CEMCO HOLDINGS v.

NATIONAL LIFE INSURANCE COMPANY OF PHILIPPINES, GR

NO. 171815, 2007-08-07
Facts:
Union Cement Corporation (UCC), a publicly-listed company, has two principal stockholders
- UCHC, a non-listed company, with shares amounting to 60.51%, and petitioner Cemco
with 17.03%. Majority of UCHC's stocks were owned by BCI with 21.31% and ACC with
29.69%. Cemco, on the... other hand, owned 9% of UCHC stocks.
BCI informed the Philippine Stock Exchange (PSE) that it and its subsidiary ACC had
passed resolutions to sell to Cemco BCI's stocks in UCHC equivalent to 21.31% and ACC's
stocks in UCHC equivalent to 29.69%.
Issues:
Simply stated, the following are the issues:
Whether or not the SEC has jurisdiction over respondent's complaint and to require Cemco
to make a tender offer for respondent's UCC shares.
Whether or not the rule on mandatory tender offer applies to the indirect acquisition of
shares in a listed company, in this case, the indirect acquisition by Cemco of 36% of UCC, a
publicly-listed company, through its purchase of the shares in UCHC, a non-listed...
company.
Whether or not the questioned ruling of the SEC can be applied retroactively to Cemco's
transaction which was consummated under the authority of the SEC's prior resolution.
Ruling:
Petitioner's stance fails to persuade.
The foregoing provision bestows upon the SEC the general adjudicative power which is
implied from the express powers of the Commission or which is incidental to, or reasonably
necessary to carry out, the performance of the administrative duties entrusted to it.
as the incidental power to conduct hearings and render decisions
SEC has the competence to render the particular decision it made in this case.
SEC has the authority to promulgate rules and regulations, subject to the limitation that the
same are consistent with the declared policy of the Code.
The power conferred upon the SEC to promulgate rules and regulations is a legislative
recognition of the complexity and the constantly-fluctuating nature of the market and the
impossibility of foreseeing all the possible contingencies that cannot be addressed in
advance.
petitioner is barred from questioning the jurisdiction of the SEC. It must be pointed out that
petitioner had participated in all the proceedings before the SEC and had prayed for
affirmative relief.
Petitioner did not question the jurisdiction of the SEC when it rendered an opinion favorable
to it
It was only when the case was before the
Court of Appeals and after the SEC rendered an unfavorable judgment against it that
petitioner challenged the SEC's competence.
Principles:
Tender offer is a publicly announced intention by a person acting alone or in concert with
other persons to acquire equity securities of a public company.[12] A public company is
defined as a corporation which is listed on an... exchange, or a corporation with assets
exceeding P50,000,000.00 and with 200 or more stockholders, at least 200 of them holding
not less than 100 shares of such company.[13] Stated differently, a tender offer is an offer
by the acquiring person to... stockholders of a public company for them to tender their
shares therein on the terms specified in the offer.[14] Tender offer is in place to protect
minority shareholders against any scheme that dilutes the share value of their investments.
It gives the... minority shareholders the chance to exit the company under reasonable
terms, giving them the opportunity to sell their shares at the same price as those of the
majority shareholders.[15]
The rule in this jurisdiction is that the construction given to a statute by an administrative
agency charged with the interpretation and application of that statute is entitled to great
weight by the courts, unless such construction is clearly shown to be in sharp contrast
with... the governing law or statute.[18] The rationale for this rule relates not only to the
emergence of the multifarious needs of a modern or modernizing society and the
establishment of diverse administrative agencies for addressing and satisfying those
needs;... it also relates to accumulation of experience and growth of specialized capabilities
by the administrative agency charged with implementing a particular statute.[19]

Grace Christian High School v. CA

GRACE CHRISTIAN HIGH SCHOOL, petitioner,vs. THE COURT OF APPEALS, GRACE VILLAGE
ASSOCIATION, INC., ALEJANDRO G. BELTRAN, and ERNESTO L. GO, respondents.

G.R. No. 108905 October 23, 1997

MENDOZA, J.:

Petitioner Grace Christian High School is an educational institution located at the Grace Village in Quezon City,
while Private respondent Grace Village Association, Inc. ["Association'] is an organization of lot and/or building
owners, lessees and residents at Grace Village.

The original 1968 by-laws provide that the Board of Directors, composed of eleven (11) members, shall serve
for one (1) year until their successors are duly elected and have qualified.

On 20 December 1975, a committee of the board of directors prepared a draft of an amendment to the
by-laws which provides that "GRACE CHRISTIAN HIGH SCHOOL representative is a permanent
Director of the ASSOCIATION."

However, this draft was never presented to the general membership for approval. Nevertheless, from 1975 to
1990, petitioner was given a permanent seat in the board of directors of the association.

On 13 February 1990, the association's committee on election sought to change the by-laws and informed the
Petitioner's school principal "the proposal to make the Grace Christian High School representative as a
permanent director of the association, although previously tolerated in the past elections should be
reexamined."

Following this advice, notices were sent to the members of the association that the provision on election of
directors of the 1968 by-laws of the association would be observed. Petitioner requested the chairman of the
election committee to change the notice to honor the 1975 by-laws provision, but was denied.

The school then brought suit for mandamus in the Home Insurance and Guaranty Corporation (HIGC) to
compel the board of directors to recognize its right to a permanent seat in the board.

Meanwhile, the opinion of the SEC was sought by the association, and SEC rendered an opinion to the effect
that the practice of allowing unelected members in the board was contrary to the existing by-laws of the
association and to §92 of the Corporation Code (B.P. Blg. 68). This was adopted by the association in its
Answer in the mandamus filed with the HIGC.

The HIGC hearing officer ruled in favor of the association, which decision was affirmed by the HIGC Appeals
Board and the Court of Appeals.

Issue: W/N the 1975 provision giving the petitioner a permanent board seat was valid.

Ruling: No.

Section 23 of the Corporation Code (and its predecessor Section 28 and 29 of the Corporation Law) leaves no
room for doubt that the Board of Directors of a Corporation must be elected from among the stockholders or
members.

There may be corporations in which there are unelected members in the board but it is clear that in these
instances, the unelected members sit as ex officio members, i.e., by virtue of and for as long as they hold a
particular office (e.g. whoever is the Archbishop of Manila is considered a member of the board of Cardinal
Santos Memorial Hospital, Inc.)

But in the case of petitioner, there is no reason at all for its representative to be given a seat in the board. Nor
does petitioner claim a right to such seat by virtue of an office held. In fact it was not given such seat in the
beginning. It was only in 1975 that a proposed amendment to the by-laws sought to give it one.

Since the provision in question is contrary to law, the fact that it has gone unchallenged for fifteen years cannot
forestall a later challenge to its validity. Neither can it attain validity through acquiescence because, if it is
contrary to law, it is beyond the power of the members of the association to waive its invalidity.

It is more accurate to say that the members merely tolerated petitioner's representative and tolerance cannot
be considered ratification.

Nor can petitioner claim a vested right to sit in the board on the basis of "practice." Prctice, no matter how long
continued, cannot give rise to any vested right if it is contrary to law.

Nestor Ching and Andrew Wellington vs. Subic Bay Golf And Country Club,Inc., Hu Ho
Hsiu Lien alias Susan Hu, Hu Tsung Chieh alias Jack Hu, Hu TsungHui, Hu Tsung Tzu and
Reynald R. Suarez, G.R. No. 174353,September 10, 2014FACTS:

Petitioners Nestor Ching and Andrew Wellington own stocks of the Subic Bay Golf and Country
Club, Inc.(SBGCCI). On June 27, 1996, Securities and Exchange Commission (SEC) approved
amendments toSBGCCI Articles of Incorporation which the petitioners allege make their shares
non-proprietary.Petitioners allege that this change was made without the appropriate disclosure
of SBGCCI to itsshareholders.Furthermore, petitioners allege several instances of fraud
committed by SBGCCI’s board of directors in itsFebruary 26, 2003 complaint.Respondent’s
answered the complaint by refuting allegations made by petitioners. As a way of
defense,respondents underscored petitioners’failure to:show that it was authorized by SBGSI to
file complaint on said company’s behalscomply with the requisites for filing a derivative suit and
an action for receivership justify their prayer for injunctive relief since the complaint may be
considered a nuisance or harassmentsuitThus, respondents prayed for dismissal of the
complaint.On July 28, 2003, the RTC held that the action is a derivative suit and issued an order
dismissing thecomplaint.Petitioners elevated the case to the Court of Appeals but the appellate
court affirmed the RTC decision.
ISSUE:
WON the petitioners are proper party in interest WON the complaint is a derivative suit

RULING:
Petitioners did not offer proof that they were authorized to represent SBGSI.The Court ruling in
Cua, Jr. v. Tan elaborated the three (3) types of suit:individual, class orrepresentative, and
derivative suit.The reliefs prayed for by petitioners, to wit: (i) enjoining defendants from acting
as officers and Board of Directors of the corporation, (ii) the appointment of receiver, (iii)
damages, clearly show that thecomplaint was filed to curb the alleged mismanagement of
SBGCCI. The cause of action pleaded by petitioners do not accrue to a single shareholder or a
class of shareholders but to the corporation itself. While there were allegations of fraud in the
subscription, petitioners do not wish to have theirsubscription rescinded. Instead, the petitioners
asked that the respondents be removed from themanagement of the corporation. Petitioner’s only
possible causeof action as the minority shareholderagainst the actions of the board is to file the
common law right to file a derivative suit. As minority shareholders, petitioners do not have any
statutory right to override the business judgements of SBGCCI’sofficers and board of directors
on the ground of the latter’s alleged lack of qualification to manage a golf course. The legal
standing of the petitioners is not a statutory right, there being no provision in theCorporation
Code or related statutes, but is instead a product of jurisprudence based on equity. However,a
derivative suit cannot prosper without first complying with the legalrequisites for its
institution:Interim Rules Governing Intra-Corporate Controversies.Petitioners failed to comply
with secondrequisite: “…exerted all reasonable efforts, and alleges the same withparticularity in
the complaint, to exhaust all remedies available under thearticles of incorporation, by-laws, laws
or rules governing the corporation orpartnership to obtain the relief he desires…”

Minority stockholders, petitioners do not have any statutory right to override the
business judgments of SBGCCI’s officers and Board of Directors on the ground of
the latter’s alleged lack of qualification to manage a golf course. (Nestor Ching v.
Subic Bay Golf)