SEC Adm. Case No. 07-10-120 Maypajo J.P. Rizal Public Market Vendors Association, Inc.

Republic of the Philippines Securities and Exchange Commission

SEC Bldg. EDSA, Greenhills, Mandaluyong City

In the matter of

MAYPAJO J.P. RIZAL PUBLIC MARKET VENDORS ASSOCIATION INC. SEC Admin. Case No. 07-10-120

For: Revocation of Certificate of

Incorporation ENFORCEMENT AND PROSECUTION DEPARTMENT Petitioner.

14 October 2010

TO:

MAYPAJO J. P. RIZAL PUBLIC MARKET VENDORS ASSOCIATION INC. J. P. Rizal Street, Maypajo, Caloocan City ENFORCEMENT AND PROSECUTION DEPARTMENT Securities and Exchange Commission 5th Floor, SEC Building, EDSA, Greenhills, Mandaluyong City

Maypajo J.P. Rizal Public Market GREGORIO S. LIM Vendors Association, Inc. Caloocan City President 9-P Istanislao St., Maypajo, COMPANY REGISTRATION AND MONITORING DEPARTMENT Securities and Exchange Commission 2nd Floor, SEC Building, EDSA Greenhilis, Mandaluyong City

ECONOMIC RESEARCH AND INFORMATION DEPARTMENT Securities and Exchange Commission 7th Floor, SEC Building, EDSA Greenhills, Mandaluyong City

Greetings:

Please take notice that on 14 October 2010, a DECISION was issued in the above-

entitled case, the original of which is now on file with this Commission.

Mandaluyong City, Philippines. By Authority of the Commission:

C.A. GERARD M. LUKBAN

RECEIVED TNw EUD & Commission Secretary

A.1

Securities and Exchange Commission SEC Bldg. EDSA, Greenhills, Mandaluyong City Republic of the Philippines

In the Matter of

MAYPAJO INC. MARKET VENDORS J.P. : RIZAL ASSOCIATION PUBLIC [Ref: CED Case No. 09-2899] SEC Adm. Case No. 07-10-120

Department, Enforcement and Prosecution Petitioner.

DECISION

This resolves the Petition for Revocation of the Certificate of Revocation of MAYPAJO J.P. RIZAL PUBLIC MARKET VENDORS ASSOCIATION, INC, fiIed by the Enforcement and Prosecution Department (EPD) on 09 July 2010.

procurement of the Association's primary registration by using fake Tax Identification Numbers (TIN) in the Articies of Incorporation. In the Petition, the EPD alleges that the incorporators committed fraud in the

inciusion of the Tax Identification Number as part of the essential requirements in all applications for a government permit, license, clearance, official paper or document, Viz Section 1 of Executive Order No. 98 dated' 28 April 1999, provides for the

instrumentalities, including Government-Owned and/or are hereby directed to incorporate the Tax Identification Number (TIN) in all forms, permits, licenses, clearances. persons transacting business with them, be they natural or judicial. Controlled Corporation, and all Local Government Units, official papers and documents which they issue -td SECtiON1. All government agencies and

To implement: Executive Order No. 98, The. Commission issued Sec

http://www.sec.gov.ph (632) 726-09-31 to 39

In Re: MAYPAJO J.P. RIZAL PUBLIC MARKET VENDORS ASSOCIATION, INC SEC Adm. Case No.07-10-120 Ref: EPD Case No.09-2899:

Decision Page 2 of 9 Revocation of Corporate Registration

Memorandum Circular No. 20 Series of 1999, which provides:

shall be accepted by the Commission uniess the Tax "Section 1. No application for registration or licensing Identification Number(TiN) partnership, incorporators, stockholders, ofthe. corporation, members, partners, directors and officers or any person acting in

the following registration forms/documents filed with this behalf of the corporation and partnership are indicated in

Commission:

A. Cover Sheet for Any Application B: Registration C. Express Lane Form of Articles of Incorporation processing) Data Sheet (for regular

and By-laws (Express Lane does not require

D. Company Data Maintenance Form E. Name Relationship Data Maintenance Form RDS)

General Information Sheet Gi. Letter-request for Opinion H. Any J K. Forms 19-BD, 19-BDR, 19-S, 19-SR, 40-TA, Personai Renewal Applications for Secondary License registration/approval 40-AR Directors/Officers of Financing Companies Document Information submitted Sheet for Of

XXX XXX XXX

Section 3. A fine of P1,000.00 shall be imposed on the corporation, partnership and/or natural person who committed any of the following and such other sanctions provided in the Internal Revenue Code and other pertinent laws and regulations:

B. Use of TIN other than that assigned to the A. taxpayer Use of double or multiple TINs by the same

C. Use of spurious TIN." taxpayer

The subject Association is a non-stock corporation duly registered with the Commission on 15 October 2008 under SEC Registration No. CN200816338.

Decision Page 3 of 9 Revocation of Corporate Registration In Re: MAYPAJO J.P. RIZAL PUBLIC MARKET VEN DORS ASSOCIATION, INC. SEC Adm.Case No. 07-10-120 Ref: EPD Case No.09-2899:

against the Association with the EPD.1 brevity) through its General Manager, Ramon 'C. Galicia filed a verified complaint On 13 January 2009, Maypajo Market Multi-Purpose Cooperative ("MPC", for

registration of the Association was tainted with fraud because some of its The verified complaint alleged that the procurement of the ' primary

incorporators were not really market vendors at the time when the Association was incorporated and that some of its incorporators made use of fake TINs in the Articles of Incorporation.

purposes for which the Association was incorporated are the following: Association's registration and filings with the Commission revealed that the primary EPD investigated the issues raised in the compiaint. Verification of the

11. are vendors in Maypajo Public Market To promote, encourage unity and cooperation among members whol

2 having control and supervision of public market To integrate and coordinate their activities with city government

3 To promote, encourage and work together for the upliftment in livelihood, moral and socio economic

4 And such other acts which may tend to improve further the condition

and well-being of the members of the Association."

After verifying the Association's registration, the EPD investigating team conducted a conference with the incorporators and trustees of the Association on 28 January 2009.

During the conference, the incorporators namely: Gregorio S. Lim, Charles G. Forto, Ramona D. Marcial, Ma. Alma D. Arteta, Aurelio Degenia, and Jose El Samonte, stated that they were market vendors even before the Association was incorporated. Consequently, the EPD directed the incorporators to submit the Association's corporate books and records to confirm the statements they made during: the conference. directive. However, the incorporators did not comply with this

In the meantime, the EPD verified the validity of the incorporators' TIN as indicated in the Association's Articies of Incorporation. The Bureau of Internal Revenue District Office No. 27.of Caloocan City ("BIR-RDO No. 27"; for brevity) issued a letter-certification confirming that six (6) out of the ten (10) incorporators used incorrect TIN, or TIN belonging to somebody else.3 The certification provided:

3 Petition, Annex E Petition, Annex "C" The Association's Articles of incorporation, Article 1

Revocation of Corporate Registration Decision Page 4 of 9. In Re: MAYPAJO J.P. RIZAL PUBLIC MARKET VEN DORS ASSOCIATION: INC. SEC Adm. Case No. 07-10-120 Ref: EPD Case No. 09-2899;

"Sir:

J.P. Rizal Public Market Vendors Assn. Inc. which we received last June 24, 2009, our verification thru ITS (Integrated Tax System) and TIN Web showed the following results: Relative to your request for certification for the TINs of the incorporators of Maypajo

Gregorio Sarmiento Lim Maria Alma Dayao Arteta Ramona Dayao Marcial Names 199-089-615 Correct/Valid 248-716-473 Valid TIN but owned by another person TIN submitted. 228-999-175 Valid TIN but owned by another person Verification/Remarks

Ertinda Ramos Bato Antonette Sosa Manlapit 194-091-462 236-935-221 Invalid TIN (Correct TIN 203-932-992) Valid TIN but owned by another person

Jose Echano Samonte Charles Garcia Forto Marissa Lorenzo Del Rosario 101-380-498 Aurelio Pasco Dugenia 253-364-714 212-393-271 241-327-364 Invalid TIN (No TIN record) Correct/Valid Valid TIN but owned by another person Correct/Valid

Carmelo Crespo Yapchangco 243-385-716 Correct/Valid

XXX XX XXX

Thus, on 27 April 2010 the EPD issued letterst to the Association and its president Gregorio S. Lim, informing them that the BIR-RDO No. 27 confirmed that invalid TINs were used in the Association's Articles of Incorporation. Further, the EPD required the Association to pay a fine in the amount of P12,000.00, and to correct the invalid TINs in Articles of Incorporation within thirty (30) days from receipt of the letter.

The Association received notice of the letter on 29 April 2010. On. 27 May

they will amend their Articies of Incorporation as soon as possible but requested for 2010, the EPD received a letter from Gregorio S. Lim dated 21 May 2010 stating that

the cancellation of the fine in the amount of P12,000.00. 5

In a letter dated 31 May 2010; EPD denied the request for cancellation of the

amend its Articles of Incorporation within fifteen (15) days from notice of. the denial fine. Further, the EPD required the Association to pay the P12,000.00 fine, and to

of the request.6

lapse of the 15-day period, the Association failed to pay the fine and amend its Articles of Incorporation. Thus, the EPD filed the present petition. Gregorio S. Lim received the said letter on 31 May 2010. However, after the

2010. Accordingly, the Association filed its answer on 29 July 2010. The EPD then The Commission ordered the Association to answer the petition on 09 July

4 Petition, Annexes "F" and "G." 5 Petition, Annex "H." Petition, Annex "I."

In Re: MAYPAJO J.P. RIZAL PUBLIC MARKET VENDORS ASSOCIATION, INC. SEC Adm. Case No. 07-10-120 Ref: EPD Case No. 09-2899:

Decision Page 5 of 9 Revocation of Corporate Registration

filed a reply on 13 August 2010. And finally, the Association filed a rejoinder on 31 August 2010. Thus, the issues in this proceeding have been sufficiently joined, and are ripe for resolution.

In their answer and rejoinder, the Association raises the following defenses:

1) It was denied due process since it was not given notice of the verified

complaint filed by MPC, and given the opportunity to answer the same

2) The Association admits that its incorporators indicated fake TINs in the

Articles of Incorporation. However, it maintains that the same does not constitute fraud in the procurement of the certificate of registration.

3) The Association filed a Petition for Correction of the Articles of

Incorporation and Amended General Information Sheet with the Commission on 10 June 2010 to correct the fake TINs.

4) That SEC Memorandum Circular No.: 20 series of 1999, Section 3 provides

that:

"SECTION 3. A fine of P1,000.00 shall be imposed on the corporation, partnership and/or natural person who committed any of the following and such other sanctions provided in the Internal

A. B. Revenue Code and other pertinent laws and regulations: C Use of double or multipie TINs by the same taxpayer Use of spurious TIN" Use of TIN other than that assigned to the taxpayer.

Accordingly, the maximum penalty that can be imposed against the Association is a fine of P1,000.00.

We find that the petition is meritorious, and the defenses raised by the Association are untenable.

The Association's argument that it was denied due process is untrue. It is well-settled that "the essence of due process in administrative proceedings is the opportunity to explain one's side or seek a reconsideration of the action or ruling complained of. As long as the parties are given the opportunity to be heard before judgment is rendered, the demands of due process are sufficiently met."7

In this case, the facts, particularly the procedural history discussed earlier show that the Association and its incorporators were given by the EPD with numerous instances, through conferences and correspondences, to explain the reason for the use of the fake TINs. Indeed, the Association, through Gregorio S.

Montemayor vs. Bundalian, et.al., G.R. No. 149335, July 1. 2003.

in Re: MAYPAJO J.P. RIZAL PUBLIC MARKET VENDORS ASSOCIATION. INC Revocation of.Corporate Registration Decision. Page 6 of 9 SEC Adm. Case No. 07-:10-120 Ref: EPD Case No. 09-2899:

thus: Lim's letter dated 21 May 2010, was abie to explain the reason for the fake TINs,

aking mga kasama ng aking alamin sa kanila "may nagsabi daw kasi sa kanila na baka puwede na iyong number ng kanilang anak o kamag-anak,: without knowledge "May kaugnayan sa maling T.I.N. na naisumite ng Se

sa Asosasyon (Maypajo J.P. Rizal Public Market Vendors Asso. paumanhin sa hindi sina(s)adyang pagkakamaling ito, at sana memorandum circular ng komisyon. Ako po ay humihingi ng po ay mabigyan kami ng konsiderasyon na huwag na ipataw

Inc.) ang multa. xxx"

Thus, the requirements of due process were sufficiently met throughout the proceedings.

The parties do not dispute that six of the incorporators made use of fake TINs in the Association's :Articles of Incorporation. Thus, the issue that needs to be resolved is whether or not the use of fake TINs constitutes fraud in the procurement of the certificate of registration, which results in revocation of the corporation's registration.

Section 6, paragraph L (1) of Presidential Decree No. 902-A, as amended, states:

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

franchise or certificate of registration of corporations, partnership :or Associations, upon any of the grounds provided by law, including the following: I)To suspend, or revoke, after proper notice and hearing, the

XX 1 Fraud in procuring its certificate of registration; XXX XXX

not so educated, were unaware or ignorant of the requirement for stating authentic TINs, and thus, what they did was a simple mistake made in good faith. The respondent argues that the incorporators, being market vendors who are

However, we find it impossible for any reasonable person, whatever his level of education might be, to knowingly make a faise statement, and still remain in good faith. Generally, a reasonable person will not in good conscience tell a falsehood. To what end was the employment of fake TINs made if not for the purpose of evading the reguirement, and defeating the government's policy?

Petition, Annex H.

In Re: MAYPAJO J.P. RIZAL PUBLIC MARKET VEN DORS ASSOCIATION, INC SEC Adm. Case No. 07-10-120 Ref: EPD Case No.09-2899: Revocation of Corporate Registration Decision Page 7 of.9

so that "tax:monitoring, leading to increased compliance with tax laws, will be It is worth stressing that Executive Order No. 98, series of 19999 was issued

Ciearance, official paper or document by the transacting public. "io greatly .improved if such Taxpayer's Identification Number will be made a mandatory reguirement in all applications for any government permit, license.

This shows that the submission of the correct TINs in the Articles of Incorporation filed with the Commission is a material fact relied upon by the Commission: in the issuance of the certificate of incorporation. Thus, the misrepresentation of the TINs is tantamount to fraud, regardless of intention to deceive or not, considering that such misrepresentation is contrary to the public interest. and public policy in that it prejudices the government's tax monitoring efforts. The succeeding discussion will further elucidate that good faith or bad faith is immaterial in the present case.

There are two types of fraud: actual and constructive. To constitute actual fraud there must be such fraud as affects the conscience --- i.e., there must be the element of deceit or intentional deception. However, in constructive fraud, intention is immaterial. There is constructive fraud for as long as the act done or omitted constitutes a misrepresentation, which in the .contemplation of the courts and tribunals is tantamount to a fraud because of its detrimental effect on public interest.

We clarify that "fraud" as used in Section 6, paragraph L (1) of P.D. 902-A includes constructive or legal fraud, and not just actual or moral fraud. The subject provision is not concerned with a crime or felony. And thus, criminal intent or intent to deceive is not essential. It is concerned with the regulation of the grant of a special privilege. Bear in mind that incorporation is not a matter of right but merely a special privilege extended by the state. Thus, in order to enjoy such privilege, the requirements and procedures for-the grant thereof must be strictly complied with. To this end, the state prescribes and gives notice, through statutes and rules, of the necessary requirements and procedures for the grant of the privilege or franchise. Anyone interested in applying for a franchise must then exercise due diligence, and familiarize themselves with such statutes or rules in order to ensure that they will be able to strictly comply with the prescribed requirements and procedures. In other words, applicants are duty bound to know the regulations, and they can never be allowed to feign ignorance thereof as good faith excusing non-compliance therewith, and then demand a franchise from the state as a matter of right.

Thus, in the present case, it is of no consequence whether the incorporators were in good faith or not when they stated fake "TINs in the subject Articles of Incorporation. The undisputed and admitted fact is that six of the incorporators knowingly and deliberately provided fake TINs in the Articles of Incorporation. Such

28 Apri 1999 10 E.0. No. 98, 4th clause; Emphasis ours.

SEC Adm. Case No. 07-10-120 Ref: EPD Case No. 09-2899 In Re: MAYPAJO J.P. RIZAL PUBLIC MARKET VENDORS ASSOCIATION, INC. Revocation of Corporate Registration Decision Page 8 of 9

certificate of registration. Were it not for the fake TINs, the Commission would have misrepresentation was relied upon by the Commission in issuing the Association's never accepting the Articles of Incorporation and issued the Association's certificate of registration.

And, it is well settled that the filing of false :and fraudulent articles of incorporation is sufficient ground to sustain proceedings for forfeiture of corporate charter.11 Thus, there can be no doubt that the subject certificate of registration merits revocation due to the fraudulent statement of the TINs in the articles 'of incorporation.

does it state that the penalties provided therein are exclusive, and to the exclusion 20, Series of 1999, the imposable fine should only be P1,000.00, is an erroneous interpretation of the circular. It must be stressed that nowhere in the said provision Further, the Association's argument that, in line with Section 3 of SEC MC No.

of other penalties imposed under other laws and regulations. Besides, a mere circular cannot supersede a statute, i.e., P.D. 902-A.

Incidentally, the Association's 2010 General Information Sheet reveals that incorporators Ramona Dayao Marcial, Maria Alma Dayao Arteta, Erlinda Ramos Bato, Aurelio Pasco Dugenia, Antonette Sosa Manlapit and Jose Echano Samonte still indicated invalid and false TINs or TINs which are assigned to another person. Indubitably, these acts not only belie their claim of good faith but also constitute further violations of SEC Memorandum Circular No. 20, Series of 1999 which calls for the imposition of additional fines against them.

WHEREFORE. premises considered, the Certificate of Registration 'of

with Company Registration No. CN200816338 is hereby REVOKED. respondent MAYPAJO J.P. RIZAL PUBLIC MARKET VENDORS ASSOCIATION INC.

Further, the incorporators namely, RAMONA DAYAO MARCIAL, MARIA ALMA

of two thousand pesos each (Php 2,000.00) for two violation of SEC Memorandum DAYAO ARTETA, ERLINDA RAMOS BATO, AURELIO PASCO DUGENIA, ANTONETTE Circular No. 20 Series of 1999 in that they made use of fake TINs in the Articles of SOSA MANLAPIT and JOSE ECHANO SAMONTE are hereby ORDERED to pay a fine

Incorporation and again in the 2010 GIS of the Respondent Association.

This is without prejudice to any further actions that may be taken against the responsible incorporators, directors, and officers of the subject Association.

I State ex rel. Brown v. Bailey, 1 6 Ind 46.

in Re: MAYPAJO J.P. RIZAL PUBLIC MARKET VENDORS ASSOCIATION, INC

Revocation of Corporate Registration Decision Page 9 of 9 SEC Adm. Case No. 07-10-120 Ref: EPD Case No.09-2899:

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

SO ORDERED

Mandaluyong City, 14 October 2010.

PE B. BARIN Chairperson

G

Ma. juanita e?cueto RAUL J. PALABRICA

Commissioner Commissioner

MAnUel O B. GAITE E DT ALA

Commissioner ommissioner