SEC Adm. Case No. 11-11-137 In the matter of TERRACOTA VILLAS, INC.

Securities and Exchange Commission SEC Building, EDSA, Greenhills, Mandaluyong City Republic of the Philippines Department of Finance

EN BANG

In the matter of: TERRACOTA VILLAS, INC.

SEC Admin. Case No. 11-11-137 For: Revocation of Corporate Registration

PROSECUTION DEPARTMENT, ENFORCEMENT AND Petitioner. X

DECISION

Corporate Registration) of Terracota Villas, Inc. ("7erracota"2, dated 08 November 2011 filed by the Enforcement and Prosecution Department ('EPD'7 of the Commission on 23 November 2011. For resolution of the Commission En Banc is the Petition (for Revocation of

'2011, and released for service the day immediately after. This was returned unserved, thus, another Summons was issued on 26 January 2012 addressed to the Treasurer, but was also returned unserved. The Returns of the Process Servers submitted on 07 December 2011 and 04 April 2012 indicated that the addressees do not reside in the address stated in the Summons. Summons addressed to the company President was issued on 01 December

Answer, however, none was filed within said period. Manifestation with Motion filed on 09 July 2012. The published Summons gave Terracota thirty (30) days from date of iast publication within which to file its Publication, which was granted. Thus, Summons was subsequently published in the 25 May 2012 issue of the Philippine Daily Inquirer, as reported by EPD through its On 27 April 2012, the EPD filed a Motion for Leave to Serve Summons by

for resolution was issued on 06 August 2012. In view of Terracota's failure to file its Answer, an Order submitting the case

served at Mampan, Barangay Camachiles, Mabalacat City, Pampanga, citing its September 2012 was filed by Terracota. They question whether the Commission has Summons on Terracota and its officers. They further argue that instead of No. 5023 Banahaw Street, Olympia Village, Makati City, the Summons s hould have been acquired jurisdiction over it, citing that there was a failure to personally serve Belatedly however, on 05 September 2012, an Answer to Petition dated 05

Enforcement and Prosecution Department, Petitioner. Page 2 of 6 In the Matter of: Terracota Villas, Inc.

Board Resolution No. 002, approved in a special meeting of Terracota's Board of change the principal place of business of the corporation, as that would require an amendment of the Articles of Incorporation. Hence, for all intents and purposes, its principal office is still that stated in the Articles of Incorporation, which is 5023 Banahaw Street, Olympia Village, Makati City. Directors on 21 November 2005 filed with the Commission and which it should have taken official notice of, changing Terracota's principal place of business to that address. The argument is without merit as the Board Resolution does not by itself

Camachiles, Mabalacat City, Pampanga" and not "Mampan, Barangay Camachiles, Paguigan, a deputized Process Server of the Commission, Summons was successfullyl served in Barangay Camachiles, Mabalacat City, Pampanga on 31 January 2012. However, the signature proving receipt of the Summons was that of a certain Allan Muli, who does not appear to be an officer of Terracota. Thus, his receipt of the Summons was not considered as valid service to Terracota. The Commission was then constrained to serve the Summons by publication. In spite of publication of the Commission, it appears that said Board Resolution: only states. "Barangay Mabalacat City Pampanga". Based on the Affidavit of Service executed by Gilbert Summons, Terracota still failed to file its Answer within the given period. When verified against the corporate filings of Terracota on record with the

Answer should be deemed not filed. In addition, EPD has pointed out in its Reply verification as required under Sec. 3-4 of the 2006 Rules of Procedure of the filed on 17 September 2012 that the Answer should be expunged for lack of Securities and Exchange Commission, that provides: . Due to the fact that it was filed more than two months out of time, said

complaint or the expunging of the answer." by an affidavit that states that the affiant has read the complaint or answer and that the allegations therein are true and correct of his own personal knowledge and/or based on authentic records. A verification based on be considered as improper and may cause the summary dismissal of the "information and belief," or which lacks the proper form of verification, shall "Sec. 3-4. Verification. -- The complaint and answer shall be verified

technicality. and counter-evidence will be dealt with to avoid resolving the case on mere However, in the interest of substantive justice, the merits of their arguments

fraud in its procurement. not the certificate of incorporation of Terracota should be revoked on the ground of The instant Petition for revocation presents the following issue: whether or

Terracota, was not in the Philippines from 1 January 2005 to 11 April 2010, and thus, could not have signed Terracota's Articles of Incorporation and By-Laws on 26 Petitioner claims that James Chu Quinones II, one of the incorporators of

Enforcement and Prosecution Department, Petitioner. In the Matter of: Terracota Villas, Inc. Page 3 of 6

January 2005 in Makati City', nor could he have personally: appeared before the notary public on 27 January 2005 to acknowledge execution of the Articles of Incorporation2, as certified in the said Articles of Incorporation and By-Laws.

name "Quinones, James II Chu" does not appear in their computer database for from the Bureau of Immigration was attached to the Petition.3 It states that the either arrivals or departures from 01 January 2005 to 11 April 2010. sign and acknowledge the execution of the Articles of Incorporation, a Certification To support the ciaim that James Chu Quinones II was not in the country to

incorporator of Terracota, attesting that James C. Quinones, II, along with James C. incorporators of Terracota, were not present or were in their respective abodes Quinones, Jr., Francis Jordan c. Quinones and Jen Jerome C. Fernando, also abroad. In addition, an Affidavit was executed by Amelia c. Javier, also an

Terracota except herself are American citizens, contrary to the information listed in the Petition is a photocopy of Linda Chu's passport, which states that she is a Terracota's Articles of Incorporation listing them as all Filipino. In fact, annexed to national of the United States of America. In her Affidavit, Amelia C. Javier also claims that all of the incorporators of

Incorporation is committed when false pretenses are employed by the grantee to acquire the same. These false pretenses may be contained in the AOI or any other documents that the SEC requires as a precondition to the approval of application for registration which results in the issuance of the Certificate of Incorporation."5 Petitioner argues that "fraud in the procurement of a company's Certificate of

reason that he was not in the Philippines, there was fraud in the procurement of Terracota's Certificate of Registration. Fraud was also present when it was misrepresented that the incorporators were all Filipino when that is not the case. signed and acknowledged by James Chu Quinones II, but which could not have been signed or acknowledged by James Chu Quinones II here in the Philippines, for the When the incorporators used the' Articles of Incorporation and By-Laws

to overcome the .assertion of Petitioner that Terracota's procurement of its Certificate of Registration was attended with fraud. The defenses and arguments presented in the Answer are still not sufficient

In fact, Terracota's defenses even further confirm that fraud was committed

3 Annex "M" of the Petition. 1 Annex "B" of the Petition. " Annex "E" of Annex "L series" of the Petition. S Par. 19 of the Petition, p. 6. 2 Ibid.

In the Matter of: Terracota Villas, Inc. Enforcement and Prosecution Department, Petitioner. Page 4 of 6

in registering the corporation with the Commission. In its Answer, Terracota states that:

Quezon City, LINDA CHU only showed a copy of the Identification Cards (IDs) of her children, and other official and valid documents." United States of America by LINDA CHU prior to the filing of the same before the SEC. LINDA CHU allowed her children to affix their signatures above their respective names in the AOI and By-Laws. Thus, all the signatures appearing therein, in the AOI and By-Laws are all original. Before the Notary Public in By-Laws of the Corporation, TERRACOTA VILLAS, INC., were brought to the "The truth of the matter is that the Articles of Incorporation and the

incorporators, and that LINDA A. CHU gave assurance herself that her children Articles of Incorporation and. By-Laws." be dispensed with by the presentation of a copy of a valid identification Card signatures appearing in the Article of Incorporation and By-Laws, and that in the said ID's and other.valid documents are one and the same signatures of those swore under oath, through phone, that they affixed their signature on the said (ID) or any official or valid documents showing to the effect that the signature or Terracota even declares that "The appearance before the Notary Public can

Section 1 of Public Act No. 2103 or the Notarial Law states that:

duly authorized by law of the country to take acknowledgements of instruments or documents in the place where the act is done. The notary public or the officer taking the acknowledgement shall certify that the person acknowledging the instrument or document is known to him and that he is the same person who executed it, acknowledged that the same is his free act and deed. The certificate shall be made under the official seal, if he is required by law to keep a seai, and if not, his certificate shall so state." Sec. 1. (a) The acknowledgement shall be before a notary public or an officer

that: Also, Section 2(b) of Rule IV of the Rules on Notaria! Practice of 2004 states

signatory to the instrument or document "(b) A_person shall not _perform a notarial act if the person_involved as

(1) is not in the notary's presence personally at the time of the notarization: ad

5 Par. 22 of the Answer to Petition. 7 Par. 12 of the Answer to Petition.

Enforcement and Prosecution Department, Petitioner. Page 5 of 6 In the Matter of: Terracota Villas, Inc.

(2) is not personally known to the notary public or otherwise identified by the notary public through competent evidence of identity as defined by these Rules." (Emphasis supplied.)

"duly signed and acknowledged by all of the incorporators" and with a notarial acknowledgmentio Also, the Corporation Code? requires that the articles of incorporation shall bel

appear as if all incorporators signed the said documents in the presence of the Articles of Incorporation and By-Laws which are not entirely truthful by making it notary public, when that was not the case. Considering the foregoing, Terracota, in effect, has admitted to submitting

that "LINDA CHU is a Filipino by birth"12, without addressing why Linda Chu was controverted by Terracota's presentation of Linda Chu's Certificate of Live Birth11. issued a passport by the United States of America, which indicates that she is an For one, it was not certified, and thus has no probative value. Also, Terracota states American national. In addition, Petitioner's claim that Linda Chu is not a Filipino citizen is not

be in contravention of the requirement that real estate companies must be owned at least 60% by Filipinos. It is stated in the Answer that "the controlling interest, 75% of the Total Outstanding Shares of the corporation is owned and in the name of LINDA CHU"13 With an incorporator who appears to be a foreign national, Terracota would

argument that the certificate of incorporation of Terracota should be revoked due to fraud in its procurement, in accordance with Section 6 (i) (1) of Presidential Decree 902-A14, which states that: From the foregoing, there is substantial evidence to support the Petitioner's

Commission shall possess the following powers: "Sec. 6. In order to effectively exercise such jurisdiction, the

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franchise or certificate associations, upon any of the grounds provided by law, including the following: (i) To suspend, or revoke, after proper notice and hearing, the Of registration ofcorporations, partnershipsor

12 Par. 11 of the Answer to Petitioni. 8 Batas Pambansa BIg. 68 (1980). 11 Annex "C"'of the Answer to the Petition. 13 Par. 23 of the Answer to Petition. 14 SEC Reorganization Act (1976). 9 Section 14. 10 Section 15.

In the Matter of: Terracota Villas, Inc. Enforcement and Prosecution Department, Petitioner. Page 6 of 6 X

1. Fraud in procuring its certificate of registration; xxx

Terracota Villas, Inc. is hereby GRANTED. The Certificate of Registration of RespOndent TERRACOTA VILLAS, INC. is hereby REVOKED. WHEREFORE, the Petition for the revocation of the corporate registration of

Monitoring Department for appropriate action. And, let this Revocation Order be also furnished to the Economic Research and Information Department for posting at the Commission's website for purposes of giving notice to the public. Let a copy of this Decision be furnished to the Company Registration and

SO ORDERED.

Mandaluyong City; 11 October 2012.

TERESITA J. HERBOSA Chairperson

MA UANITA E. Ct} RAUL J. PALABRICA

Commissioner Commissioner

MM MANUEL Commissioner O B. GAITE EladIO M. Jala Yommissioner