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Conditions for the Exercise of Judicial Review

SEC v. BAGUIO COUNTRY CLUB | 766 SCRA 355 (2015)

PONENTE: Velasco, Jr., Peralta, Villarama, Jr. and Perez

FACTS: This is a petition on certiorari of the decision and resolution of the Court of Appeals.

On December 17, 1998, the Securities and Exchange Commission (SEC) approved the amended bylaws submitted
by the Baguio Country Club Corporation (BCCC).

On September 22, 2002, Atty. Manuel R. Singson, acting for and in behalf of Ramon K. Ilusorio and Erlinda Ilusorio,
requested SEC via a letter-complaint, to compel BCCC to hold an annual election of the board of directors for 2002
in view of the nullity of Art. 5, Sec. 2. SEC opined that the amendment increasing the term of office to two (2) years
is contrary to law, particularly Section 23 of the Corporation Code. BCCC then claimed that the SEC already
approved the amended bylaws and that the petitioners have no legal standing to question the said bylaws, not
being stockholders of the BCCC.

On November 13, the SEC issued an order, ruling that Art.5, Sec. 2 of the amended bylaws of the BCCC violates
section 23 of the Corporation Code and should be amended to conform with the rules.

On February 6, 2003, SEC ordered BCCC’s Chairman, President, and Board Members to show cause why they
should not be charged with indirect contempt for defying its order. BCCC submitted its compliance, claiming that it
did not intend to ignore the order but was merely awaiting the latter’s clarifications regarding the order.

On March 18, 2003, Ramon Ilusorio, as stockholder of BCCC, filed a petition with the SEC. The petition prayed for
the SEC to call and conduct, under its control and supervision, a stockholder’s meeting in the BCCC for the election
of the members of the board of directors.

In its August 15, 2003, the SEC ordered the calling and conduct of the stockholder’s meeting for the election of the
members of the board under its control and supervision.

On September 26, 2003, BCCC filed a petition for certiorari and prohibition with the Court of Appeals, imputing
that SEC committed grave abuse of discretion for issuing its order. BCCC also claimed that the Ilusorios are not
stockholders of the BCCC and therefore cannot file an action to question the amended bylaws of the corporation.

The Court of Appeals granted BCCC’s petition, set aside the SEC’s orders and dismissed the letter of complaint by
Ilusorio. CA ruled that Ilusorio has legal standing to file the petition but agreed with the BCCC that SEC had no
jurisdiction over the unverified letter and their petition of the Ilusorios for it is an intra-corporate dispute

On September 1, 2004, the CA denied the SEC’s motion for reconsideration for lack of merit hence these petitions.

In G.R. No. 165146, SEC filed through the OSG a petition. The OSG said that the 1-year term rule is
mandatory and thus, cannot be shortened or expanded and it is an administrative matter.

In G.R. No. 165209, the OSG maintained that the nullification of the BCCC bylaws is only a necessary effect
of the act of the SEC in the exercise of its regulatory, supervisory and control power over corporations.

ISSUE: WON judicial review is necessary.

HELD: No, judicial review is not necessary. The SC ruled that the only issue that must be resolved in the instant
case is whether or not the SEC can call a stockholder’s meeting for the purpose of conducting an election of the
BCCC board of directors. The calling of the meeting for the conduct of election was made to rectify the inadvertent
approval of the 2-year term for the members of the board. With the return of the 1-year term, there is no more
actual controversy that warrants the exercise of our judicial power. Thus, rendering the case moot and academic.

The power of judicial review can only be exercised in connection with bona fide controversy which involves the
statute sought to be reviewed.