Timeshare Realty Corp. v. Lao

Timeshare Realty Corporation

v.

Cesar Lao and Cynthia Cortez,

G.R. No. 158941

FACTS OF THE CASE

1.  On October 6, 1996, herein petitioner, Timeshare Realty, sold to Ceasar M. Lao and Cynthia V. Cortez (respondents), one timeshare of Laguna de Boracay for US$7,500.00 payable in eight months and fully paid by the respondents.

2. Sometime in February 1998, the SEC issued a resolution to the effect that petitioner was without authority to sell securities, like timeshares, prior to February 11, 1998.  It further stated in the resolution/order that the Registration Statement of petitioner became effective only on February 11, 1998.  It also held that the 30 days within which a purchaser may exercise the option to unilaterally rescind the purchase agreement and receive the refund of money paid applies to all purchase agreements entered into by petitioner prior to the effectivity of the Registration Statement.

3. Petitioner sought a reconsideration of the aforesaid order but the SEC denied the same in a letter dated March 9, 1998.

         

4. On March 30, 1998, respondents wrote petitioner demanding their right and option to cancel their Contract, as it appears that Laguna de Boracay is selling said shares without license or authority from the SEC.  For failure to get an answer to the said letter, respondents this time, through counsel, reiterated their demand through another letter dated June 29, 1998.  But despite repeated demands, petitioner failed and refused to refund or pay respondents.

ISSUE

Whether the issuance by the SEC of an authority to sell securities in favor of Timeshare Realty, at a later date, will have the effect of ratifying those transactions entered into, at an earlier date, without such license to sell said securities.

RULING

No.  The provisions of B.P. Blg. 178 do not support the contention of petitioner that its mere registration as a corporation already authorizes it to deal with unregistered timeshares.  Corporate registration is just one of several requirements before it may deal with timeshares:

            Section 8.  Procedure for registration. - (a) All securities required to be registered under subsection (a) of Section four of this Act shall be registered through the filing by the issuer or by any dealer or underwriter interested in the sale thereof, in the office of the Commission, of a sworn registration statement with respect to such securities, containing or having attached thereto, the following:

x x x x

(36)   Unless previously filed and registered with the Commission and brought up to date:

(a)     A copy of its articles of incorporation with all amendments thereof and its existing by-laws or instruments corresponding thereto, whatever the name, if the issuer be a corporation.

          Prior to fulfillment of all the other requirements of Section 8, petitioner is absolutely proscribed under Section 4 from dealing with unregistered timeshares, thus:

           

Section 4.  Requirement of registration of securities. - (a) No securities, except of a class exempt under any of the provisions of Section five hereof or unless sold in any transaction exempt under any of the provisions of Section six hereof, shall be sold or offered for sale or distribution to the public within the Philippines unless such securities shall have been registered and permitted to be sold as hereinafter provided.