CASE DIGEST: TIMESHARE REALTY CORPORATION vs. LAO G.R. No. 158941. February 11, 2017

FACTS:

The petitioner herein sold to respondents, one timeshare of Laguna de Boracay without first seeking authority to sell securities, like timeshares from the Securities and Exchange Commission. Petitioners registered the said securities to SEC but the Registration Statement became effective only on February 11, 1998, the date after the sale was made. Without such registration of the securities, petitioners cannot sell the same.

 

Thus, respondent demand rescission of their contract and demand refund of their payment but the petitioner failed to do so.

 

Petitioner argues on the other hand, that upon their registration with SEC as a corporation it already possesses the required license or authority to sell securities like timeshares. Further, petitioner also claims that their registration as broker securities, which the SEC approved, ratifies the prior transaction it had with the respondents and thus negates the latter’s right or option to rescind the sale.

 

ISSUE:

Whether registration as a Corporation authorizes the Corporation to sell unregistered timeshares.

 

RULING:

No. The Court held by referring to the provisions of BP Blg. 178 which does not support the contention that mere registration as a corporation already authorizes it to deal with unregistered timeshares. Its registration as a corporation is just one of several requirements before it may have allowed selling timeshares.

 

Section 4(a) of BP Blg. 178 provides that no securities 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. There are also securities that are exempted from the registration requirement as provided in other provisions of BP Blg. 178. But for those securities that are required to be registered, like the timeshares in this instant case, Section 8 of BP Blg. 178 provides for the procedure of registration of securities intended to be sold or offered for sale or distribution. The procedure requires the filing of a sworn registration statement with respect to such securities by the issuer or by any dealer or underwriter interested in the sale thereof, in the office of SEC, containing or attaching 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. Without complying with such procedures, the corporation is absolutely proscribed from dealing with unregistered timeshares.

 

In this case, the sale of timeshares by the petitioner was made prior to the effectivity of the registration of such securities. The petitioner is then without authority and license to effect such sale.

xxx

Personal Note: A corporation has powers conferred to it by law, its Articles of Incorporation, those implied from express powers, and those that are necessary or incidental to the exercise of the powers so conferred. It has the power to sell or dispose of its real or personal property. But the powers it possesses are not absolute, it is limited. The acts contrary or inconsistent to those only conferred are considered ultra vires, which may cause its transactions to be voidable. In this instance, the sale is limited by another law requiring certain procedures and regulations to be followed and observed before effecting such sale. Their power to sell is not absolute for it is limited by a law imposing some conditions.