Petitioner: Philippine National Construction Corporation

Respondents: Ernesto Pabion and Louella Ramiro

FACTS:
1. Ernesto Pabion and Louella Ramiro, stockholders of the PNCC (Philippine National
Construction Corporation), filed a verified petition with SEC alleging that since 1982 or
for a period of 12 years, there has been no stockholders’ meeting to elect the
corporation’s board of directors, thus enabling the incumbent directors to hold on their
position beyond their 1-year term, un violation of PNCC’s by-laws and the Corporation
Code.
2. The following are PNCC’s assertions against the petition:
• PNCC claims that it is a government –owned and controlled corporation whose
organization, management, administration and supervision are governed by A.O. No. 59
• It asserts that its board of directors does not hold office by virtue of a stockholder’s
election but by appointment of the President of the Philippines
• That as a GOCC, it is not required to hold a general meeting of stockholders but,
instead, the general manager thereof is merely required to submit an annual report to
the President of the Philippines
3. SEC Hearing Officer Manuel Perea decided not to preceed with the trial on the merits
as it is required to determine first whether PNCC is a GOCC. The case was then
elevated to the SEC en banc which declared Hearing officer Perea to have acted with
grave abuse of discretion. Thus, instead of remanding the case, it resolved the issue
stating that PNCC, being incorporated under the Corporation code, is considered an
acquired asset corporation and is not considered a GOCC pursuant to Section 2 of A.O.
No. 59.
4. CA upheld the decision of SEC stating that PNCC, though majority-owned by
government financial institutions (GFIs), retained its character as a private corporation.

ISSUES:
1. Whether or not PNCC is a GOCC
2. Whether or not SEC has jurisdiction to order PNCC to hold a stockholders’ meeting
for the election of its board of directors.

RULINGS:
1. No. As correctly ruled by SEC, PNCC is not a GOCC. Instead, it is an acquired asset
corporation. This is because PNCC is a corporation that is under private ownership, the
voting or outstanding shares of which were conveyed to the government financial
institutions in satisfaction of debts.
PNCC is a corporation created in accordance with the general corporation statute.
Hence, it is essentially a private corporation, notwithstanding the government’s interest
therein through the debt-to-equity conversion imposed by PD 1295. Being a private
corporation, PNCC is subject to SEC regulation and jurisdiction.
The fact that PNCC retained a private counsel instead of being represented by a
government corporate counsel or by the SOLGEN proves that it is a SEC-regulated
entity correctly classified as a private corporation.
2. YES. The general rule is that SEC has no jurisdiction over GOCCs with original
charter or those created by special law. However, it has jurisdiction over GOCCs
established or organized under the corporation code. These GOCCs are regarded as
private corporations.
PNCC, belonging to this class, is subject to the jurisdiction of SEC. As provided for in
Section 50 of the Corporation code, SEC can compel PNCC to hold a stockholders’
meeting for the purpose of electing members of its board of directors. Failure of PNCC
to hold annual meetings for how many years constitutes gross, continuing violation of its
by-laws and the corporation code. Petitioners, as stockholders, can rightfully petition the
SEC to order the same.