SEC En Banc Case No. 04-14-327Nationwide Development Corporation, Appellant vs. Atty. Cynthia Corazon G. Roxas, Appellee

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

CORPORATION, rep. by ATTY. CONTRERAS, JR., NATIONWIDE DEVELOPMENT DEOGRACIAS G. Appellant,

-- versus - SEC En Banc Case No. 04-14-327

ATTY. CYNTHIA CORAZON G. ROXAS, Appellee.

DECISION

12 August 2013. 2014 (the "Appeal") filed by Appellant Nationwide Development Corporation registration of Volume IX of the Stock and Transfer Book (STB) procured on (NADECOR) on 15 April 2014 praying for the reversal of the Order dated 18 March 2014 of the Company Registration and Monitoring Department "CRMD), and the issuance of a new judgment recalling and cancelling the Before this Commission is the Memorandum on Appeal dated 15 April

THE PARTIES

Pasig City. Appellant is represented by its counsel of record, Zamora Poblador existing under Philippine laws having been issued a Certificate of at Suite 203, Jollibee Centre Building, San Miguel Avenue, Ortigas Center Incorporation bearing SEC Registration No. 11636, and with principal office Vasquez & Bretana Law Office. Appellant NADECOR is a corporation duly organized and validly

citizen, of legal age, and is represented by her counsel of record, Villaraza and Angangco Law Office. Appellee Atty.Cynthia Corazon G.Roxas (Atty.Roxas) is a Filipino

RELEVANT FACTS

"STB) of NDC were registered with the Commission, while Volumes IV to On 14 September 1977, Volumes I to III of the Stock and Transfer Book

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VIII were simultaneously registered on 21 June 2011 in anticipation of a planned public offering.

John Engle (the New Board). Calalang, Jose G. Ricafort, Jose P.De Jesus, Roberto P. Romulo,Alfredo I. Meeting (the "2011 ASM) where Luis Manuel Gatmaitan, the Corporate election of the new members of the Board of Directors (BOD), Conrado Ayala,Victor P. Lazatin,Ethelwoldo E.Fernandez, Leocadio Nitorreda and Secretary, attested to the presence of a quorum, and which resulted in the On 15 August 2011, NADECOR held its Annual Stockholders'

Order), the RTC upheld the complaint and declared void and of no force and effect the 2011 ASM.2 Grace Ricafort and Maria Teresa Flora Santos, who all claimed to be stockholders of record of NADECOR, filed a complaint with the Regional Trial Court (the RTC seeking the nullification of the 2011 ASM and the election of the New Board.In its Order dated 21 December 2011(the RTC On 20 October 2011,Corazon Ricafort, Jose Manuel Ricafort, Marie

enjoining the implementation of the RTC Order, and which subsequently made permanent the WPI and nullified the said RTC Order.3 of four (4) separate petitions for certiorari before the Court of Appeals (the "CAwhich granted the application for Writ of Preliminary Injunction(WPI The RTC Order resulted in the filing by NADECOR and the New Board

meeting held on 16 June 2012. Mr. Calalang, then demanded from Atty. NADECOR in his possession, including the STB within forty-eight (48) hours from receipt of the letter.4 recognized by the CA has removed them from their respective positions as Contreras the immediate turn over of all documents and records of G. Contreras, Jr.Atty. Contreras) and Atty. Lemuel Santos that the BOD Corporate Secretary and Assistant Corporate Secretary during the special In a letter dated 20 June 2012, Mr. Calalang informed Atty. Deogracias

corporate secretary, respectively. even date, the Ricafort-de Jesus Group also held another ASM wherein they and Appellant Atty. Contreras were elected as members of the BOD and members of the Romulo-Calalang Group were elected as members of the BOD and Appellee Atty. Roxas was elected as the corporate secretary. On On 22 August 2012,NADECOR held its 2012 ASM where the

2 Pars. 3.2 and 3.4 of the Verified Answer Ad Cautelam 4 Annex "D" of the Petition; Par. 3.11 of the Answer information: Principal Office Address: Unit 1401 14/F Pearl Bank Centre 146 Valero Street, Salcedo Village, Makati City / President: Conrado T. Calalang, Chief Operating Officer:Leocadio Nitorreda, Corporate Secretary: Cynthia Corazon G. Roxas. 5 As per 2013 GIS of NDC, received by the Commission on 18 September 2013,with the following 3 Pars. 3.6 to 3.10 of the Answer 1 See Ricafort, et. al. vs Dicdican, et. al.(G.R. Nos. 202647-50, March 9, 2015

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President, respectively, of the corporation, with Atty. Roxas as the Corporate Secretary. September 2012 and 18 September 2013,indicated that Roberto R.Romulo and Conrado T. Calalang (the Calalang Group were the Chairman and Sheets (GIS) with the Commission. The GIS filed on 15 June 2012 and 22 August 2013 indicated that Jose G.Ricafort and Jose P.de Jesus (the Ricafort Group were the Chairman and President, respectively, of the corporation with Atty. Contreras as the Corporate Secretary; while the one filed on 21 Thus,in 2012 and 2013,NADECOR filed two 2) General Information

as the duly elected Corporate Secretary of NADECOR, applied for the that NADECOR is not in possession of any other copy of the volume being registered. On the basis thereof, the application was granted by the CRMD which registered Volume IX of the STB. be an additional volume to the preceding registrations. Appellee represented registration of Volume IX of the STB of NADECOR which was intended to On 12 August 2013,herein Appellee Atty.Roxas,representing herself

thru Appellee's claim that NADECOR does not possess any other copy of the volume. alleged that (a Volume VIII of the STB was not completely filled-up;(b) Volume VIII and all the other volumes of the STB are not lost and are in the custody of NADECOR; and (c)Volume IX was registered under false pretexts corporate secretary of NADECOR,filed a Petition to Cancel and Void Stock and Transfer Book (the Petition, therein alleging that the registration of Volume IX was obtained through fraud. In support thereof, Atty. Contreras On 16 August 2013, Atty.Contreras, also representing himself as the

insisted that the CRMD should have required Appellee to submit the previous volumes or present an affidavit of loss as a condition for the registration of in possession of any other copy of the volume being registered was false because she allegedly knew that the Ricafort Group was in possession of Volume IX of the STB. reversible error in registering Volume IX because the irregularity of the application was apparent i.e. Atty. Roxasdeclaration that NADECOR is not Volumes I-VIII as she personally demanded for the same. Atty. Contreras thus Appellant Atty. Contreras also maintained that the CRMC committed

manifested that its incumbent BOD did not authorize the filing of the Petition by Atty. Contreras, and prayed that the Commission deems the Petition to have been withdrawn. Dy Tuazon Ty & Coloma Law Office, and acting through the Calalang Group, filed a Motion to Withdraw Petition dated 31 October 2013, where it On 6 November 2013, NADECOR, through Counsel Molo Sia Velasco

Cautelam dated 2 November 2013 (the Answer) praying for the dismissal On 13 November 2013, Appellee filed her Verified Answer Ad

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of the Petition on the ground, among others, that Atty. Contreras had no was in order as the other volumes were allegedly inaccessible. authority to file the same and that the registration of Volume IX of the STB

cannot be withdrawn by Atty. Roxas who represents the Calalang Group. Petition which was filed by the Ricafort Group represented by Atty. Contreras, Poblador,Vasquez & Bretana, and acting through the Ricafort Group, filed an Opposition and Reply reiterating its prayer for the issuance of an order cancelling and declaring void Volume IX of the STB. It maintained that the On 25 November 2014, NADECOR, through Counsel Zamora,

held, among others that the RTC erred in nullifying NADECOR's 15 August yet to be resolved by the Supreme Court. 2011 ASM. Appellant thereafter filed a Motion for Reconsideration which is dismissed the petitions in G.R. Nos. 202647-50 and G.R. Nos. 205921-24, and In its Decision promulgated on 9 March 2016, the Supreme Court

ISSUE

Did the CRMD commit reversible error in approving the application and registering Volume IX of the STB of NADECOR?

RULING

basis thereof. instant Appeal is the Order of the CRMD which held that the registration of of NADECOR and/or a duplication thereof, and dismissed the Petition on the Vol.IX of the STB of NADECOR did not result in the creation of a new STB At the outset, it should be emphasized that what is being assailed in the

the registration of Vol. IX of the STB.7 insist that the CRMD seriously erred in registering Vol. IX of the STB of separately kept by Appellee and the Calalang Group of NADECOR. Citing the case of Provident International Resources Corporation vs. Venus, this Commission was remiss in performing its duty to ensure that a corporation has only one set of STB because the CRMD was aware that Volumes I-VII were existing and in their possession. Appellants also maintained that CRMD should have required Appellee to submit an affidavit of loss as a condition for NADECOR which was a second and different set of STB, procured and Appellants maintained that by allowing the registration of Vol. IX of the STB In the Appeal, Atty.Contreras and the Ricafort Group of NADECOR

application and registered Vol. IX of the STB because the same was merely Appellee countered by arguing that the CRMD correctly granted the

6 Par, No. 2 (Page 9) of the Appeal 7 Par. No. 18 (Page 15) of the Appeal

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turn over possession of the same notwithstanding his removal as corporate an additional volume of NADECOR's STB, and not a new and separate STB. The application was necessitated by the alleged refusal of Atty. Contreras, who admitted to be in possession of the first eight (8) volumes of the STB, to secretary.

it verified show that NADECOR has only one (1) STB, and pointed out that and transfer book that was being registered i.e. Vol. IX is an additional volume the application submitted by Appellee contained a certification that the stock to the existing eight (8) volumes. that the registration of Vol.IX of the STB did not create a new STB.In support thereof, the CRMD stated that the records on file with the Commission which In its Order, the CRMD justified the dismissal of the Petition by holding

any director or shareholder, thus: law in effect when the Petition was filed, requires all stock corporations to keep and maintain a stock and transfer book at its principal office or at the office of its stock and transfer agent, which should be open for inspection by Section 74 of Batas Pambansa Blg.68(the Corporation Code),the

carefully made. The protest of any director, trustee, stockholder or member when any director, trustee, stockholder or member entered or left the meeting must be noted in the minutes; and on a similar demand, the yeas and nays must be taken on any motion or proposition, and a record thereof on any action or proposed action must be recorded in full on his demand. corporation shall, at its principal office, keep and carefully preserve a record of all business transactions, and minutes of all meetings of stockholders or members, or of the board of directors or trustees, in which shall be set forth in detail the time and place of holding the meeting, how authorized, the notice given, whether the meeting was regular or special, if special its object. those present and absent, and every act done or ordered done at the meeting. Upon the demand of any director, trustee, stockholder or member, the time SECTION 74.Books to be Kept;Stock Transfer Agent.-Every

XXX XXX XXX

xxx" (Emphasis supplied) of stock made, the date thereof, and by and to whom made; and such other be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection of any director or stockholder of the corporation at reasonable hours on business days. Stock corporations must also keep a book to be known as the "stock and transfer book", in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any installment; a statement of every alienation, sale or transfer entries as the by-laws may prescribe. The stock and transfer book shall

8 Pars. 4.32 and 4.32 of the Verified Answer

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and their corresponding shareholdings in the corporation.1 In Lanuza v. Court of Appeals (the Lanuza Case), the Supreme Court defined a stock and transfer book in the context of the afore-quoted provision, and emphasized ownership of stocks, among others, which can be conveniently resorted to, accessed or relied upon by stockholders and directors: that it is a private document intended to be an accurate repository of the A stock and transfer book is the quintessential record of all stockholders

ownership of stock and like matters." (Emphasis supplied) or transfer of stock made, the date thereof and by and to whom made; and such other entries as may be prescribed by law. A stock and transfer book is necessary as a measure of precaution, expediency and convenience since it provides the only certain and accurate method of establishing the various corporate acts and transactions and of showing the installments paid and unpaid on all stock for which subscription has been made, and the date of payment thereof; a statement of every alienation, sale names and addresses of all stockholders arranged alphabetically, the "On the other hand, a stock and transfer book is the book which records the

corporations to register their STB with the Commission within thirty (30) days from the registration of their Articles of Incorporation. only one (1 STB under Sec.74 of the Corporation Code, the Guidelines for the Verification of the Paid-up Capital of Corporationsll require all In relation to its duty of ensuring that every corporation should have

another/new volume of the same STB; the first will violate the rule of keeping only one STB while the second will not. exercise his/her rights as stockholder.12 Moreover, considering that the STB is intended to be a record of the various corporate acts and transactions and the ownership of stock, it is not unusual for a corporation to secure and maintain multiple volumes which are all part of a single STB. Thus, what is prohibited is the registration of another/new STB and not the registration of and transfer book of the corporation, the same remains a private transaction and does not bind the corporation. Consequently, the transferee is unable to Until and unless the transfer of the shares of stock is duly recorded in the stock The importance of a stock and transfer book cannot be overemphasized.

Atty. Roxas, alleging that the same resulted in the creation of a new STB of NADECOR. The Commission however notes that except for its allegations CRMD in registering Vol.IX of the STB which was applied for by Appellee In the instant case, Appellant Atty. Contreras is assailing the act of the

issuance of stock certificates to the alleged transferee has no legal basis. x x x [T]he stock and transfer book is the basis for ascertaining the persons entitled to the rights and subject to the liabilities of a stockholder. Where a transferee is not yet recognized as a stockholder, the corporation is under no specific legal duty to issue stock certificates in the transferee's name.Teng vs SEC, G.R. No. 184332, February 17, 2016) SEC OGC Opinion No. 15-03, dated 3 July 2015, addressed to Mr. Zandro O. Babol. 11 dated June 25, 1975 transfer is not effective until it is recorded. Unless and until such recording is made[] the demand for the 10 G.R. No. 131394, [March 28, 2005], 494 PHIL 51-67 12In Ponce v.Alsons Cement Corporation, the Court stated that "[f]rom the corporation's point of view, the

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submission of an affidavit of loss13 Atty. Contreras failed to present any evidence showing that Vol. IX of the STB was a completely new STB of NADECOR which is what the law prohibits. relating to the irregularities committed by the CRMD in registering Vol. IX of the STB i.e. failure to require presentation of the other volumes and

confirm that NADECOR has only one (1) STB on file.15 to the extent of verifying the records of the Commission where it was able to of the STB on the basis of a finding that the same was an addition to the existing volumes and not a different STB. In support thereof, the CRMD went violations of law, rules or regulations unsupported by proof is not evidence,14 the Commission does not find any cogent reason to disturb the Order of the CRMD which sustained the legality and validity of the registration of Vol. IX On account thereof, and in the context of the rule that allegations of

as inexistent and not in her possession at the time of the application. the first eight (8) volumes and the submission of an affidavit of loss as there was no allegation that the STB of NADECOR or any of the volumes thereof, was lost or destroyed. What was being sought from the CRMD was merely the registration of a new volume i.e. Vol. IX which was certified by Appellant possession of any other copy of the volume being registered under this application or under previous registrations" which means that prior to its registration, Vol. IX was inexistent and not in her possession. Given these circumstances, the CRMS was thus correct in not requiring the production of the submission of an affidavit of loss as the same has no basis in law. As admitted by Appellants, the first eight (8) volumes are existing and in their possession. In her application, Appellee declared that NADECORis not in CRMD erred in not requiring the production of the first eight (8) volumes and Moreover, we find no merit in the argument of Appellants that the

completely filled up17. Appellant is in effect saying that corporations cannot new volumes until the latest volume is completely filled-up. the principal office of NDC16, and that Vol.VIII of the STB was not yet secure new volumes of their STBs, and the Commission cannot issue such registered Vol. IX of the STB because it was made aware through the pleadings filed that Vols. 1-XIII are existing, intact and were in his custody at Appellant Atty. Contreras however insists that CRMD erroneously

Appellant Atty. Contreras' position and argument have no basis in law.

16 Par.No.15page 15of the Appeal lack of merit.Morales, Jr.vs Carpio-Morales. G.R.No.208086, July 27,2016 15 See Par. 2 page 11) of the Order 17 Par. 7 (page 2 of the Petition 14 The basic rule is that mere allegation is not evidence and is not equivalent to proof. Charges based on mere suspicion and speculation likewise cannot be given credence. When the complainant relies on mere conjectures and suppositions, and fails to substantiate his allegations, the complaint must be dismissed for 13 see Par. Nos. 14 & 15 (page 5) of the Appeal

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the Commission which implements the law, the single STB which may or may not comprise of multiple volumes, is owned by only one (1) corporation and all entries therein necessarily bind the corporation as owner of such records and the persons affected thereby. simply because they all form part of one (1 STB. From the perspective of noted that the feigned lament of Appellant Atty. Contreras was negated by his four (4) volumes which was approved by the Commission on 21 June 2011.18 This shows that corporations can apply for, and the Commission can register new volumes of the same STB even before the latest volume is filled-up use and maintenance by a single corporation of more than one (1) STB. There is however no law which requires corporations to fill-up and complete the latest volume of their STBs before they can secure additional volumes. Corollarily, the Commission can approve and register new volume(s) of the same STB sans completion of the existing volumes. Relative thereto, We own admission that NADECOR applied for the simultaneous registration of It should be emphasized that what the law prohibits is the procurement,

Hence, contrary to the position and argument of Appellant, the maintenance same, changes from time to time. The foregoing finds support in the Lanuza may arise relating to entries in the STB, held that parties are not left without recourse or remedy because such entries are not conclusive and may be impeached or contradicted by competent evidence, thus: of only one (1) volume of STB will not guarantee the absence of erroneous is expected in a set up where the person(s) tasked to maintain and keep the Case where the Supreme Court, being cognizant of the possible conflicts that and/or conflicting entries therein which may result in confusion because this volume runs counter to the intent of the law as this will enable Appellee to already been ascertained and established that NADECOR has only one (1) given wide latitude of discretion in relation to the entries made in their respective STBs which are essentially considered as their private records make separate, independent and distinct entries, and result in confusion19 is not relevant to the determination of the issue in the instant case because it has STB consisting of nine (9) volumes. It bears emphasis that corporations are Moreover, the argument of Appellant that the registration of the new

records.20 written therein. In fact, it is generally held that the records and minutes of other competent evidence. Thus, parol evidence may be admitted to supply omissions in the records or explain ambiguities, or to contradict such records, is not in any sense a public record, and thus is not exclusive evidence of the matters and things which ordinarily are or should be a corporation are not conclusive even against the corporation but are prima facie evidence only, and may be impeached or even contradicted by "However, a stock and transfer book, like other corporate books and

18 Par. Nos. 3 and 5 (page 3) of the Appeal 2o Lanuza, supra note l1, 19 Par.Nos.3 to5(page 11 of the Appeal

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matters pending with the Supreme Court which relates to the validity of the pending with the Supreme Court who is yet to resolve the Motion for Reconsideration filed by Appellant. To do otherwise would render moot the ASM and the legitimacy of the directors elected therein, in violation of the principle of judicial courtesy which was explained in Oca vs Custodio21, to Wit said authority which is pending with the Supreme Court. Stated differently, the Commission cannot act on the matter relating to the allegation that Atty. Contreras acted without authority in filing the Petition because the same will involve passing upon the legitimacy of the Calalang Group who allegedly authorized such filing. This is an intra-corporate controversy that is currently registered by CRMD is part of the STB of NADECOR, the determination of the validity of the authority of the person who caused the filing and registration thereof is a matter that need not be resolved by this Commission because the same relates to the issue on the legitimacy of the source of the More importantly, considering that Vol. IX of the STB which has been

court. It is exercised as a matter of respect and for practical considerations. "Judicial courtesy is exercised by suspending a lower court's proceedings although there is no injunction or an order from a higher court. The purpose is to avoid mooting the matter raised in the higher

However, this principle applies only if the continuation of the lower court's proceedings will render moot the issue raised in the higher court. (Emphasis supplied)

Resources Corporation vs. Venus22, thus: corporate dispute which is already pending with the Supreme Court. The second issue on the other hand is administrative in nature and can thus proceed independently of the former as held in the case of Provident International with the implementation of the RCC, and can thus be acted upon in the instant case. The first issue goes into the very heart of the election contest, an intra- of Atty. Conteras, which is ultimately dependent on the legitimacy of its source i.e. the authority of the Calalang Group, the matter relating to the validity of the registration of Volume IX of the STB effected by CRMD is clearly within the regulatory authority of the Commission as the agency tasked Petition as the same requires a determination of the validity of the authority However, while the Commission cannot determine the validity of the

hearing), certificates of registration of corporations, partnerships and From the above,it can be said that the SEC's regulatory authority over private corporations encompasses a wide margin of areas, touching nearly all of a corporation's concerns. This authority more vividly springs from the fact that a corporation owes its existence to the concession of its corporate franchise from the state. Under its regulatory responsibilities, the SEC may pass upon applications for, or may suspend or revoke (after due notice and

21 G.R. No. 199825, July 26, 2017 22 G.R. No. 167041, June 17, 2008

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as well as implementing rules and directives of the SEC, such as may be impose fines or other penalties for violations of the Revised Securities Act, associations (excluding cooperatives, homeowners' association, and labor unions); compel legal and regulatory compliances; conduct inspections; and warranted.

recalling and canceling a STB that was erroneously registered. Considering that the SEC, after due notice and hearing, has the regulatory power to revoke the corporate franchise -- from which a corporation owes its legal existence -- the SEC must likewise have the lesser power of merely

controversies brought up by respondents. registration and monitoring of STBs, it is the body cognizant of the STB Contrary to the allegations of respondents, the issues involved in this case can be resolved without going into the intra-corporate secretary was indeed authentic, and duly registered by the SEC as early as September 1979. As the administrative agency responsible for the registration procedures, and in possession of the pertinent files, records and specimen signatures of authorized officers relating to the registration of STBs. The evaluation of whether a STB was authorized by the SEC primarily requires an examination of the STB itself and the SEC files. This function necessarily belongs to the SEC as part of its regulatory jurisdiction. the primary competence and means to determine and verify whether the subject 1979 STB presented by the incumbent assistant corporate Going to the particular facts of the instant case, we find that the SEC has

and necessarily within the regulatory jurisdiction of the SEC.(Emphasis As the regulatory body, it is the SEC's duty to ensure that there is only one set of STB for each corporation. The determination of whether or not the 1979-registered STB is valid and of whether to cancel and revoke the August 6, 2002 certification and the registration of the 2002 STB on the ground that there already is an existing STB is impliedly supplied)

cancel the registration of Volume IX of the STB of NDC. In view of the foregoing, this Commission finds no cogent reason to

hereby DENIED for lack of merit. The Order dated 18 March 2014 of CRMD is hereby AFFIRMED. WHEREFORE, premises considered, the Memorandum on Appeal is

SO ORDERED.

Pasay City, Philippines; 6 May 2021.

EMILIO B. IQUINO

Chair person

Nationwide Development Corp.vs. Atty.Roxas SEC En Banc Case No.04-14-327 Dane '1of 11 Decision

EPHYRO LUIS B.AMATONG Commissioner Aww JAVEY PAUL D. FRANCISCO Commissioner

KEWINLESTER K. LEE U Commissioner KARLQ $. BELLO Commissioner