Case Summary (G.R. No. 239010)
Issues
- Whether the SEC has capacity to litigate after its own order was reversed by a higher tribunal.
- Which SEC department properly adjudicates revocation complaints.
- Whether listing a deceased person as incorporator constitutes fraud in procuring a certificate of registration.
SEC’s Petition Expunged (G.R. No. 239010)
The Supreme Court held the SEC lacked standing to seek review of the appellate decision. As a quasi-judicial body, it is not a real party in interest and may not actively contest an adverse ruling from a superior court. The petition in G.R. No. 239010 was therefore expunged for lack of capacity.
Jurisdiction of SEC-CRMD and Validity of Complaint (G.R. No. 240888)
SEC Regulation No. 359 validly entrusts the Company Registration and Monitoring Department with authority to revoke certificates for fraud, including misrepresentation by an incorporator. Although Locsin-Garcia failed to attach a non-forum-shopping certificate, the requirement is mandatory but not jurisdictional. The SEC may overlook procedural defects to protect the investing public. The SEC-CRMD rightly proceeded on the merits of her complaint.
Fraud Definition and Applicable Standards
Under PD 902-A Sec. 6(i), the SEC may revoke a charter for “fraud in procuring its certificate of registration.” Fraud encompasses deliberate misrepresentation or concealment of material facts. SEC Regulation No. 359 further specifies that listing a deceased incorporator, submitting falsified documents, or providing false addresses constitutes actionable fraud.
Fraudulent Inclusion of Deceased Incorporator
Javier’s death in 2004 extinguished her civil personality and capacity to contract. Nonetheless, AZ 17/31’s AOI and By-Laws bore her falsified signature, credited her with paid-up shares, and listed her among the first directors. These acts demonstrated a calculated misrepresentation to secure corporate registration. The presence of other valid incorporators could not cure the fraud, as the certificate of incorporation is the State’s grant of juridical st
Case Syllabus (G.R. No. 239010)
Parties and Consolidated Petitions
- Petitioner in G.R. No. 239010: Securities and Exchange Commission (SEC), through the Office of the Solicitor General.
- Petitioner in G.R. No. 240888: Azucena Locsin-Garcia.
- Respondent in both cases: AZ 17/31 Realty, Inc.
- Both petitions question the Court of Appeals’ April 24, 2018 Decision and July 16, 2018 Resolution in CA-G.R. SP No. 152300.
Antecedent Facts and Incorporation of AZ 17/31 Realty, Inc.
- AZ 17/31 Realty, Inc. was incorporated on April 23, 2008 as a close corporation for the acquisition, development, leasing, sale or investment in real estate of all kinds.
- Articles of Incorporation listed seven incorporators, including Pacita Javier, Enrique de Zuzuarregui, Antonio de Zuzuarregui, Jr., Antonette S. Rosca, Anthony de Zuzuarregui, Antoinette de Zuzuarregui, and Maria Edna de Zuzuarregui.
- Subscribed and paid-up capital: P22,000,000 authorized; subscriptions and payments varied per incorporator, with Antonio de Zuzuarregui, Jr. providing the bulk of paid–up capital.
- The seven incorporators comprised the first Board of Directors.
Allegation of Fraud in Procurement of Registration
- Locsin-Garcia’s letter dated January 9, 2016 to SEC-CED alleged that Pacita Javier was already deceased (died August 17, 2004) when named as incorporator in 2008.
- CED verification with NSO confirmed Javier’s death at age 90; her death certificate listed Enrique as informant.
- Locsin-Garcia sought revocation of AZ 17/31’s certificate of registration on ground of fraudulent procurement.
Defense by AZ 17/31 Realty, Inc.
- Argued dismissal for failure to attach certificate of non-forum shopping and lack of cause of action.
- Asserted no fraud: inclusion of Pacita’s name was surplus to the mandatory five–incorporator requirement.
- Emphasized full compliance with reportorial requirements, payment of taxes, contribution to the economy, and absence of intent to defraud.
Proceedings before the SEC-CRMD
- By Order dated May 30, 2016, SEC-CRMD revoked AZ 17/31’s certificate of registration.
- Held that despite procedural infirmity, public interest justified action; SEC empowered motu proprio to suspend or revoke certificates.
- Found misrepresentation: a deceased person cannot enter into contractual relations, and AZ 17/31 knew or should have known of Pacita’s death.
- Concluded that the fraud vitiated the Articles of Incorporation approval.
Proceedings before the SEC-En Banc
- AZ 17/31 appealed to the full Commission, arguing: • Death of Antonio de Zuzuarregui, Jr. extinguished any liability. • Pacita’s inclusion was to honor his mother, not to meet incorporator quota. • Other incorporators were unwilling participants and should not suffer forfeiture of corporate existence. • Requested lesser penalties (fine or suspension) instead of revocation.
- SEC En Banc Decision dated August 10, 2017: • Affirmed SEC-CRMD jurisdiction under SEC Regulation No. 359. • Rejected