SEC En Banc Case No. 06-24-545COPPERSTONE LENDING, INC. doing business under the name/s and style/s of QUICKLA, POCOCASH,BLUE PESO, PESO FORREST, MOCA MOCA, PESO BUFFET & LOAD CASH

Securities and Exchange Commission COMMISSION EN BANC Republic of the Philippines Department of Finance

IN THE MATTER OF:

BLUE PESO,PESO FORREST, MOCA STYLE/S OF COPPERSTONE LENDING,INC.DOING BUSINESS UNDER THE NAME/S AND QUICKLA, POCOCASH, SEC EN BANC CASE NO. 06-24-545 FOR: REVOCATION OF CERTIFICATE OF AUTHORITY (CA TO OPERATE A MOCA, PESO BUFFET & LOAD CASH 2021050012959-04; CA No. 3454) (SEC Registration Appellants, No. LENDING COMPANY FOR VIOLATION OF: 1. MEMORANDUM CIRCULAR NO.18, 2. R.A.3765 SERIES OF 2019 ON THE PROHIBITION OF UNFAIR COLLECTION PRACTICES OF FINANCING COMPANIES AND LENDING COMPANIES; OR THE TRUTH IN

OTHER FEES CHARGED BY LENDING COMPANIES, FINANCING COMPANIES, PLATFORMS PROMULGATED:18 December 2024 LENDING ACT; AND SERIES IMPLEMENTATION SENTRAL NG PILIPINAS CIRCULAR NO. CEILING/S ON INTEREST RATES AND AND 3. 1133 SERIES 0F 2021 MEMORANDUM THEIR OF ONLINE 2022 CIRCULAR NO.3 OF ON ON LENDING BANKO THE THE

DECISION

Before this Commission is the Appeal Memorandum dated 26 May 2024 (the "Appeal") filed by Copperstone Lending, Inc. on 5 June 2024 praying for the reversal and the setting aside of the Resolution dated 21

Lending Companies Department (FLCD), which sustained the Order May 2024 (the Assailed Resolution") issued by the Financing and

the dispositive portion of which, in part, reads: dated 11 April 2024 (the "Assailed Order) earlier issued by the latter,

WHEREFORE,in view of the foregoing, the Primary Registration (SEC No.2021050012959-04) AND the Certificate of Authority to Operate as

TILA in relation to MC No. 7, Series of 2011 on Implementing the TILA a Lending Company (CA No. 3454) of Copperstone Lending Inc. is hereby REVOKED. It is likewise ordered to pay the penalty of Twenty Thousand Pesos (Php20,000.00) for its first violation of RA 3765 or the

In the Matter of: Copperstone Lending, Inc SEC En Banc Case No. 06-24-545 Page 2 of 18 Decision

to Enhance Loan Transaction Transparency within 15 days from receipt of this Order."

THE PARTIES

Appellant, Copperstone Lending, Inc. (the "Appellant") is a domestic corporation duly organized and existing under Philippine laws, having been issued a Certificate of Incorporation with registration number SEC No. 2021050012959-04. Appellant is also a grantee of a Certificate of Authority to Operate as a Lending Company with CA No. 3454, which allows it to carry out and maintain a lending operation. Appellant owns and operates the following online lending applications/platforms: QUCKLA, POCOCASH, BLUE PESO, PESO FORREST, MOCA MOCA,PESSOBUFFET and LOAD CASH.Appellant's principal office is at Unit 1907, The Trade and Financial Tower, 7th Ave. cor. 32 St., Bonifacio Global City, Fort Bonifacio,Taguig City

Appellee, FLCD is a department of this Commission tasked to

lending companies (LCs) with the Financing Company Act, Lending Company Regulation Act, the Financial Products and Services Consumer monitor and enforce compliance by financing companies (FCs) and

Protection Act, and their respective implementing rules and regulations, among others; having the authority to suspend or revoke the Certificates of Registration and CA of erring LCs or FCs, whenever warranted by the circumstances.

THE RELEVANT FACTS

From September 2022 to March 2023, the FLCD received complaints from the purported borrowers of Appellant, who all alleged that the latter violated Memorandum Circular No. 18, series of 2019 (MC No.18), otherwise known as the "Prohibition on Unfair Debt Collection Practices of Financing Companies and Lending Companies",and Republic Act No. 3765 or the "Truth in Lending Act" (TILA) in relation to Memorandum Circular No.7,series of 2011(MC No.7)[Implementation of the Truth in Lending Act to Enhance Loan Transaction Transparency].

The complainants and the nature of their complaints which were received by the FLCD,and which,according to the latter,warranted the appropriate regulatory action, are summarized as follows:

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(1 Ms. Carol Sevilla (Ms. Sevilla) alleged that Appellant failed to inform her of the exact loan amount, and the interest(s) on

overdue amounts. Ms. Sevilla also alleged that Appellant harassed her in effecting collection of the loan amount.1

( Ms. Princess Crishane Arevalo (Ms. Arevalo) alleged that Appellant employed unfair debt collection practices in

effecting collection of the amount which she borrowed.2

3 Mr. Jiovanni Granaderos (Mr. Granaderos) alleged that Appellant unilaterally modified the payment terms by exacting payment of the loan on the seventh (7th) day, instead the loan amount. Mr. Granaderos also alleged that he was of after the one hundred eightieth (180th) day from receipt of

his debt.3 threatened by Appellant with an estafa case if he will not pay

(4) Ms. Shieva Camille Eroy (Ms. Eroy) alleged that Appellant threatened her with an estafa case if he will not pay his debt.4

((5 Ms. Brazcell Domondon (Ms. Domondon) alleged that Appellant threatened that she will be blacklisted with other

financial institutions, and her family members and friends will be informed of her loan if she does not pay the same.5

Mr. Ronello Omero (Mr. Omero alleged that Appellant

unilaterally modified the payment terms by exacting payment of the loan on the seventh (7th) day, instead of after disbursed a loan amount without his prior authority, and

loan amount.6 the one hundred eightieth (180th) day from receipt of the

(7 Mr. Job Stephen Maristela (Mr. Maristela) alleged that

Appellant harassed him and the contacts in his mobile phone

of his loan amount.7 posted comments in his Facebook account, to exact payment

Acting on the foregoing complaints, the FLCD issued Show Cause Letters and Comment Letters on different dates, directing Appellant to

6 Ibid. page 5. 1 Order dated 11 April 2024. See pages 1 to 2. 4 Ibid. pages 4 to 5. 5 Ibid. page 5. 2 Ibid. pages 2 to 3 3 Ibid. page 3 to 4. 7 Ibid. page 6.

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explain why it should not be penalized for violating MC No.18 and/or the

address the complaints against it, the FLCD also conducted a conference, TILA in relation to MC No. 7.8 To enable Appellant to present its side and which was attended by its Compliance Consultants, Mr. RJ Buenaventura and Mr. Cesar Morales.

After the conduct of the proceedings, the FLCD issued the Assailed Orderwhere it found Appellant to have violated (a) MC No.18 in relation to the complaints of Mr. Maristela, Mr. Domondon, Mr. Granaderos and Ms. Arevalo; (b) MC No.18 inasmuch as the violation was committed by Appellant's third-party SEOVLC rovider Ie TriwaveInformation

and(C)the TILAvisI Technology, Inc.(Triwave), which Ap ellant admitted to have engaged; mplaints of Ms.Eroy and Mr. Granader supreme penalty of revocatio licenses of Appellant ratiocina d one thousand eighty six (1,086) case, the number of comp 0 collection practices and unclear disclosure of loan terms which Appellant carried out.9

Appellant filed a Motion for Reconsideration dated 22 April 2024 which was denied by the FLCD in the Assailed Resolution for lack of merit. The FLCD maintained that the complainants subject of the instant case were able to show by substantial evidence that Appellant violated MC No. 18 and/or the TILA in relation to MC No.7,which merited the revocation of its primary and secondary licenses.

Hence,the instant Appeal

On 18 July 2024, the FLCD filed its Comment on the Appeal

credence to the screenshots of the texts and messages which the Memorandum which prayed for the denial of the Appeal. In giving

complainants submitted in evidence, the FLCD argued that fact that they all bore the name of Appellant's OLPs suffices to support a conclusion that

licenses of Appellant, and Appellant's reliance in FCash Global Lending they were owned and operated by the latter.1o The FLCD equally maintained that it did not err in revoking the primary and secondary

Inc.v.CGFD was misplaced.

8 Ibid. page 1 1o Comment on the Appeal Memorandum. See page 5. 9Order.Page 12

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On 12 August 2024, Appellant filed its Reply to FLCD's Comment with Motion for Leave, therein reiterating its prayer seeking the reversal and the setting aside of the Assailed Order which was affirmed by the Assailed Resolution. In support thereof, Appellant maintained that the pieces of evidence submitted by the complainants which the FLCD relied upon failed to establish its culpability. Appellant specifically argued that by giving full credence to the screenshots of the text and email messages, the FLCD violated the Rules on Electronic Evidence which require a testimony of the party or the person who has personal knowledge of the

through an affidavit or testimony, the veracity of the screenshots which same.11 The Appellant claimed that the complainants did not validate

they submitted. Appellant also reiterated its argument that the penalty of

existing policy of the Commission, as well as jurisprudence.12 Finally, the revocation which the FLCD imposed is harsh, and contrary to the

Appellant maintained it did not violate the TILA since the complete

choose is available in the app. information on the terms of the loan which prospective borrowers get to

On 28 October 2024,Appellant filed a Manifestation with Motion for Early Resolution, where it prayed for the (a reinstatement of its corporate franchise, (b) the lifting of the revocation of its license to operate as OLP, and (c) the reinstatement of its name in the List of

manifested that it had implemented Recorded Online Lending Platforms. easures to ensure full compliance In support thereof, Appellant

with all applicable laws, rules and regulations, including the termination of its contract with Information Technology Corp.[Secure]; (b) active monitoring of Secure's and its replacement by Secure

compliance with all applicable laws, rules and regulations; (c

and a 24-hour cooling-off period, among others; and (d) a new formal functionality that provides prospective lenders with the terms of loan office organization. replacement of its existing lending apps to specifically highlight a

ISSUES

(A (B Whether Appellant was denied of its right to due process. Whether Appellant violated MC No.18 and the TILA in relation

C Whether the penalty of revocation of the Certificate of Incorporation and the CA of Appellant is warranted by the to MC No.7.

circumstances and evidence on record.

11 Reply. Pars. 3 to 7; 11, 13. 12Ibid.Pars.26 to 31.

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RULING

A. Appellant was not denied the

right to due process

In its Appeal, Appellant maintains that FLCD's act of taking cognizance of, and giving credence to the screenshots of the SMS messages submitted in evidence byMs. Sevilla, Ms. Arevalo, Mr. Granaderos, Ms. Eroy, Ms. Domondon Mr. Omero and Mr. Maristela (hereinafter referred to as the" "Complainants" constituted a denial of its right to due process aGa ed and unauthenticated which failed to comply with the Rules HA Evidence.13 The Appellant also claims that the failure III,Part II of the2016Rule of omply with Section 3.1, Rule Securities and Exchange Commission (the "2016 Rule suance of Show Cause Letters instead of the required Formal 111 uall constituted a violation of its right to due process.14 In this sregar Appellant argued that the FLCD's reliance on SEC Resolution 718 series of 2016 was misplaced as the same cannot be considered a binding rule for not having been published even in the Commission's website.15

The FLCD countered that the Appellant was not denied of its right to due process since it was given opportunity to refute the allegations of the Complainants which were laid down in the Show Cause Letters/Comment Letters, and to present its defense when it submitted its Position Paper.16

At the onsetemphasis should be made of the fact that the instant case partakes of the nature of an administrative action, which is determined in an administrative proceeding. In our jurisdiction, it is a

evidence are not strictly applied in administrative proceedings,17 where settled jurisprudential rule that the technical rules of procedure and

the quantum of proof necessary to sustain a finding is merely substantial evidence,18 or that amount of relevant evidence a reasonable mind might

15 Ibid. Pars.26,27, 29 and 31. have to be sustained for as long as it is supported by substantial evidence that the respondent has committed the acts stated in 14 Ibid. Par.24 1 Comment on the Appeal Memorandum. See page 2. 17 "Further, administrative bodies are not bound by the technical niceties of law and procedure and the rules obtaining requirements,subject to the observance of fundamental and essential requirements of due process in justiciable cases presented G.R. No.140079.March 31,2005 the complaint or formal charge. As defined,substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion. This is different from the quantum of proof required in criminal proceedings which 13 Appeal.Par.15.See also Reply.Pars.3,6 and 7 in courts of law.Administrative tribunals exe administrative due process ca Administrative proc e +h em. In administrative proceedings, technical rules of procedure and evidence are not strictly applied and ceedings are governed by the substantial evidence rule." A finding of guilt in an administrative case would Inot be fully equated with due process in its strict judicial sense." (Samalio vs Court of Appeals. ercising quasi-judicial powers are unfettered by the rigidity of certain procedural

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accept as adequate to support a conclusion. In adopting these jurisprudential precepts, Section 1-4(a), Rule I, Part I of the 2016 Rules provides the purpose for the same, to wit:

inexpensive determination of every action and proceeding before the Commission and to carry out the objectives of the laws it is public interest, to secure a just, prompt, expeditious, and mandated to implement." (Emphasis supplied) "These rules shall be liberally construed and administered to promote

implement the laws administered by it by promptly and expeditiously passing upon the actions filed with it, unhampered by the technical rules of procedures obtaining in the courts of justice,Section 5-1,Rule I, Part I Thus, to ensure that the Commission is able to effectively

of the 2016 Rules specifically grants the Commission the power and authority to suspend the application of the Rules, to wit:

interest, the Commission may, in any particular manner, exempt it and reasonable procedure to improve the delivery pf public service disposition of cases." (Emphasis supplied) "In the broad interest of justice and in order to best serve public from these Rules in exceptional cases and apply such suitable, fair and to assist the parties in obtaining a speedy and judicious

Be that as it may, the relaxation of the rules of procedure and

in jurisprudence that in administrative case, due process is satisfied compliance with the quantum of evidence required in administrative proceedings does not give this Commission the authority disregard the In this regard, this Commission is fully cognizant of the rule established demands of fair play which is guaranteed under our 1987 Constitution.

when respondent is afforded the opportunity to explain his/her side,or to seek reconsideration of the action/ruling which he/she is assailing, to Wt:

administrative proceedings, as in the case at bar, procedural due process simply means the opportunity to explain one's side or the opportunity to seek a reconsideration of the action or ruling heard, either through oral arguments or pleadings, is accorded, there is "The essence of procedural due process is embodied in the basic requirement of notice and a real opportunity to be heard. In complained of. 'To be heard' does not mean only verbal arguments in court; one may also be heard thru pleadings. Where opportunity to be

necessitates a finding of guilt of the accused beyond reasonable doubt. The Ombudsman, in ordering the withdrawal of the criminal complaints against respondent was simply saying that there is no evidence sufficient to establish her guilt beyonc reasonable doubt which is a condition sine qua non for conviction. Ergo, the dismissal of the criminal case will not foreclose administrative action against respondent.(Velazques vs Hernandez.G.R.No.150732. August 32,2004)

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in Vivo v. Philippine Amusement and Gaming Corporation as follows: no denial of procedural due process." This was extensively discussed

necessary, and technical rules of procedure are not strictly applied. Ledesma v. Court of Appeals[(565 Phil.731,740 process in administrative proceedings in this wise: administrative proceedings, this means a fair and complained of. Administrative due process cannot be fully equated with due process in its strict judicial sense, for in the former a formal or trial-type hearing is not always [2007])] elaborates on the well-established meaning of due investigation is at the very heart of procedural due process. The essence of due process is to be heard, and, as applied to reasonable opportunity to explain one's side, or an opportunity to seek a reconsideration of the action or ruling The observance of fairness in the conduct of any

action or ruling complained of."19 (Emphasis supplied) due process is simply to be heard, or as applied to administrative proceedings, an opportunity to explain one's side, or an opportunity to seek a reconsideration of the x xx Due process, as a constitutional precept, does not charges and giving reasonable opportunity for the person so charged to answer the accusations against him constitute the minimum requirements of due process. The essence of always and in all situations require a trial-type proceeding. Due process is satisfied when a person is notified of the charge against him and given an opportunity to explain or defend himself. In administrative proceedings, the filing of

conducted by the FLCD, and filed a Motion for Reconsideration, all of answer the said allegations, thus giving the latter the opportunity to addressed all the Show Cause Letters, participated in the conference which were admitted, given due course and considered by the FLCD in the Assailed Order and the Assailed Resolution. opportunity to explain its side, or put up its defense. In this regard, We Appellant has allegedly violated, they also directed the Appellant to explain its side. In fact, the records will bear that Appellant formally note that the Show Cause Letters/Comment Letters did not only issued Show Cause Letters/Comment Letters, the same did not automatically resulted in the denial of Appellant's right to due process because the subsequent proceedings obtaining therefrom show that Appellant was informed of the nature of charges, and was given ample disclosed the names of the Complainants, and the laws/regulations which In the instant case, the records show that while the FLCD merely

1 Disciplinary Board, Land Transportation Office v.Gutirrez (G.R. No.224395, July 3, 2017).

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instant Appeal, Appellant filed a Reply to FLCD's Comment with Motion for Leave, and a Manifestation with Motion for Early Resolution,where it Moreover, this Commission is cognizant of the fact that in the

was able to reiterate and/or expound on its arguments, and adduce additional evidence to support its position.The said pleadings were given due course, admitted, and will be considered by this Commission in passing upon the matters/issued presented in the instant Appeal.

showing that Appellant actively participated in the proceedings of the Verily, these factual circumstances and pieces of evidence, all

negate its allegation that it was denied of the right to due process. instant case, and exhaustively presented its position and arguments,

B. Appellant violated MC No. 18

and the TILA in relation to MC No. 7. The settlement of the complaints filed by the Complainants did not moot the issues presented in the instant case

in not dismissing the complaints against it, arguing that the settlement The Appellant maintains that the FLCD committed reversible error

complaints.20 and resolution of the same mooted the issues presented in the said

This Commission does not agree with Appellant

and a CA,both of which partakes of the nature of a permit,which requires for its continued enjoyment, not being a contract from which a right can be demanded from the State. Thus, the failure of Appellant, or any FC or full compliance by the grantee of all applicable laws,rules and regulations It bears emphasis that Appellant is a grantee of a primary franchise

sanctions, including the suspension or revocation of its license.21 LC for that matter, to comply with the provisions of the applicable laws, rules and regulations may result in the imposition of the appropriate

where the Supreme Court sustained the revocation of the issuer's The doctrine in SEC v. Universal Rightfield Property Holdings, Inc.22

22 G.R. No. 181381. July 20, 2015. 20 Appeal. Pars. 38, 69 to 71 21 See Section 9 of R.A.No.9474;Sec.16 in relation to Sec.6d of R.A.No.11765; and MC No.18 relating to revocation of CA

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registration of securities, and its license to sell the same for failure on the part of the licensee to comply with the applicable laws, rules and regulations, is instructive, to wit:

administrative hearings and make decisions, it does so in the course of "Rather, when the SEC exercises its incidental power to conduct the performance of its regulatory and law enforcement function.

Significantly, unlike in Globe Telecom, Inc. where the Court ruled that the fine imposed by the NTC without notice and hearing, was null and

(Emphasis supplied) void due to the denial of petitioner's right to due process, the revocation of URPHI's registration of securities and permit to sell them to the public cannot be considered a penalty but a withdrawal of a privilege,which regulatory power the SEC validly exercised after giving it due notice and opportunity to be heard."

including suspension or revocation of licenses, prescribed under appropriate laws, rules or regulations,23 it is performing an important When the Commission imposes the appropriate penalties,

franchises/permits fully complies with such laws, rules or regulations.24 regulatory function of ensuring that all regulated entities and grantees of

finds that there is no need to belabor the issue on whether Appellant After carefully considering the records of the case,this Commission

violated MC No.18 and the TILA in relation to MC No.7 in relation to the Complainants, as the fact of violation was admitted by no less than Appellant itself. By claiming that the instant case has been rendered moot after the complaints of the Complainant nts were "settled and resolved"25 Appellant has,in effect judicially admitted26,albeit impliedly,the veracity of the complaints against it for violation of MC No. 18,and the TILA in relation to MC No.7,to wit:

in the future."27 harassment correspondence to Mr. Granaderos and that immediate actions have been taken to prevent any similar incidents from occurring the Respondent-Appellant concluded that one of its personnel sent the "Xxx Additionally, based on the results of the investigation conducted

27 Appeal. Par.57 23 Sec. 5 (f) and (m) of the SRC. 25 Appeal. Par. 69 need for proof with respect to the matter or fact admitted. It may be contradicted only by a showing that it was made throug palpable mistake or that no such admission was made." (Agbayani vs Lupa Realty Holding Corporation, G.R. No. 201193. June 10. 24Sec.5d) of the SRC admission and failed to refute that admission during the said proceedings despite the opportunity to do so. A judicial admission is an admission, verbal or written, made by a party in the course of the proceedings in the same case, which dispenses with the 2019 "The foregoing transcript of the preliminary conference indubitably shows that counsel for petitioners made a judicia

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regulations, implemented by the Honorable Commission."28 Service Agreement. It assured the FLCD that it has a stringent screening and admission process for the personnel hired by its third-party collecting agent to ensure strict adherence to all laws, rules, and "Xxx. The Respondent-Appellant clarified that it had outsourced its debt collection services to a third-party company under a Debt Collection

Technology Inc. ("Triwave"Y, appellant's third-party provider handling collection from delinquent borrowers. Xxx. "Appellant has terminated its contract with Triwave Information

("SECURE"), a company with global experience in collecting industry. Replacing Triwave is SECURE INFORMATION TECHNOLOGY CORP Xxx."2

punished, which may include contract termination."30 "Xxx. Appellant will ensure that SECURE adopts zero tolerance for violations of MC 18 regulations, which violations will result in termination of employment of the violators. SECURE itself will be

of MC No. 18 and the TILA in relation to MC No.7,were backed by evidence. complaints of the Complainants, and even to have replaced Triwave with SECURE,if it was not convinced that the allegations against it for violation It makes no sense for Appellant to have proactively settled the

that it should not be held liable for the violations of its third-party collecting agent (or employees), invoking the relevant provisions of the Civil Code on Agency.31 In the same manner, We don't find merit in Appellant's argument

has unwaveringly applied is that the provisions of positive law are operate to govern and/or limit the relations of the contracting parties, tol Wit: deemed written into the contracts of private individuals, and the same A well-settled jurisprudential principle which the Supreme Court

their freedom to stipulate and the binding effect of contracts. This argument is misplaced. The Civil Code provides: "Severina's heirs anchor their claim on the kasunduan, stressing on

stipulations, clauses, terms and conditions as they may ARTICLE 1306. The contracting parties may establish such

31 Reply to FLCD's Comment with Motion for Leave. Pars. 38, 41, 43 and 44. 28 Ibid. Par. 62. 29 Manifestation with Motion for Early Resolution. Pars. 1 and 2. 30 Ibid. P

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morals, good customs, public order or public policy. deem convenient provided they are not contrary to law,

It is basic that the law is deemed written into every contract. Although a contract is the law between the parties, the provisions of positive law govern the relations between the parties."32 (Emphasis supplied) which regulate contracts are deemed written therein and shall limit and

Applying the afore-quoted doctrinal principle, We cannot sustain Appellant's plea for exemption of liability because Section 13 of Republic

solidarily liable with their third-party service providers, is deemed Act No. 11765, which expressly makes financial services providers

Wit: written into the Service Agreement between Appellant and Triwave,to

"The financial service provider shall be responsible for the acts or

marketing and transacting with financial consumers for its financial omissions of its directors, trustees, officers, employees, or agents in limited to, debt collection, with financial consumers for its financial products and services." products or services. The financial service provider shall be solidarily liable with accredited third-party service providers for their acts or omissions in marketing and transacting, which may include, but not

C. The penalty of revocation of

Appellant's Certificate of

warranted on record. Registration and CA is not circumstances and evidence by the

Appellant maintained that the FLCD committed reversible error in revoking its primary license and CA, arguing that such penalty is disproportionate in the light of the facts,specifically that this is allegedly

argued that pursuant to the existing rule of exhausting all available the first time that it was charged for violation of MC No. 18. Appellant

the opportunity to take corrective measures and demonstrate that it deserves to continue operating as a lending company.33 remedies before imposing the penalty of revocation,it should be afforded

The FLCD,on the other hand, countered by reiterating its position

numerous complaints that it received showed not only a pattern of unfair that the penalty of revocation was proper and appropriate, as the

33 Appeali. Pars. 79, 80, and 81. See also Reply. Pars.26, 27, 32, and 36. 32 Heirs of San Miguel vs Court of Appeals.G.R.No.136054. September 5,2001

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debt collection practice, but also the gravity of the offense. In this regard, the FLCD maintained that while only six (6) of the complaints progressed into formal complaints, the fact that it received a total of one thousand eighty-six (1,086) complaints allegedly against Appellant disclose a pattern of abusive collection practices,which are circumstantial evidence that supports and warrants the imposition of the penalty of revocation

We agree with Appellant that the attendant facts and circumstances, considered in their entirety, doesn't support the imposition of the supreme penalty of revocation.

Section 5(m)34 of the SRC and Section 179 (k)35 of the RCC provide for the express grant to the Commission of the power to suspend or revoke the certificate of registration of corporations. On the other hand, Section 9(f)36 of the Lending Company Regulation Act of 2007 provides for the power of the Commission to suspend or revoke a CA issued to an LC or FC.

In the exercise of its regulatory power to penalize and impose the appropriate sanction(s) upon a regulated entity found to have violated the laws,rules or regulations administered by the Commission,We have consistently adopted the rule that revocation of a corporation's franchise and/or the secondary license issued to it is a penalty of last resort. In fact, in a number of cases where this Commission was called-upon to review and pass-upon a decision/resolution of an operating department where

remedy of dissolving a corporation, or revoking a franchise/license must the penalty of revocation was imposed, this Commission reiterated and was guided by the following equally important rules: (a) the drastic

be exercised with great caution, to the extent that all remedies must be exhausted before imposing the harshpenalty o dissolution/revocation;37 (b) that revocation will only be resorted if all

powers and functions: 34 "Section 5. Powers and Functions of the Commission. - 5.1. The commission shall act with transpare the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions provided by this code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses law, ency and shall have the

(m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnership or associations, upon any of the gro un provided by law 3s "Section 179. Powers, Functions, and Jurisdiction of the Commission. - The Commission shall have the power and authority to:

36"SEC.9.Authority ofthe SEC-The SEC is hereby authorized to (i) Suspend or revoke the certificate of incorporation after proper notice and hearing:"

37 See FCash Globai Lending, Inc. vs CGFD (SEC En Banc. Case No. 12-20-480., March 2, 2021) citing 16A Fletcher Cyc Corp [Perm Ed] sec.8035 at p.155 (f) Impose such administrative sanctions including suspension or revocation of the lending company's authority to operate and the imposition of fines for violations of this Act and regulations ssued by the SEC in pursuance thereto.

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the available remedies have been exhausted;38 and (c) that the erring corporation must be given an opportunity to correct any misdeed, or to comply with the law.39 The doctrine in the old (yet still controlling) case of Government of the Philippine Islands v. El Hogar Filipino40 which embodies the foregoing rules is instructive, to wit:

"The question then arises whether the failure of the respondent to get rid of the San Clemente property within five years after it first acquired the deed thereto, even supposing the five-year period to be properly

hesitate to say that in our opinion the corporation has not been counted from that date, is such a violation of law as should work a forfeiture of its franchise and require a judgment to be entered for its dissolution in this action of quo warranto. Upon this point we do not

and its thousands of shareholders the extreme penalty of the law shown to have offended against the law in a manner that should entail a forfeiture of its charter. Certainly no court with any discretion to use in the matter would visit upon the respondent

as a consequence of the delinquency here shown to have been committed.

XXX XXX XXX

respondent would not be an appropriate remedy in this case. We do not This provision clearly shows that the court has a discretion with and that there are certain misdemeanors and misusers of franchises which should not be recognized as requiring their the buying and holding of real property for speculative purposes in absolute and unconditional order for the dissolution of the corporation, itself of the San Clemente property many months prior to the institution of this action. It is evident from this that the dissolution of the of course undertake to say that a corporation might not be dissolved for offenses of this nature perpetrated in the past, especially if its conduct had exhibited a willful obduracy and contempt of law. We content ourselves with holding that upon the facts here before us the penalty of dissolution would be excessively severe and fraught with consequences Sugar Estates Development Co. (38 Phil.,15), it was found that the offending corporation had been largely (though indirectly) engaged in contravention of its charter and contrary to the express provisions of law. Moreover, in that case the offending corporation was found to be still interested in the properties so purchased for speculative purposes at the time the action was brought. Nevertheless, instead of making an the judgment of ouster was made conditional upon the failure of the corporation to discontinue its unlawful conduct within six months after final decision. In the case before us the respondent appears to have rid respect to the infliction of capital punishment upon corporations dissolution. In Government of the Philippine Islands vs. Philippine

3 In theMatter of the Petitionfor Involuntary Disolution ofStarconnection,Inc.(SEC CaseNo.06-09-271,January7,2010 38 See Marbel Institute of Technical College, et al. vs. Agapito Lubaton, et al. (SEC Case No. 05-09-0336.October 18, 2016) 40G.R.No. 26649.,13 July 1927

In the Matter of: Copperstone Lending, Inc. SEC En Banc Case No. 06-24-545 Page 15 of 18 Decision

altogether disproportionate to the offense committed." (Emphasis supplied)

It should nonetheless be emphasized that the rule on corporate revocation as a last result has no application in cases where the violation/infraction is attended by fraud, serious misrepresentation, illegality, or if there is a repeated violation. Thus, the Commission imposed the penalty of revocation (which was sustained by the Supreme Court) on a corporation (a) that carried out an unlawful and fraudulent investment-taking scheme;41 (b) whose incorporators misrepresented their identities by using fictitious names or aliases;42 (c) that continuously failed to file the required reports, being a registered issuer of securities, notwithstanding prior revocation of its license;43 and (d) whose incorporators were not unit owners of the condominium which is required under the old Corporation Code.44

Be that as it may, in the exercise of its power to penalize regulated entities, the Commission has the discretion to impose the appropriate penalties based on its appreciation of the facts, attendant circumstances, and evidence adduced by the parties. This is clear in Section 5 of MC No. 18,which implements the Lending Company Regulation Act of 200745,to Wit:

"Subject to the facts, circumstances and gravity of the offense, the Commission, at its discretion, may impose a fine of not less than twice the fine for the second offense but not more than P1 Million (1,000,000) Pesos; or suspension of lending or financing activities for a period of sixty (60) days; or Revocation of Certificate of Authority to operate as a Financing or Lending Company, as appropriate for each circumstance." (Emphasis supplied)

The afore-quoted provision implements a policy of imposing a penalty which is commensurate to the gravity and seriousness of the violation, consistent with, and considering all the attendant facts and/or circumstances which the evidence bears. In other words, from the perspective of the regulation, a penalty imposed is considered appropriate if it has considered the violation i.e. the acts and

43 Securities and Exchange Commission vs Universal Rightfield Property Holdings,Inc.(G.R.No.181381.July 20,2015 41 Kapa-Community Ministry International, Inc. vs EIPD of the SEC (G.R. No. 259600. July 27, 2022): See also In the Matter of: Organico Agribusiness Ventures Corp.SEC En Banc Case No.08-19-462 Skyworld Condominium Owners Association,Inc.vs Securities and Exchange Commission. (G.R.No.95778.July 17,1992 42 Care Best International, Inc.vs Securities and Exchange Commission (G.R.No.215510.March 16,2015 45 "SEC.9. Authority of the SEC.The SEC is hereby authorized to

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operate and the imposition of fines for violations of this Act and regulations issued by the SEC in pursuance thereto. (f Impose such administrative sanctions including ension or revocation of the lending company's authority to

In the Matter of: Copperstone Lending, Inc. SEC En Banc Case No.06-24-545 Page 16 of 18 Decision

circumstances attendant in the commission thereof, as well as the those done by the perpetrator after committing the violation. While it is true that subsequent actions will not negate the fact of violation,especially so that what is involved is a special law/regulation where the mere commission of the prohibited act justifies the imposition of the penalty, the same is nonetheless important for purposes of determining the appropriate penalty to be imposed. A contrary position would render nugatory the grant (and exercise of) the discretion by the Commission to determine and impose the appropriate penalty based on the attendant "facts, circumstances and gravity of the offense"

In the instant case, the evidence presented by the FLCD showed that Appellant indeed violated MC No. 18 and/or the TILA in relation to MC No.7. Moreover, as pointed out earlier, the statements made by Appellant in its pleadings which were quoted in the earlier part of this Decision constitute an admission of such findings of violation by the FLCD. These should properly be considered in determining the appropriate penalty to be imposed upon the Appellant.

Be that as it may, the evidence on record will equally bear that during the pendency of the instant case, Appellant has implemented policies and processes, and carried out actions which, taken together, reveal its sincere efforts to address its shortcomings, and comply with the provisions of applicable laws, rules and regulations. For one, Appellant has terminated the services of Triwave,its previous third-party collection agent, which has been replaced by Secure.46 While the replacement of Triwave might be considered as an admission by Appellant that Triwave

and in ensuring that the same violation is prevented. For this purpose, and will adopt a policy of zero tolerance to violations of MC No. 18.47 nonetheless indicative of Appellant's seriousness in correcting a mistake, has indeed employed unfair debt collection practices, the same is Appellant has manifested that it will monitor the performance of Secure,

Appellant also submitted evidence showing that it has replaced its lending app, and will use a new one that is compliant with the TILA.48

Appellant's resolute intent to carry out its lending business in compliance Thesecircumstances constitute substantialevidence showing

with MC No. 18, as well as other applicable laws, rules and regulations.

In the instant Appeal, where the Commission is called upon to exercise its discretion on whether to sustain the imposition of the

46 Manifestation with Motion for Early Resolution. Pars. 1 & 2 48 Ibid. pars. 9 & 10. 47 Ibid. Pars. 3, 5 and 6.

In the Matter of: Copperstone Lending, Inc. SEC En Banc Case No.06-24-545 Page 17 of 18 Decision

the violation, as well as the subsequent actions made by Appellant should supreme penalty of revocation of the primary and secondary franchises of Appellant, the facts and circumstances relating to the commission of imposed a penalty that is "appropriate", consistent with the above- be considered. Only by doing so can this Commission be truly said to have

quoted regulatory mandate. The same will likewise ensure that the

properly; removing any doubt that the same is tainted with arbitrariness, exercise by the Commission of the discretion granted to it is carried out

vindictiveness, irregularity or abuse.

Thus, taking into consideration all the attendant facts and circumstances, We agree with Appellant that the penalty of revocation of its primary and secondary franchises is excessive and too harsh. While the fact of violation is not disputed, Appellant was nonetheless able to show that it has reformed, and has even already laid down and/or

the applicable laws effected policies and procedures that are designed to fully comply with uos GC OT This Commission is cognizant of the risk (and the cost) I that TTTK in effecting such reforms in the interim, even G prayer for the reinstatement of mind, these subsequent actions of A sincerity to conduct its business affairs in a Vith statutorv. gulatory and legal requirements. This justifies the grant of a second lease of Appellant's corporate life.

imposing the supreme penalty of revocation at this time, We are not It must be emphasized though that while this Commission is not

with accordingly, which may result in the revocation of its primary and they are. Unfair or abusive debt collection and recovery practices are serious violations which are punished by law. The instant Decision should therefore be considered by Appellant as a stern and final warning MC No. 7, and other applicable laws, rules and regulations will be dealt that another,or a repeated violation of MC No.18,the TILA in relation to secondary franchises. saying that Appellant's violation is not reprehensible or serious, because

is hereby GRANTED. The Order dated 11 April 2024 (which was affirmed by the Resolution dated 21 May 2024) of the FLCD is hereby MODIFIED. The following penalties are hereby imposed upon Copperstone Lending Inc.: WHEREFORE, premises considered, the Memorandum on Appeal

In the Matter of: Copperstone Lending, Inc. SEC En Banc Case No. 06-24-545 Page 18 of 18 Decision

(a A fine of Pesos: Twenty Thousand & 00/100 (Php20,000.00) for its first violation of RA 3765 or the TILA in relation to MC

No.7, Series of 2011 on Implementing the TILA to Enhance

b A fine of Pesos: One Million & 00/100 (Php1,000,000.00) for violation of MC No.18; and Loan Transaction Transparency;

(c The Certificate of Authority of Copperstone Lending Inc. is suspended for sixty (60) days.

SO ORDERED.

Makati City, Philippines.

M

EMILIO B. AQUINO

Chairperson

JAVEYPAUL D. FRANCISCO KARLQ S.BELLO

Commissioner Commissioner

MCJILL BRYANT T. FERNANDEZ ROGELIO V.QUEVEDO

Commissioner Commissioner