue on whether or not Complainant-Appellee Azucena Locsin-Garcia has a cause of action against Appellant; 4 The CED and not the CRMD is the one who has technical expertise and

the case. specialized knowledge necessary in determining the existence of facts relevant to

On the other hand, Appellee contends that Appellant admitted that, despite the death of Pacita Javier on 17 August 2004, it still included the latter as one of their incorporators.12 This constitutes falsification and misrepresentation in Appellant Articles

certificate of registration.13 Appellee argues that the remaining incorporators cannot simply dissociate themselves from the fraud committed since they ought to know that their of Incorporation (Aol), which is considered as fraud in the procurement of the latter's

grandmother, Pacita Javier, is already deceased at the time of Appellant's incorporation. Appellee further claims that Appellant falsified its AOI and By-laws by forging the signature of the deceased Pacita Javier.14 Thus, Appellee prays for the denial of the instant appeal.

Issue

Appellant's Certificate of Incorporation on the ground of fraud in procuring the latter's The main issue to be resolved is whether or not the CRMD is correct in revoking

certificate of incorporation.

Ruling

that were raised by Appellant that are needed to be resolve. Before we proceed with the merits of the case, there are some procedural matters

present a Certification against Non-forum shopping, which is a fatal defect.i5 In Diamond Taxi vs. Llamas16, the Supreme had the occasion to rule that: As to the issue on non-forum shopping, Appellant argues that Appellee did not

mandatory, this requirement should not, however, be interpreted too literally "Indeed, while the requirement as to the certificate of non-forum shopping is

I2 Paragraph I I of the Reply Memorandum. 16 G.R. No. 190724, March {2, 2014 13 1 Paragraphs i 3-1 5 of the Reply Memorandum. 15 Pages 10-14 of the Memorandum of Appeal.

SEC En Banc Casc No. 07-1 6-408 Azucena l In re: AZ 17/31 Realty, Inc. vs Paae5of Ocn-aci

and thus defeat the objective of preventing the undesirable practice of forum. shopping."

involve the determination of rights and interest of the parties, but the exercise of the Commission's regulatory powers.17 The CRMD further ruled that it would not be fair to rule on forum shopping. As sufficiently explained by CRMD, a revocation case does not allow a corporation to exist, if its franchise is under suspicion. Thus, there is a compelling We agree with CRMD that the instant case calls for a liberal interpretation of the

reason for the CRMD to relax the rule which is the Commission's mandate to protect the investing public.

As to the issue on the presence of Appellee's cause of action, Appellant contends that Appellee is not a real party in interest, hence, the complaint states no cause of action.18 A

in the suit or the party entitled to the avails of the suit".19 However, as above-stated, this is a revocation case and the Commission is merely exercising its regulatory powers. Hence, it is immaterial if the Appellee is a real-party-in-interest or not. "real-party-in-interest" is "the party who stands to be benefited or injured by the judgment

As to the issue on CRMD's jurisdiction, Appellant claims that it should be the

the instant case and not the CRMD, as provided in SEC Resolution No. 235, series of 2002.20 This policy is no longer applicable in light of SEC Resolution No. 359, series of 2010, Commission's Compliance and Enforcement Department (CED) that has jurisdiction over wherein its states that:

Department to revoke, after complying with due process, Certificates of Incorporation of registered partnerships or corporations on the following grounds: "RESOLVED, To AUTHORIZE the Company Registration and Monitoring

X X X

5. If any of the incorporators is already deceased at the time of incorporation; X X X

7. If any of the incorporators submitted spurious or falsified documents to prove compliance with the requirements for registration; and x x x"

We now resolve the merits of the instant appeal.

manifestation of either juridical capacity and capacity to act.22 "Juridical capacity" is the Civil personality is extinguished by death.21 Civil personality is merely the external

19 Salonga v. Warner Barnes & Co. G.R. No. L-2246, January 31, 1 9S 1. 8 Phi. 1 25. 2' Article 42, New Crvit Code. !8 Pages 1 4. 1 5 of the Merorandum of Appeal 20 Pages I 5- 1 6 of the Memorandum of Appeat. :7 Page 3 of the Assziled Order.

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fitness to be the subject of legal relations, while "capacity to act" is the power to do acts with legal effects.23

In Gochan and Sons vs. Heirs of Baba24, the Supreme Court ruled that contracting parties must be juristic entities at the time of the consummation of the contract. Stated otherwise, to form a valid and legal agreement it is necessary that there be a party capable of contracting and a party capable of being contracted with. Hence, if any one party to a supposed contract was already dead at the time of its execution, such contract is undoubtedly simulated and false and therefore null and void by reason of its having been made after the death of the party who appears as one of the contracting parties therein. The death of a person terminates contractual capacity.

contract between three parties: (a) between the State and the corporation; (b) between the In this connection, the articles of incorporation (charter) of a corporation is a

stockholders and the State: and (c) between the corporation and the stockholders.25 On the other hand, By-laws are relatively permanent and continuing rules of action adopted by the corporation for its own government and that of the individuals composing it and having the direction, in whole and in part, in the management and control of its affairs and activities.26

Commission has exclusive jurisdiction over actions for revocation/cancellation of the primary franchise or certificate of registration of a corporation, on the following grounds: Relative thereto, Section 6 (l), sub-paragraph 1 of P.D. No. 902-A, provides that the

1.) Fraud in procuring its certificate of registration; x x x".

The fraud mentioned in Section 6, (1), sub-paragraph 1 of P.D. No. 902-A as one of the grounds for revocation of a certificate of registration of a corporation, partnership or association refers to fraud attendant in the registration of the corporation, partnership or association and the same must be contained or connected with the documents and/or papers presented to the Commission for the registration of the said corporation, partnership or association27.

In the instant case, the Appellee presented evidence that Pacita Javier, one of Appellant's incorporators, was already deceased at the time Az 17/31 Realty, Inc. was

2004-483 clearly states that she died on 17 August 2004. This fact was further confirmed incorporated on 23 April 2008. The Death Certificate of Pacita Javier with Registry No. by EIPD when the latter verified the same with the NSO.

24 Gocharn and 5ons Realty Corp. y. Heirs of Raymundo Baba, 456 Phil. 569. 578. (2003). 22 z Sanchez Roman 114-147. 23 Artic!e 37. New Civil Code. 25 Handbook on Private Corporations, 2009 edition, Lucila Decasa, page 27 27 In the matter of Silvermoon Security & Investigation Agency. Inc., et al., SEC Case No. I 2-05-99 citing In the matter Enterprise, SEC Case No. 03-05-4 9. 22 id. page 67. of Charlyn Marketing

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Moreover, the fact of the death of Pacita Javier on 17 August 2004 was never denied nor disputed by Appellant in the CRMD proceedings. Applying Section 11-8 of the 2006 SEC Rules of Procedure (2006 SEC Rules) which provides that the findings of fact by the Operating Department shall not be disturbed by the Commission En Banc unless serious errors of fact have been committed. We will accept the fact of death of Pacita Javier before the filing of Appellant's AOI with CRMD as true.

her signature on Appellant's A0I and By-iaws at the time of incorporation in 2008. However, there were signatures affixed above the name of Pacita Javier in Appellant's AOI Considering that Pacita Javier died in 2004, it would be impossible for her to affix

and By-laws. Clearly, these signatures are not those of Pacita Javier. Thus, there is fraud in the procurement of Appellant's Certificate of Incorporation.

committed, we find no merit on the same. Appellant's other incorporators namely: Enrique deceased Pacita Javier was included as one of its incorporators, to wit: de Zuzuaregui, Antonette S. Rosca, Anthony de Zuzuaregui, Antonette de Zuzuaregui and Maria Edna de Zuzuaregui could not feign ignorance that they are unaware of the death of Pacita Javier, who is their grandmother. In fact, Appellant admitted in its appeal that the As for Appellant's arguments that the other incorporators are unaware of the fraud

Realty, Inc., her mother, Pacita Javier was already dead, her inclusion in the roster of incorporators was intended by Antonio - not for the purpose of a " x x x Also, while it is true that at that time of incorporation of AZ 17/31

as there are seven (7) incorporators but rather to perpetuate the memory of her late complying with the required number of five (5) incorporators to form a corporation mother he dearly loved.

aside from being obedient and loyal children to their father, only own nominal Admittedly. this is incorrect, but what can the other incorporators do, as they. shares in the company, and therefore, they cannot outvote and overturn the will fo the latter."

incorporators of a corporation. Thus, it is illogical to claim that these remaining incorporators could not know of the death of Pacita Javier. Since Appellant submitted Certificate of Incorporation. simulated and false AOI and By-laws, we agree with CRMD's action to revoke Appellant's As above-stated, the AOI and By-laws are agreements between of all of the

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merit. CRMD's Order dated 30 May 2016 is hereby AFFIRMED. WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of

Department for proper notation and action. Let a copy of this Decision be furnished to the Company Registration and Monitoring

S0 ORDERED.10 August 2017

TERESITA J. HERBOSA Chairperson

mamt AT ANTONIETA F. IBE Commissioner EPHYRO LUIS B. AMATONG Commissioner

RBO EMiLio'B, ai M UINO mmissioner Commisstoner