Saint Louis University

SCHOOL OF LAW

ANALYTIC MEMO INDEX

PART 6
LAW 321A - CORPORATION LAW

SUBMITTED BY:

AGUILA, John Louis

ANDRION, Al Adrian
APOSTOL, Winchister
FAMULERAS, Nel John
ADOLFO, Jane Ling
AGUSTIN, Jireh
AQUINO, Ma. Delmar
BARRIENTOS, Claudine Vic-Vic
BUYUCCAN, Hearthel Kate
CORTEZ, Nenita
DUMO, Warlyn
JUDAN, Jyszl
MARAWIS, Korina Mae
MAURICIO, Edilyn
MENDITA, Paula
PAGUEL, Val Mollyn
SIGNEY, Lorraine Joy
UGAY, Angelique

JD 3 BLOCK A

SUBMITTED TO:

ATTY. MARIA LULU REYES

 LEGAL WHY IS THIS THE LEGAL PROVISION/
CASE TITLE CONCLUSION
QUESTION PROBLEM? PRINCIPLE/ RULE

WHAT IS THE SECURITIES AND EXCHANGE COMMISSION?

Shozo Yamaguchi and Fermin A change in the corporate name does Hence, As a general rule, officers or
Canlas were President/Chief not make a new corporation, and directors under the old corporate name
Operating Officer and Treasurer whether effected by special act or bear no personal liability for acts done or
respectively, of Worldwide under a general law, has no effect on contracts entered into by officers of the
Garment Manufacturing, Inc. By the identity of the corporation, or on its corporation, if duly authorized.
virtue of Board Resolution No.1 property, rights, or liabilities. The Inasmuch as such officers acted in their
dated August 1, 1979, defendant corporation continues, as before, capacity as agent of the old corporation
Shozo Yamaguchi and private responsible in its new name for all and the change of name meant only the
respondent Fermin Canlas were debts or other liabilities which it had continuation of the old juridical entity,
authorized to apply for credit previously contracted or incurred. the corporation bearing the same name
facilities with the petitioner is still bound by the acts of its agents if
Whether or not the Republic Planters Bank in the forms authorized by the Board.
amendment in a of export advances and letters of
REPUBLIC corporation's credit/trust receipts
PLANTERS Articles of accommodations. Petitioner bank
BANK V. CA Incorporation issued nine promissory notes. In
G.R. NO. 93073 effecting a change some promissory notes, the name
DECEMBER of corporate name Worldwide Garment
21, 1992 extinguished the Manufacturing, Inc. was apparently
personality of the rubber stamped above the
original corporation. signatures of defendant and private
respondent. Worldwide Garment
Manufacturing, Inc. noted to
change its corporate name to Pinch
Manufacturing Corporation.
Subsequently, petitioner bank filed a
complaint for the recovery of sums
of money covered among others, by
the nine promissory notes with
interest thereon, plus attorney's fees
and penalty charges.

Petitioner Securities and Exchange
Commission (SEC), through its
Corporate Finance Department,
issued an Order revoking URPHI's
Registration of Securities and
Permit to Sell Securities to the
Public for its failure to timely file its
Year 2001 Annual Report. URPHI
filed with the SEC a and allow it to continue in order to
Manifestation/Urgent Motion to
Set Aside Revocation Order and
Whether or not the
Reinstate Registration after
court of appeals
complying with its reportorial
erred in deciding a
SEC V. requirements. The SEC granted
question of
UNIVERSAL URPHI's motion to lift the
substance which is
RIGHTFIELD revocation order, considering the
not in accord with
JULY 20, 2015 current economic situation,
the law and
URPHI's belated filing of the
prevailing
required annual and quarterly
jurisprudence.
reports, and its payment of the
reduced fine of P82, 000.00.
Thereafter, URPHI failed again to
comply with the same reportorial
requirements. The SEC revoked
URPHI's Registration of Securities
and Permit to Sell Securities to the
Public for its failure to submit its
reportorial requirements within the
final extension period.
Under its regulatory responsibilities,
the SEC may pass upon applications
for, or may suspend or revoke (after
due notice and hearing), certificates of
registration of corporations,
partnerships and associations
(excluding cooperatives, homeowners
associations, and labor unions); compel
Notwithstanding the belated filing of the
legal and regulatory compliances;
said reports, as well as the claim that
conduct inspections; and impose fines
public interest would be better served if
or other penalties for violations of the
the SEC will merely impose penalties
Revised Securities Act, as well as
implementing rules and directives of
become profitable again, the SEC cannot
the SEC, such as may be warranted.
be faulted for revoking once again
URPHI's registration of securities and
Relative to its adjudicative authority,
permit to sell them to the public due to
the SEC has original and exclusive
its repeated failure to timely submit such
jurisdiction to hear and decide
reports. Needless to state, such
controversies and cases involving –
continuing reportorial requirements are
Intra-corporate and partnership
pursuant to the state policies declared in
relations between or among the
Section 238 of the SRC of protecting
corporation, officers and stockholders
investors and ensuring full and fair
and partners, including their elections
disclosure of information about
or appointments;
securities and their issuer.
State and corporate affairs in relation to
All told, the CA erred in ruling that the
the legal existence of corporations,
SEC revoked URPHI's registration of
partnerships and associations or to
securities and permit to sell them to the
their franchises; and
public without due process of law.
Investors and corporate affairs
particularly in respect of devices and
schemes, such as fraudulent practices,
employed by directors, officers,
business associates, and/or other
stockholders, partners, or members of
registered firms;
 Respondent Performance Foreign
Exchange Corporation(PFEC) is a
domestic corporation duly
registered under Securities and
Exchange Commission (SEC) with
its primary purpose to operate as a
broker/agent between market
participants in transactions
involving, but not limited to, foreign
exchange, deposits, interest rate
instruments, fixed income
securities, bonds/bills, repurchased
agreements of fixed income
securities, certificate of deposits,
bankers acceptances, bills of
Whether or not
exchange, over-the-counter option
petitioner SEC has
of the aforementioned instruments,
acted with grave
SEC V. PFEC Lesser Developed Country‘s
abuse of discretion
G.R. NO. (L.D.C.) debt, energy and stock
in issuing the Cease
154131 indexes and all related, similar or
and Desist Order
JULY 20, 2006 derivative products, other than
and its subsequent
acting as a broker for the trading of
Order making it
securities pursuant to the Revised
permanent.
Securities Act of the Philippines. Its
secondary purpose is to engage in
money changer or exchanging
foreign currencies into domestic
currency, Philippine currency or
other foreign currencies into
another currency.
Respondent‘s officers complied and
explained before the CED the
nature of their business. In 2001,
Emilio B. Aquino, Director of
CED, issued a Cease and Desist
Order in CED Case No. 99-2297,
stating that his department
conducted an inquiry on
The fact that respondent is under
A receiver is a person appointed by the
receivership does not divest the HLURB
court, or in this instance, by a
of that jurisdiction. No violation of the
quasi~judicial administrative agency, in
SEC order suspending payments to
behalf of all the parties for the purpose
creditors would result as far as
of preserving and conserving the
petitioners’ complaint before the
property and preventing its possible
HLURB is concerned. Since what
destruction or dissipation, if it were left
petitioners seek to enforce are
in the possession of any of the parties.
respondent‘s obligations as a subdivision
The appointment of a receiver does not
developer. Such claims are basically not
dissolve a corporation, nor does it
pecuniary in nature although it could
interfere with the exercise of its
incidentally involve monetary
corporate rights. In this case where
considerations. All that petitioners‘
there appears to be no restraints
claims entail is the exercise of proper
imposed upon respondent as it
subdivision management on the part of
undergoes rehabilitation receivership,
the SEC~appointed Board of Receivers
respondent continues to exist as a
towards the end that homeowners shall
corporation and hence, continues or
enjoy the ideal community living that
should continue to perform its
respondent portrayed they would have
contractual and statutory
when they bought real estate from it. It
responsibilities to petitioners as
can not also be considered as having
homeowners.
claims against respondent.
 respondent‘s business operations
for possible violation of Republic
Act (R.A.) No. 8799,otherwise
known as The Securities Regulation
Code; that the outcome of the
inquiry shows that respondent is
engaged in the trading of foreign
currency futures contracts in behalf
of its clients without the necessary
license; that such transaction can be
deemed as a direct violation of
Section 11 of R.A. No. 87994 and
the related provisions of its
Implementing Rules and
Regulations; and that it is imperative
to enjoin respondent from further
operating as such to protect the
interest of the public.
Petitioner had filed on October 10, Petitioner properly filed the present
1977 and October 17, 1977 his petition directly with this Court without
complaints and continuing going through the prescribed procedure
opposition with respondent of filing an appeal with respondent
commission against the filing of Commission en banc within the 30-day
respondent Manila Polo Club, Inc.'s reglementary period since such recourse
Amended Articles of Incorporation was obviously not a plain, speedy and
Whether or not the
and Amended By-Laws which adequate remedy. petitioner has not
QUASHA V. hearing officer of
would convert said club into a satisfactorily established his right to the
SEC the SEC is
proprietary club, assailing the restraining order prayed for. Considering
G.R. NO. L- empowered to issue
amendments as illegal, inequitable that petitioner submitted the incident on
47536 the questioned
and immoral, alleging inter alia that the basis of his memorandum without
MAY 31, 1978 order denying the
the amendments have the effect of presentation of evidence, the Court
injunctive relief.
enabling the members to holds that respondent commission did
appropriate the club's property and not act with grave abuse of discretion in
to use it as their contribution to the denying the restraining order prayed for.
new club; the real estate assets of The case is ordered remanded to
Manila Polo Club consist of 25 respondent commission for a full trial
hectares, more or less, of prime real and hearing and determination on the
estate in 'he middle of Forbes lark merits.
 Makati, Metro Manila. which are
conservatively valued at present
market valuation of P200 Million
and its buildings, improvements,
facilities and other equipments at
about P20 Million. Petitioner prayed
for the disapproval and cancellation
of respondent club's amended
articles and by-laws and denial of its
application to register its proprietary
shares, and prayed for a restraining
order meanwhile enjoining it from
selling and/or accepting any
payments for the questioned
proprietary shares.
The Philippine Blooming Mills, Inc.
(PBM) and Alfredo Ching jointly
submitted to the Securities and
Exchange Commission a petition
Whether or not the for suspension of payments (SEC
court a quo could No. 2250) where Alfredo Ching was
acquire jurisdiction joined as co-petitioner because
over Ching in his under the law, he was allegedly
TRADER’S
personal and entitled, as surety, to avail of the
ROYAL BANK
individual capacity defenses of PBM and he was
V.
as a surety of PBM expected to raise most of the
CA
in the collection suit stockholders' equity of Pl00 million
G.R. NO. L-
filed by the bank, being required under the plan for
78412
despite the fact that the rehabilitation of PBM. Traders
SEPTEMBER
PBM's obligation to Royal Bank was included among
26, 1989
the bank had been PBM's creditors named in Schedule
placed under A accompanying PBM's petition for
receivership by the suspension of payments. In its en
SEC. banc decision, the SEC declared
that it had assumed jurisdiction over
petitioner Alfredo Ching pursuant
to Section 6, Rule 3 of the new Rules
of Procedure of the SEC providing
The Securities and Exchange
Commission was empowered, as
rehabilitation receiver, to take custody
and control of the assets and properties
of PBM only, for the SEC has
jurisdiction over corporations only not
over private individuals, except
stockholders in an intra-corporate
dispute Being a nominal party in SEC
The term "parties-in-interest" in
Case No. 2250, Ching's properties were
Section 6, Rule 3 of the SEC's New
not included in the rehabilitation
Rules of Procedure contemplates only
receivership that the SEC constituted to
private individuals sued or suing as
take custody of PBM's assets.
stockholders, directors, or officers of a
Therefore, the petitioner bank was not
corporation.
barred from filing a suit against Ching, as
a surety for PBM. An anomalous
situation would arise if individual
sureties for debtor corporations may
escape liability by simply co- filing with
the corporation a petition for suspension
of payments in the SEC whose
jurisdiction is limited only to
corporations and their corporate assets.
 that "parties in interest without
whom no final determination can be
had of an action shall be joined
either as complainant, petitioner or
respondent" to prevent multiplicity
of suits.
A conflict arose between petitioner
Vicente Angliongto and private
respondent Rufino T. Nasser on the
matter of exclusive control and
management of Petitioner
Corporation. On July 7, 1983,
petitioner Corporation by petitioner
Angliongto, filed a verified petition
in the public respondent SEC
against private respondent Nasser,
alleging, that private respondent
Nasser was a Director, Executive
Whether or not the
Vice-President and General
Securities and
Manager of petitioner Corporation
VICMAR Exchange
from 1974 to August 26, 1982 but
DEVELOPME Commission has
during the annual meeting of
NT V. CA abused its discretion
stockholders of petitioner
G.R. NO. 81547 in recalling its Order
corporation held on August 26,
MAY 21, 1990 to enforce a writ of
1982, private respondent Nasser
preliminary
was not re-elected as member of the
injunction.
Board of Directors or to his
previous management positions.
In view of the result of the annual
stockholders' meeting, private
respondent Nasser was then advised
by the incoming president, herein
petitioner Angliong to that the latter
would actively manage the
corporate affairs of Petitioner
Corporation.
In view thereof, private respondent
Nasser was asked to turn over all
The SEC possesses, inter alia, the
power to issue preliminary or
permanent injunction, whether
prohibitory or mandatory
accordance with the pertinent
provisions of the Rules of Court
(Section 6-a, P.D. 902-A).
To allow execution of the writ of
preliminary injunction in favor of the
petitioners despite having transferred
their rights of ownership, control and
management over said corporation to
respondent Nasser would be baseless,
the contract having shown prima facie
that the latter is entitled to remain as
Vice-President and General Manager of
petitioner Corporation.
Thus, no grave abuse of discretion can
be attributed to the SEC in recalling the
in
order to enforce a writ of preliminary
injunction in this wise. After all, the
issuance or recall of preliminary writ of
injunction is an interlocutory matter that
remains at all times within the control of
the court (Alvaro v. Zapata, 118 SCRA
728 [1982]). The grant or denial of an
injunction rests upon the sound
discretion of the lower tribunal, in the
exercise of which the Supreme Court will
not interfere except in a clear case of
abuse.
 corporate books and records in his
possession to the duly elected
officers, among others, which
demand remained (un)heeded by
private respondent Nasser as the
latter continued to hold office as
Executive Vice-President and
General Manager of petitioner
Corporation, performing acts and
entering into transactions inimical
to the interests of the petitioner
Corporation and its stockholders.

INTRA-CORPORATE CONTROVERSY

The Court finds, and so holds, that the

Section 5.2 of RA 8799 provides:
Petitioner filed with the RTC of case is not an intra-corporate dispute
Makati a Complaint for Sum of and, instead, is an ordinary civil action.
The Commission's jurisdiction over all
Money and Specific Performance There are no intra-corporate relations
cases enumerated under Section 5 of
with Damages against respondent. between the parties. Petitioner is neither
Presidential Decree No. 902-A is
Petitioner prayed for the payment of a stockholder, partner, member or
hereby transferred to the Courts of
the amounts mentioned in officer of respondent corporation. The
general jurisdiction or the appropriate
Paragraph 38 of the Complaint as parties' relationship is limited to that of
Regional Trial Court: Provided, That
LU V. RCBC well as the shares of stocks an investor and a securities broker.
the Supreme Court in the exercise of its
SECURITIES Whether or not the enumerated in Paragraph 19 of the Moreover, the questions involved
authority may designate the Regional
G.R. 219491 RTC has said Complaint. Petitioner also neither pertain to the parties' rights and
Trial Court branches that shall exercise
OCTOBER 17, jurisdiction? sought the recovery of treble obligations under the Corporation Code,
jurisdiction over the cases. The
2018 damages, exemplary damages and if any, nor to matters directly relating to
Commission shall retain jurisdiction
attorney's fees. respondent filed a the regulation of the corporation. Since
over pending cases involving intra-
Motion to Dismiss6 contending the Complaint filed by petitioner
corporate disputes submitted for final
that: (1) the RTC of Makati did not partakes of the nature of an ordinary civil
resolution which should be resolved
acquire jurisdiction over the subject action, it is clear that it was correctly
within one (1) year from the enactment
matter of the case because petitioner raffled-off to Branch 63. Hence, it is
of this Code. The Commission shall
deliberately evaded the payment of improper for it (Branch 63) to have
retain jurisdiction over pending
the correct docket fees; ordered the re-raffle of the case to
suspension of payment/rehabilitation
another branch of the Makati RTC.
 cases filed as of 30 June 2000 until
finally disposed.
Petitioners Manuel Luis C.
In relation to the above provision,
Gonzales4 and Francis Martin D.
Section 5 of PD 902-A states that:
Gonzales filed a Complaint5 for
"Injunction with prayer for Issuance
In addition to the regulatory and
of Status Quo Order, Three and
adjudicative functions of the Securities
Twenty (20)-Day Temporary
and Exchange Commission over
Restraining Orders, and Writ of
corporations, partnerships and other
Preliminary Injunction with
forms of associations registered with it Petitioners filed a commercial case, with
Damages" against respondents GJH
as expressly granted under existing laws the Office of the Clerk of Court in the
Land, Inc. (formerly known as S.J.
and decrees, it shall have original and RTC of Muntinlupa City, which is the
Land, Inc.) before the RTC of
exclusive jurisdiction to hear and official station of the designated Special
Muntinlupa City seeking to enjoin
decide cases involving. Commercial Court, in accordance with
Whether or not the sale of S.J. Land, Inc.'s shares
A.M. No. 03-03-03-SC. It is, therefore,
GONZALES V. Branch 276 of the which they purportedly bought
(a) Devices or schemes employed by or from the time of such filing that the RTC
GJH LAND, RTC of Muntinlupa from S.J. Global, Inc. Essentially,
any acts, of the board of directors, of Muntinlupa City acquired jurisdiction
INC. City erred in petitioners alleged that the
business associates, its officers or over the subject matter or the nature of
G.R. 202664 dismissing the case subscriptions for the said shares
partnership, amounting to fraud and the action.43 Unfortunately, the
NOVEMBER for lack of were already paid by them in full in
misrepresentation which may be commercial case was wrongly raffled.
20, 2015 jurisdiction over the the books of S.J. Land, Inc., but
detrimental to the interest of the public This error may have been caused by a
subject matter. were nonetheless offered for sale on
and/or of the stockholder, partners, reliance on the complaint's caption,
July 29, 2011 to the corporation's
members of associations or however, contradicts and more
stockholders, hence, their plea for
organizations registered with the importantly, cannot prevail over its
injunction. After filing their
Commission; actual allegations that clearly make out an
respective answers11 to the
intra-corporate dispute
complaint, respondents filed a
(b) Controversies arising out of intra-
motion to dismiss on the ground of
corporate or partnership relations,
lack of jurisdiction over the subject
between and among stockholders,
matter, pointing out that the case
members, or associates; between any or
involves an intra-corporate dispute
all of them and the corporation,
and should, thus, be heard by the
partnership or association of which
designated Special Commercial
they are stockholders, members or
Court of Muntinlupa City.
associates, respectively; and between
such corporation, partnership or
association and the state insofar as it
 concerns their individual franchise or
right to exist as such entity; and

(c) Controversies in the election or

appointments of directors, trustees,
officers or managers of such
corporations, partnerships or
associations.

On the other hand, Section 19(1) and

(8) of BP 129, as amended, provides:

Regional Trial Courts shall exercise

exclusive original jurisdiction:

(1) In all civil actions in which the

Pedro, Anastacia, Oscar, and
Rodrigo each owned shares of stock
of Zenith Insurance Corporation.
Pedro died in 1964, while Anastacia
died in 1993. Although Pedro’s
estate was judicially partitioned
among his heirs, no similar
REYES V.
settlement and partition appear to
REGIONAL
have been made with Anastacia’s
TRIAL Is there an existing
estate. Zenith and Rodrigo filed a
COURT, G.R. intra-corporate
complaint with the Securities and
NO. 165744, dispute?
Exchange Commission (SEC)
AUGUST 11,
against Oscar, to obtain an
2008
accounting of the funds and assets
of the company which are in the
control, custody, and/or possession
of Oscar and to determine the
shares of stock of deceased spouses
Pedro and Anastacia Reyes that
were arbitrarily and fraudulently
subject of the litigation is incapable of
pecuniary estimation;
To determine whether a case involves an
intra-corporate controversy, and is to be
heard and decided by the branches of the
RTC specifically designated by the Court
to try and decide such cases, two
elements must concur: (a) the status or
relationship of the parties; and (2) the
nature of the question that is the subject
of their controversy.
The first element requires that the
controversy must arise out of intra-
corporate or partnership relations
between any or all of the parties and the
corporation, partnership, or association
of which they are stockholders, members
or associates; between any or all of them
and the corporation, partnership, or
association of which they are
stockholders, members, or associates,
There is no existing intra-corporate
dispute. In the first test, without the
settlement of Anastacia’s estate, there
can be no definite partition and
distribution of the estate to the heirs.
Without the partition and distribution,
there can be no registration of the
transfer. And without the registration,
we cannot consider the transferee-heir a
stockholder who may invoke the
existence of an intra-corporate
relationship as premise for an intra-
corporate controversy within the
jurisdiction of a special commercial
court.
As to the second test, what Rodrigo
clearly aims to accomplish through his
allegations of illegal acquisition by Oscar
is the distribution of Anastacia’s
shareholdings without a prior settlement
 appropriated by Oscar for himself. respectively; and between such of her estate – an objective that, by law
The latter questioned the SEC’s corporation, partnership, or association and established jurisprudence, cannot be
jurisdiction to entertain the and the State insofar as it concerns their done. The RTC of Makati, acting as a
complaint because it pertains to the individual franchises. The second special commercial court, has no
settlement of the estate of Anastacia element requires that the dispute among jurisdiction to settle, partition, and
Reyes. the parties be intrinsically connected with distribute the estate of a deceased.
A Deed of Absolute Sale was the regulation of the corporation. If the
executed by and between BF nature of the controversy involves
Homes—represented by petitioner matters that are purely civil in character,
Orendain—as absolute and necessarily, the case does not involve an
registered owner, and the LSFSIPI intra-corporate controversy.
(Speed Distribution, Inc. v. Court of Appeals) The case is under the jurisdiction of
over a parcel of land.
RTC. As held in Viray v. Court of
BF Homes filed a Complaint before
It bears reiterating that Section 145 of the Appeals, the better policy in determining
the RTC against LSFSIPI and
Corporation Code protects, among which body has jurisdiction over a case
Orendain for reconveyance of the
others, the rights and remedies of would be to consider not only the status
property—alleging that the
corporate actors against other corporate or relationship of the parties but also the
LSFSIPI transacted with Orendain
actors. The statutory provision assures an nature of the question that is the subject
in his individual capacity and
ORENDAIN aggrieved party that the corporation's of their controversy. The LSFSIPI is
therefore, neither FBO
V. BF dissolution will not impair, much less neither an officer nor a stockholder of
Which has Management, Inc. nor Orendain
HOMES, 506 S remove, his/her rights or remedies BF Homes, and this case does not
jurisdiction over the had title to the property transferred.
634 against the corporation, its stockholders, involve intra-corporate proceedings. In
action for Moreover, BF Homes averred that
G.R. NO. directors or officers. It also states that addition, the seller, Orendain, is being
reconveyance—the the selling price was grossly
146313, corporate dissolution will not extinguish sued in his individual capacity for the
RTC or SEC? inadequate or insufficient
OCTOBER 31, any liability already incurred by the unauthorized sale of the property in
amounting to fraud and conspiracy
2006 corporation, its stockholders, directors, controversy. In addition, jurisdiction
with the LSFSIPI. Hence, it prayed
or officers. In short, Section 145 over the case for reconveyance is clearly
that LSFSIPI reconvey the disputed
preserves a corporate actor's cause of vested in the RTC as provided in
property or, if reconveyance was no
action and remedy against another paragraph (2), Section 19, B.P. Blg. 129.
longer feasible, pay the present
corporate actor. In so doing, Section 145 Clearly, the controversy involves matters
value of the property.
also preserves the nature of the purely civil in character and is beyond
Orendain filed a Motion to Dismiss
controversy between the parties as an the ambit of the limited jurisdiction of
stating that the RTC had no
intra-corporate dispute. the SEC.
jurisdiction over the reconveyance
suit; BF Homes filed its Opposition,
alleging that the case was within the
exclusive jurisdiction of the RTC,
not the SEC, considering that the
 case was an ordinary reconveyance
suit.
It is true that a complaint for accounting,
reconveyance, etc. of corporate
Respondent Pascual filed a
properties has previously been held to be
complaint in the Regional Trial
within the jurisdiction of the SEC.
Court for "accounting,
Nonetheless, a distinction can be drawn
reconveyance of real property based
between those cases and the case at bar,
on implied trust resulting from
for, in those cases, the corporations
PASCUAL V. fraud, declaration of nullity of TCT,
involved were still existing, whereas in
COURT OF recovery of sums of money, and
the present case, there is no more
APPEALS, 339 damages" against petitioner
corporation involved. There is no
S 117, G.R. NO. Alfredo, and the latter’s wife Loreta
question that assessing the financial
138542, Pascual. Petitioners filed a motion
status of an existing corporation, for
AUGUST 25, to dismiss on the ground that the
purposes of an action for accounting,
2000 complaint raises an intra-corporate
requires the expertise of the SEC. But in
controversy between the parties
the case of a dissolved corporation, no
over which original and exclusive
such expertise is required, for all its
jurisdiction is vested in the
business has been properly accounted
Securities and Exchange
for already, and what is left to be
Commission.
determined is properly within the
competence of regular courts.
Vitaliano filed, in his individual Yes. The Court finds and so holds that
capacity and on behalf of FQB+7, the case is essentially an intra-corporate
Inc. a complaint for intra-corporate dispute. It obviously arose from the
dispute against respondents intra-corporate relations between the
Nathaniel D. Bocobo, Priscila D. parties, and the questions involved
AGUIRRE V. Whether the RTC Bocobo and Antonio De Villa. pertain to their rights and obligations
FQB+7 INC., has jurisdiction over Characterizing Nathaniel's, under the Corporation Code and matters
G.R. NO. an intra-corporate Priscila's, and Antonio's continuous relating to the regulation of the
170770, dispute involving a representation of the corporation as corporation. We further hold that the
JANUARY 09, dissolved a usurpation of the management nature of the case as an intra-corporate
2013 corporation powers and prerogatives of the dispute was not affected by the
"real" Board of Directors, the subsequent dissolution of the
Complaint asked for an injunction corporation. The dissolution of the
against them and for the corporation simply prohibits it from
nullification of all their previous continuing its business. However,
actions as purported directors, despite such dissolution, the parties
 including the GIS they had filed
with the SEC. The Complaint also
sought damages for the plaintiffs
and a declaration of Vitaliano's right
to inspect the corporate records.
The case was assigned to Branch 24
of the RTC of Manila which was a
designated special commercial
court. The respondents sought the
annulment of all the proceedings
and issuances in SEC Case on the
ground that RTC has no jurisdiction
over the subject matter, which they
defined as being an agrarian dispute.
They theorized that Vitaliano's real
goal in filing the Complaint was to
maintain custody of the corporate
farm in Quezon Province. Since this
land is agricultural in nature, they
claimed that jurisdiction belongs to
the Department of Agrarian Reform
(DAR), not to the Manila RTC.
Complaint of MTCP President
Tamayo sufficiently alleged acts
sufficient to constitute the crime of
estafa as well as to give rise to a
prosecution for violation of PD
FABIA V.
902-A, that petitioner Fabia failed to
COURT OF
liquidate his cash advances which
APPEALS, 388 Is there an existing
were drawn by petitioner in his
S 574, G.R. intra-corporate
capacity as then president of the
NO. 132684, dispute?
corporation and include those
SEPTEMBER
which were taken purportedly for
11, 2002
the purpose of buying office
equipment and appliances which
petitioner however failed to deliver
despite demands as he apparently
had converted or misappropriated it
SECTION 5.2. The Commission's
jurisdiction over all cases enumerated
under Sec. 5 of P.D. 902-A is hereby
transferred to the courts of general
jurisdiction or the appropriate Regional
Trial Courts (RTC): Provided, that the
Supreme Court in the exercise of its
authority may designate the RTC
branches that shall exercise jurisdiction
over these cases. The Commission shall
retain jurisdiction over pending cases
involving intra-corporate disputes
submitted for final resolution which
should be resolved within one (1) year
from the enactment of this Code. The
Commission shall retain jurisdiction over
involved in the litigation are still
corporate actors. The dissolution does
not automatically convert the parties into
total strangers or change their intra-
corporate relationships. Neither does it
change or terminate existing causes of
action, which arose because of the
corporate ties between the parties. Thus,
a cause of action involving an intra-
corporate controversy remains and must
be filed as an intra-corporate dispute
despite the subsequent dissolution of the
corporation.
Yes. The case circumstances are
cognizable not only by the then intra-
corporate jurisdiction of the SEC but
could also very well fall within the
criminal jurisdiction of the regular
courts. The acts charged may be in the
nature of an intra-corporate dispute as
they involve fraud committed by virtue
of the office assumed by petitioner as
President, Director and stockholder in
MTCP, and committed against the
MTCP corporation, and therefore
violative of SEC rules and regulations.
This sufficiently removes the action
from the jurisdiction of the regular
courts, and transposes it into an intra-
 to his own use and benefit to the
prejudice and damage of respondent
MTCP. Petitioner concedes that the
dismissal of the criminal action is
without prejudice to the filing of an
intra-corporate/civil case for
violation of PD 902-A as amended
by RA 8799 before the RTC which
currently exercises jurisdiction over
corporate matters. However,
invoking the doctrine of primary
jurisdiction, petitioner reasons that
his corporate/civil prosecution
must first be resolved before the
criminal action could be filed.
Petitioner and private respondent
entered into a contract for the
purchase or sale of commodities.
Petitioner, allegedly without valid
A&A and justifiable cause, maliciously,
CONTINENT arbitrarily, wantonly, fraudulently,
AL and recklessly ordered private
COMMODITI respondent to increase his margin
ES requirements per contract and gave
PHILIPPINES private respondent up to 5 P.M. of
, INC. V. Whether or not the the same day within which to
SECURITIES SEC has jurisdiction deposit with petitioner the amount.
AND over the case Respondent requested additional
EXCHANGE time within which to raise the
COMMISSION amount, but petitioner informed
, 225 S 314, G.R. him that it would immediately sell
NO. 55343, his seven copper contracts should
AUGUST 16, he fail to deposit the additional
1993 amount by 5 P.M. that same day.
Respondent then requested that
should petitioner proceed with the
sale, the same be not effected
immediately upon the opening of
pending suspension of corporate controversy within the
payments/rehabilitation cases filed as of jurisdiction of the SEC. In the same vein,
30 June 2000 until finally disposed (RA the alleged fraudulent acts constitute the
8799, The Securities Regulation Code, 30 elements of abuse of confidence, deceit
May 2000). or fraudulent means, and damage under
Art. 315 of The Revised Penal Code on
estafa. What is essential is that the
fraudulent acts are likewise of a criminal
nature and hence cognizable by the
regular courts.
The applicable law is PD 902-A
(Reorganization of the Securities and
Yes. Petitioners’ Complaints sufficiently
Exchange Commission with Additional
allege acts amounting to fraud and
Powers), as amended by PDs Nos. 1653,
misrepresentation committed by
1758 and 1799. Sec. 3 of PD 902-A
Respondent Corporation, the SEC must
provides:
be held to retain its original and exclusive
jurisdiction over these five (5) cases
Sec. 3. The Commission shall have
notwithstanding the revocation by the
absolute jurisdiction, supervision and
Central Bank of Respondent
control over all corporations,
Corporation’s license or permit to
partnerships or associations, who are the
operate as financing company despite
grantees of primary franchises and/or a
the fact that the suits involve collections
license or permit issued by the
of sums of money paid to said
government to operate in the Philippines;
corporation, the recovery of which
and in the exercise of its authority, it shall
would ordinarily fall within the
have the power to enlist the aid and
jurisdiction of regular Courts. The fraud
support of and to deputize any and all
committed is detrimental to the interest
enforcement agencies of the government,
of the public and, therefore,
civil or military, as well as any private
encompasses a category of relationship
institution, corporation, firm, association
within the SEC jurisdiction.
or person.
 trading if prices were low but at a Which provision should be read together
later time. However, petitioner did with Sec. 5 of the same law which states:
not accede to the request and sold
immediately upon the opening of Sec. 5. In addition to the regulatory and
trading. Claiming that he had adjudicative functions of the Securities
incurred a loss due to the premature and Exchange Commission over
sale of the copper contracts and that corporations, partnerships and other
he would have made a profit had the forms of associations registered with it as
sale been made at a later date, expressly granted under the existing laws
respondent filed with the SEC. and decrees, it shall have original and
Private respondent SHAPE is a duly exclusive jurisdiction to hear and decide
registered non-stock, non-profit cases involving: (a) Devises or schemes
employed by or any acts of the Board of SEC. The complaint alleges that as an
corporation the primary purpose of
Directors, business associates, its officers officer of SHAPE Alleje employed
which is to foster and promote
and partners, amounting to fraud and devises or schemes tantamount to fraud
health, conduct physical education
misrepresentation which may be and misrepresentation in order to divert
and fitness exercises as well as
detrimental to the interest of the public corporate funds and assets for his
pleasure and recreation activities by
and/or to the stockholders, partners, personal use. This has transposed an
establishing and maintaining
members of associations or organizations otherwise ordinary action for recovery of
facilities, sports centers, and the like.
Whether the registered with the Commission. certain properties and sum of money
Petitioner Alleje was the Executive
Regional Trial Court with damages into an intra-corporate
ALLEJE V. Vice President (EVP) of SHAPE
— and not the SEC controversy which calls for the
COURT OF until his termination of 6 June 1991.
— has jurisdiction adjudicative powers of the SEC pursuant
APPEALS, 240 SHAPE filed a complaint for
over an action for to Sec. 5, par. (a), of PD 902-A. In other
S 495, G.R. injunction and damages with
recovery of words, the complaint filed SHAPE
NO. 107152, application for preliminary
corporate funds and before the Pasig trial court imputes
JANUARY 25, injunction and/or temporary
assets allegedly unmistakable acts of fraud to Alleje as an
1995 restraining order with preliminary
misappropriated by officer of SHAPE which have
attachment against petitioner Alleje.
its officers supposedly resulted in its heavy financial
The case was raffled to Br. 153 of
losses. The fraud committed is
the Regional Trial Court of Pasig.
detrimental to the interest not only of the
Instead of filing an answer, Alleje
corporation itself but also of its
filed a motion to dismiss contending
members who have unselfishly agreed
that the Regional Trial Court has no
among themselves that no part of the net
jurisdiction over the present action
income of the corporation shall inure to
which partakes of an intracorporate
any of then.
controversy solely cognizable by the
SEC.
 Petitioners herein filed with the
court a complaint praying therein
that the defendant Dimensional
Construction Trade and
Development Corporation, the
private respondent, be ordered to
pay them the sums of money which
BANEZ V. were already due to them under the
DIMENSION various promissory notes issued by
AL said defendant. Before a judgment
CONSTRUCTI Whether or not the in the case can be rendered,
ON, 140 S 249, SEC has jurisdiction defendant corporation filed an
G.R. NO. L- over the case omnibus motion to: (a) annul all
62648, proceedings taken in the court
NOVEMBER below; (b) lift and dissolve all
22, 1985 attachments, levies or executions
and (c) to dismiss the case. It was
defendant's contention that it is the
Securities and Exchange
Commission and not the Court of
First Instance, that has exclusive
jurisdiction over the subject matter
of the case.
Petitioner Raul Sesbreño made a
money market placement in the
amount of P300,000.00 with the
Philippine Underwriters Finance
Corporation Cebu Branch; the
SESBRENO V.
placement, with a term of thirty-two
COURT OF
Whether or not the (32) days, would mature on 13
APPEALS, 240
SEC has jurisdiction March 1981. On 13 March 1981,
S 606, G.R.
over the case petitioner sought to encash the
NO. 89252
postdated checks issued by
MAY 24, 1993
Philfinance. However, the checks
were dishonored for having been
drawn against insufficient funds. As
petitioner had failed to collect his
investment and interest thereon, he
No. The recitals of the complaint
disclose that plaintiff's cause of action is
merely for the collection of the various
sums of money that have already become
payable to petitioners due to the
promissory notes executed by defendant
corporation which have already matured.
There is no allegation nor any mention
whatsoever in plaintiff's complaint that a
device or scheme was resorted to by
private respondent corporation
amounting to fraud and
misrepresentation. It is, therefore,
difficult to consider that petitioners' case
falls within the jurisdiction of the
Securities and Exchange Commission
pursuant to PD 902-A.
No. This act of Philfinance in accepting
the investment of plaintiff and charging
it against DMC PN No. 2731 when its
entire face value was already obligated or
earmarked for set-off or compensation is
difficult to comprehend and may have
been motivated with bad faith.
Philfinance, therefore, is solely and
legally obligated to return the investment
of plaintiff, together with its earnings,
and to answer all the damages plaintiff
has suffered incident thereto.
Unfortunately for plaintiff, Philfinance
was not impleaded as one of the
defendants in this case at bar; hence, this
 filed an action for damages with the Court is without jurisdiction to
Regional Trial Court against private pronounce judgement against it.
respondents Delta and Pilipinas.
The trial court dismissed the
complaint and counterclaims for
lack of merit and for lack of cause of
action, with costs against petitioner.
Upon appeal, respondent Court of
Appeals affirmed the decision of the
lower court.
P.D. No. 134421 expanding the
jurisdiction of the NHA (now HLURB),
as follows:
DPDCI posits that the HLURB has SECTION 1. In the exercise of its
no jurisdiction over the complaint functions to regulate the real estate trade The mere relationship between the
PHILIP L. GO,
filed by petitioners because the and business and in addition to its powers parties, i.e., that of being subdivision
PACIFICO Q.
controversies raised therein are in provided for in Presidential Decree No. owner/developer and subdivision lot
LIM AND
Whether Court of the nature of "intra-corporate 957, the National Housing Authority buyer, does not automatically vest
ANDREW Q.
Appeals erred in disputes." Thus, the case does not shall have exclusive jurisdiction to hear jurisdiction in the HLURB. For an action
LIM V.
finding that PHCC fall within the jurisdiction of the and decide cases of the following nature: to fall within the exclusive jurisdiction of
DISTINCTIO
is an indispensable HLURB under Section 1, P.D. No. (a) Unsound real estate business the HLURB, the decisive element is the
N
party which 957 and P.D. No. 1344. According practices; nature of the action as enumerated in
PROPERTIES
warranted the to DPDCI, petitioners sought to (b) Claims involving refund and Section 1 of P.D. 1344. On this matter,
DEVELOPME
dismissal of the case address the invalidation of the any other claims filed by we have consistently held that the
NT AND
by reason of it not corporate acts duly entered and subdivision lot or condominium concerned administrative agency, the
CONSTRUCTI
having been executed by PHCC as a corporation unit buyer against the project National Housing Authority (NHA)
ON, INC.
impleaded in the of which petitioners are admittedly owner, developer, dealer, broker before and now the HLURB, has
case members of, and not the acts or salesman; and jurisdiction over complaints aimed at
G.R. NO.
pertaining to their ownership of the (c) Cases involving specific compelling the subdivision developer to
194024 APRIL
units. Such being the case, PHCC performance of contractual and comply with its contractual and statutory
25, 2012
should have been impleaded as a statutory obligations filed by obligations.
party to the complaint. buyers of subdivision lot or
condominium unit against the
owner, developer, dealer, broker
or salesman.
STRATEGIC Is a derivative suit On October 20, 2000, the PNCC A derivative action is a suit by a In this case, the PNCC Board cannot
ALLIANCE possible to question Board of Directors passed Board stockholder to enforce a corporate cause conceivably be expected to attack the
DEVELOPME the validity of the Resolution No. BD-092-2000 of action. Under the corporation code, validity of the Compromise Agreement
 NT Compromise admitting PNCC’s liability to where a corporation is an injured party, since the PNCC Board itself approved
CORPORATI Agreement entered Marubeni for P10,743,103,388 as of its power to sue is lodged with its board the Compromise Agreement. In fact, the
ON VS. into by the PNCC September 30, 1999. In January of directors or trustees. However, an PNCC Board steadfastly defends the
RADSTOCK Board? 2001, barely three months after the individual stockholder may file a Compromise Agreement for allegedly
SECURITIES PNCC Board first admitted liability derivative suit on behalf of the being advantageous to PNCC. When the
LTD. for the Marubeni loans, Marubeni corporation to protect or indicate case was on appeal before the CA, there
assigned its entire credit to Radstock corporate rights whenever the officials of was no need for Sison to avail of any
G.R. NO. for US$2 million or less than P100 the corporation refuse to sue, or are the remedy, until PNCC and Radstock
178158, million. In short, Radstock paid ones entered into the Compromise
DECEMBER Marubeni less than 10% of the to be sued, or hold control of the Agreement, which disposed of all or
4, 2009 P10.743 billion admitted amount. corporation. In such actions, the substantially all of PNCC’s assets. Sison
Radstock immediately sent a notice corporation is the real party-in-interest came to know of the Compromise
and demand letter to PNCC. On while the suing stockholder, on behalf of Agreement only in December 2006.
January 15, 2001, Radstock filed an the corporation, is only a nominal party. PNCC and Radstock submitted the
action for collection and damages Compromise Agreement to the CA for
against PNCC. approval on January 10, 2007. The CA
approved the Compromise Agreement
on January 25, 2007. To require Sison to
exhaust all the remedies within the
corporation will render such remedies
useless as the Compromise Agreement
had already been approved by the CA.
PNCC’s assets are in danger of being
dissipated in favor of a private foreign
corporation. Thus, Sison had no
recourse but to avail of an extraordinary
remedy to protect PNCC’s assets.
IEMELIF argues IEMELIF argues that the intra- Jurisdiction over the subject matter is The Complaint stated that IEMELIF is
IGLESIA
that the intra- corporate dispute alleged by Juane is determined by the allegations of the the absolute and registered owner of the
EVANGELICA
corporate dispute a completely extraneous matter that complaint, irrespective of whether or not subject parcel of land. The Complaint
METODISTA
alleged by Juane is a was never alleged or prayed for in the Plaintiff is entitled to recover upon all stated further that by virtue of the
EN LAS ISLAS
completely the Complaint. IEMELIF points or some of the claims asserted therein – appointment and assignment of
FILIPINAS
extraneous matter out that the right to physically a matter that can be resolved only after defendant Juane as Resident Pastor of
(IEMELIF),
that was never occupy the premises is derived from and as a result of the trial. Nor may the the Cathedral Congregation in Tondo,
INC. V.
alleged or prayed Juane’s appointment as a church jurisdiction of the court be made to Manila, he was authorized to stay in and
NATANAEL
for in the worker assigned to the Cathedral, depend upon the defenses set up in the occupy the Pastor’s residence inside the
B. JUANE
Complaint. and not from his being a member of answer or upon the motion to dismiss, cathedral complex. The Complaint
IEMELIF points the corporation. for, were we to be governed by such rule, stated that this authority to stay in the
 G.R. NO. out that the right to the question of jurisdiction could depend premises expired upon Juane’s
172447 physically occupy almost entirely upon the defendant. reassignment as Resident Pastor of the
SEPTEMBER the premises is Sta. Mesa Congregation. Finally, the
18, 2009 derived from Complaint stated that IEMELIF issued a
Juane’s appointment demand for Juane to vacate the premises
as a church worker which was within one year from the date
assigned to the of the Complaint, 17 September 2002.
Cathedral, and not
from his being a
member of the
corporation.
Filchart filed before the SEC a
petition, praying for the
appointment of a management
committee to take over the business It should be noted that the SCCs are still
GD EXPRESS
operations of PEAC pending considered courts of general jurisdiction.
WORLDWIDE
litigation and for judgment Section 5.2 of R.A. No. 8799 directs
N.V. AND
Whether the dispute declaring, among others, the nullity merely the Supreme Court’s designation
AMIHAN Pursuant to Section 5.2 of Republic Act
was not intra- of certain provisions in the joint of RTC branches that shall exercise
MANAGEME No. 8799, the SEC’s jurisdiction over
corporate in venture agreement between PADC jurisdiction over intra-corporate
NT intra-corporate controversies has been
character and petitioner GD Express, disputes. Nothing in the language of the
SERVICES, transferred to the RTCs or Special
considering that particularly those requiring the law suggests the diminution of
INC. V. HON. Commercial Courts (SCC) designated by
respondent Filchart consent of petitioner GD Express jurisdiction of those RTCs to be
COURT OF the Court pursuant to A.M. No. 00-11-
had not fully paid in the sale of PADC’s shareholdings designated as SCCs. The assignment of
APPEALS 03-SC promulgated on 21 November
the subscription in PEAC. Also sought to be intra-corporate disputes to SCCs is only
2000.
rights in PADC. nullified were certain provisions in for the purpose of streamlining the
G.R. NO.
PEAC’s articles of incorporation workload of the RTCs so that certain
136978 MAY 8,
and by-laws, and the management branches thereof like the SCCs can focus
2009
agreement between petitioners GD only on a particular subject matter.
Express and Amihan. Named
respondents were herein petitioners
GD Express and Amihan.
Petitioner raises the Private respondent Alejandro Ty Jurisdiction over the subject matter is In the cases at bar, the relationship of
THE
issue of jurisdiction then filed two complaints for the conferred by law (Union Bank of the private respondent when he sold his
INTESTATE
of the trial court. recovery of the above-mentioned Philippines vs. Court of Appeals, 290 SCRA shares of stock to his son was one of
ESTATE OF
She alleges that an property, which was docketed as 198 [1998]). The nature of an action, as vendor and vendee, nothing else. The
ALEXANDER
intra-corporate Civil Case Q-91-10833 in Branch well as which court or body has question raised in the complaints is
T. TY V.
dispute is involved. 105 Regional Trial Court of Quezon jurisdiction over it, is determined based whether or not there was indeed a sale in
COURT OF Hence, under City (now herein G.R. No. 112872),
APPEALS Section 5(b) of praying for the declaration of nullity
Presidential Decree of the deed of absolute sale of the
G.R. NO. 902-A, the SEC has shares of stock executed by private
112872 APRIL jurisdiction over the respondent in favor of the deceased
19, 2001 case. Alexander, and Civil Case Q-92-
14352 in Branch 90 Regional Trial
Court of Quezon City (now G.R.
No. 114672), praying for the
recovery of the pieces of property
that were placed in the name of
deceased Alexander by private
respondent, the same property
being sought to be sold out,
mortgaged, or disposed of by
petitioner. Private respondent
claimed in both cases that even if
said property were placed in the
name of deceased Alexander, they
were acquired through private
respondent’s money, without any
cause or consideration from
deceased Alexander.
Petitioner questions
Petitioner now questions the
the jurisdiction of
jurisdiction of the trial court arguing
the trial court
that the instant case involves an
HERNANI N. arguing that the
intra-corporate controversy
FABIA V. instant case involves
primarily cognizable by the SEC
COURT OF an intra-corporate
and, as such, the public prosecutor
APPEALS controversy
had no authority to initially rule in
primarily cognizable
the preliminary investigation of the
G.R. NO. by the SEC and, as
complaint for estafa filed against
132684 such, the public
him as it was barred under the
AUGUST 20, prosecutor had no
doctrine of primary jurisdiction
2001 authority to initially
from exercising jurisdiction over the
rule in the
criminal case without the prior
preliminary
resolution of the SEC on the matter.
investigation of the
on the allegations contained in the the absence of cause or consideration.
complaint of the plaintiff (Serdoncillo vs. The proper forum for such a dispute is a
Benolirao, 297 SCRA 448 [1998]; Tamano regular trial court. The Court agrees with
vs. Ortiz, 291 SCRA 584 [1998]), the ruling of the Court of Appeals that
irrespective of whether or not plaintiff is no special corporate skill is necessary in
entitled to recover upon all or some of resolving the issue of the validity of the
the claims asserted therein (Citibank, transfer of shares from one stockholder
N.A. vs. Court of Appeals, 299 SCRA 390 to another of the same corporation.
[1998]). Jurisdiction cannot depend on
the defenses set forth in the answer, in a
motion to dismiss, or in a motion for
reconsideration by the defendant (Dio vs.
Conception, 296 SCRA 579 [1998]).
The doctrine of primary jurisdiction
exhorts us to refer the instant case to the
Section 6, PD 902-A confines the
SEC for its resolution of the matter in
jurisdiction of the SEC to "intra-
dispute. However, it should be noted
corporate disputes" defined as any act or
that RA 8799, The Securities Regulation
omission of the Board of
Code, has amended PD 902-A, and
Directors/Trustees of corporations, or
transferred the jurisdiction of the SEC
of partnerships, or of other associations,
over intra-corporate cases to the courts
or of their stockholders, officers, or
of general jurisdiction or the appropriate
partners, including any fraudulent
Regional Trial Courts. To transfer the
devices, schemes or representations, in
present case to the SEC would only
violation of any law or rules and
result in a circuitous administration of
regulations administered and enforced by
justice. Thus, the Regional Trial Court of
the Commission.
Manila should dismiss Crim. Case No.
98-162570 without prejudice to the filing
 complaint for estafa of the proper action which shall then be
filed against him as raffled off to the appropriate branch of
it was barred under the court pursuant to A.M. No. 00-11-
the doctrine of 03-SC.
primary jurisdiction
from exercising
jurisdiction over the
criminal case
without the prior
resolution of the
SEC on the matter.
In order that the commission can take
cognizance of a case, the controversy
TEODORO B. The respondent spouses Delfino must pertain to any of the following The present dispute is intra-corporate in
VESAGAS, and Helenda Raniel are members in relationship: a) between the corporation, character. In the first place, the parties
AND good standing of the Luz Villaga partnership or association and its here involved are officers and members
WILFRED D. Tennis Clud, Inc. (club). They stockholders, partners, members, or of the club. Respondents claim to be
ASIS V. THE alleged that petitioner Teodoro B. officers; c) between the corporation, members of good standing of the club
HONORABLE Vesagas, who claims to be the club's partnership, or association and the state until they were purportedly stripped of
COURT OF duly elected president, in conspiracy as far as its franchise, permit or license to their membership in illegal fashion.
APPEALS with petitioner Wilfred D. Asis, operate is concerned; and d) among the Petitioners, on the other hand, are its
Whether the SEC
AND who, in turn, claims to be its duly stockholders, partners or associates President and Vice-President,
has jurisdiction over
DELFINO elected vice-president and legal themselves. The fact that the parties respectively. More significantly, the
the case.
RANIEL AND counsel, summarily stripped them involved in the controversy are all present conflict relates to, and in fact
HELENDA of their lawful membership, without stockholders or that the parties involved arose from, this relation between the
RANIEL due process of law. Thereafter, are the stockholders and the corporation, parties. The subject of the complaint,
respondent spouses filed a does not necessarily place the dispute namely, the legality of the expulsion
G.R. NO. Complaint with the Securities and within the loop of jurisdiction of the from membership of the respondents
142924 Exchange Commission (SEC) on SEC. Jurisdiction should be determined and the validity of the amendments in
DECEMBER March 26, 1997 against the by considering not only the status or the club's by-laws are, furthermore,
5, 2001 petitioners. relationship of the parties but also the within the Commission's jurisdiction.
nature of the question that is the subject
of their controversy.
SPOUSES These cases involve the question of P.D. No. 902-A which reorganized the Basically and indubitably, the dispute at
JOSE ABEJO Whether the SEC who, between the Regional Trial SEC with additional powers "in line with bar, as held by the SEC, is an
AND has jurisdiction over Court and the Securities and the government's policy of encouraging intracorporate dispute that has arisen
AURORA the case. Exchange Commission (SEC), has investments, both domestic and foreign, between and among the principal
ABEJO, original and exclusive jurisdiction and more active publicParticipation in stockholders of the corporation Pocket
 TELEC. over the dispute between the the affairs of private corporations and Bell due to the refusal of the corporate
TRONIC principal stockholders of the enterprises through which desirable secretary, backed up by his parents as
SYSTEMS, corporation Pocket Bell Philippines, activities may be pursued for the erstwhile majority shareholders, to
INC. VS. Inc. (Pocket Bell), a "tone and voice promotion of economic development; perform his "ministerial duty" to record
HON. paging corporation," namely, the and, to promote a wider and more the transfers of the corporation's
RAFAEL DE spouses Jose Abejo and Aurora meaningful equitable distribution of controlling (56%) shares of stock,
LA CRUZ, Abejo (hereinafter referred to as the wealth. covered by duly endorsed certificates of
JUDGE OF Abejos) and the purchaser, stock, in favor of Telectronics as the
THE Telectronic Systems, Inc. purchaser thereof. mandamus in the
REGIONAL (hereinafter referred to as SEC to compel the corporate secretary
TRIAL Telectronics) of their 133,000 to register the transfers and issue new
COURT minority shareholdings (for P5 certificates in favor of Telectronics and
(NATIONAL million) and of 63,000 shares its nominees was properly resorted to
CAPITAL registered in the name of Virginia under Rule XXI, Section 1 of the SEC's
JUDICIAL Braga and covered by five stock New Rules of Procedure, which
REGION, certificates endorsed in blank by her provides for the filing of such petitions
BRANCH (for P1,674,450.00), and the spouses with the SEC. Section 3 of said Rules
CLX-PASIG), Agapito Braga and Virginia Braga further authorizes the SEC to "issue
SPOUSES (hereinafter referred to as the orders expediting the proceedings ... and
AGAPITO Bragas), erstwhile majority also [to] grant a preliminary injunction
BRAGA AND stockholders. With the said for the preservation of the rights of the
VIRGINIA purchases, Telectronics would parties pending such proceedings.
BRAGA, become the majority stockholder,
VIRGILIO holding 56% of the outstanding
BRAGA AND stock and voting power of the
NORBERTO corporation Pocket Bell.
BRAGA

G.R. NO. L-
63558 MAY 19,
1987
DANIEL R. The petitioners do The issues raised in this petition Section 6 (P.D. No. 902-A) further grants The SEC is at least a co-equal body of
AGUINALDO, not question the principally hinge on the propriety of the SEC "in order to effectively exercise the Regional Trial Court when it
DOMINADOR jurisdiction of the the issuance of the temporary such jurisdiction," the power, inter alia, adjudicates controversies over which it
R. AYTONA SEC over the case restraining order by the SEC. The "to issue preliminary or permanent has jurisdiction, it follows that the
AND ROMEO between them and petitioners contend that — (1) injunctions, whether prohibitory or temporary restraining order issued by
H. BORSOTO the private Considering the improvident mandatory, in all cases in which it has SEC must have the same life-span as that
V. THE respondents. What issuance and unnecessary and jurisdiction, and in which cases the issued by the trial court. It is a well-
 SECURITIES they challenge is the oppressive continuance of the pertinent provisions of the Rules of settled rule that a temporary restraining
AND continuance of the restraining order, the respondent Court shall apply." order issued by a trial court has a life of
EXCHANGE temporary Commission gravely abused its only twenty (20) days.
COMMISSION restraining order discretion and failed to do an act or
issued by the duty resulting from its office when
G.R. NO. L- respondent SEC it failed to lift the restraining order
61377 JUNE 30, and the apparent and to act with deliberate dispatch
1988 delay of the on petitioners' basic and
latter's en supplemental petitions pending
banc division in before it; and (2) private
resolving their main respondents, aided and abetted by
and supplemental the inaction of respondent
petitions which also Commission, are acting contrary to
pray for the lifting law and in derogation of petitioners'
of the questioned rights as stockholders and officers
restraining order. of Nadecor; the "private
respondents have miserably failed to
establish any right or title to the
corporate offices of Nadecor' and
'hence, they are not entitled to the
ancillary reliefs of preliminary
injunction and restraining order."
An intra-corporate controversy, which
Presidential Decree 902-A is
falls within the jurisdiction of regular
entitled as Reorganization of the
courts, has been regarded in its broad
Securities and Exchange
sense to pertain to disputes that involve
Commission with Additional Power
Does PD 902-A any of the following relationships: (1) The jurisdiction of the SEC is limited to
and Placing said Agency under the
PEREYRA V. confer jurisdiction between the corporation, partnership or matters intrinsically connected with the
Administrative Provision of the
IAC to the Securities and association and the public; (2) between regulation of corporations, partnerships
Office of the President.
Exchange the corporation, partnership or and associations and those dealing with
181 S 244 Commission over association and the state in so far as its internal affairs of such entities; P.D. 902-
This necessarily delves into the
1990 all matters affecting franchise, permit or license to operate is A does not confer jurisdiction to SEC
nature of the jurisdiction of
corporations? concerned; (3) between the corporation, over all matters affecting corporations.
Securities and Exchange
partnership or association and its
Commission with respect to
stockholders, partners, members or
intrinsic matters of the subject
officers; and (4) among the stockholders,
relationships.
partners or associates, themselves.
 In order that the SEC can take
cognizance of a case, the controversy
must pertain to any of the following
Ernesto Movilla, who was a
relationships: a) between the corporation,
Certified Public Accountant during
partnership or association and the public; The claim for unpaid wages and
his lifetime, was hired as such by
b) between the corporation, partnership separation pay filed by the complainant
Mainland Construction in 1977.
or association and its stockholders, against petitioner corporation involves a
During the annual meeting of
partners, members or officers; c) between labor dispute. It does not involve an
stockholders, the Board of
the corporation, partnership or intra-corporate matter, even when it is
Directors were elected. On the same
association and the State as far as its between a stockholder and a
MAINLAND day, an organizational meeting was
franchise, permit or license to operate is corporation. It relates to an employer-
CONSTRUCTI held and the Board of Directors
Is this an intra- concerned; and d) among the employee relationship which is distinct
ON V. elected Ernesto Movilla as
corporate stockholders, partners or associates from the corporate relationship of one
MOVILLA Administrative Manager. He
controversy under themselves. with the other. Moreover, there was no
occupied the said position up to the
the jurisdiction of showing of any change in the duties
GR. NO. 118088 time of his death.
SEC? The fact that the parties involved in the being performed by complainant as an
NOVEMBER The Department of Labor and
controversy are all stockholders or that Administrative Officer and as an
23, 1995 Employment conducted a routine
the parties involved are the stockholders Administrative Manager after his
inspection on Mainland
and the corporation does not necessarily election by the Board of Directors. What
Construction. All employees listed
place the dispute within the ambit of the comes to the fore is whether there was a
in the DOLE's order were paid by
jurisdiction of SEC. The better policy to change in the nature of his functions and
Mainland Corporation, except
be followed in determining jurisdiction not merely the nomenclature or title
Ernesto Movilla.
over a case should be to consider given to his job.
Movilla filed a case before the
concurrent factors such as the status or
NLRC.
relationship of the parties or the nature
of the question that is the subject of their
controversy.
Johnny K. H. Uy and UBS In order that the SEC can take At the time of the execution of the Deed
Marketing Corporation filed with cognizance of a case, the controversy of Assignment wherein Johnny K. H. Uy
the Securities and Exchange must pertain to any of the following and Magdalena Uy, assigned all their
SEC V. CA Is this an intra- Commission a complaint against the relationship: (a) between the stockholdings in Soon Kee Commercial,
corporate private respondents Ban Hua Uy- corporation, partnership or association Inc. to Ban Hua Uy-Flores and Ban Ha
G.R. NO. 93839 controversy under Flores, Ban Ha Uy-Chua, Roland and the public; (b) between the Uy-Chua and other members of the Uy
AUGUST 23, the jurisdiction of King and Soon Kee Commercial, corporation, partnership or association family, and the Deed of Assignment
1991 SEC? Inc. for the recovery of UBS and its stockholders, partners, members, wherein Ban Hua Uy-Flores and Ban Ha
Marketing Corporation's corporate or officers; (c) between the corporation, Uy-Chua, assigned all their
books, books of account, and the partnership or association and the state in stockholdings in UBS Marketing
accounting and turn over of the so far as its franchise, permit or license to Corporation to Johnny K. H. Uy or to
 funds and properties belonging to operate is concerned; and (d) among the his wife, Johnny K. H. Uy and Ban Hua
UBS Marketing Corporation. stockholders, partners or associates Uy-Flores and Ban Ha Uy-Chua were all
themselves. interlocking stockholders and officers of
the complaint alleged that before the 2 corporations owned by the Uy
the segregation of the family family.
business, private respondents Ban
Hua Uy-Flores and Ban Ha Uy- Hence, the deeds of assignment were
Chua, aside from being intra-corporate transactions which arose
stockholders and directors, were from intra-corporate relations or
also officers of the UBS Marketing between and among the stockholders of
Corporation, who had custody, the two (2) family corporations.
control and supervision of its
records, property and funds; that
private respondent Roland King
was the accountant of all the
business concerns of the Uy family
including UBS Marketing
Corporation; that after the
segregation, petitioner Johnny K. H.
Uy demanded for the turn over of
the records of the UBS Marketing
Corporation but which the private
respondents refused without just
cause; and that they held on and
refused to account for funds and
property, a portion of which should
go to or benefit Johnny K. H. Uy or
the UBS Marketing Corporation, in
accordance with their settlement
agreement made before the Board
of Mediators.
Sunsetview Condominium filed its Ownership of a unit is a condition sine The private respondents, therefore, who
SUNSETVIEW Is this an intra- amended complaint for the qua non to being a shareholder in the have not fully paid the purchase price of
CONDOMINI corporate collection of overdue accounts on condominium corporation. It follows their units and are consequently not
UM V. controversy under assessments and insurance that a purchaser of a unit who is not yet owners of their units are not members or
CAMPOS the jurisdiction of premiums and the interest thereon the owner thereof for not having fully shareholders of the petitioner
SEC? against Lim Siu Leng to whom was paid the full purchase price, is not a condominium corporation,
assigned a unit called "Alegria" of shareholder
 G.R. NO. L- the Sunset. View Condominium Inasmuch as the private respondents are
52361 Project by Alfonso Uy who had not shareholders of the petitioner
APRIL 27, 1981 entered into a "Contract to Buy and condominium corporation, the instant
Sell" with Tower Builders, Inc. over case for collection cannot be a
the said unit on installment basis. "controversy arising out of
intracorporate or partnership relations
The private respondent filed a between and among stockholders,
motion to dismiss on the ground of members or associates; between any or
lack of jurisdiction since it involves all of them and the corporation,
a dispute between her and the partnership or association of which they
corporation; that she has are stockholders, members or associates,
automatically become, as a respectively" which controversies are
purchaser of the condominium unit, under the original and exclusive
a stockholder of the petitioner jurisdiction of the Securities & Exchange
pursuant to Section 2 of the Commission, pursuant to Section 5 (b)
Condominium Act, Republic Act of P.D. No. 902- A. The subject matters
No. 4726; that the dispute is intra- of the instant cases according to the
corporate and is consequently under allegations of the complaints are under
the exclusive jurisdiction of the the jurisdiction of the regular courts
Securities & Exchange Commission
as provided in Section 5 of P.D. No.
902-A.

Petitioner alleges that the private

respondent who had not fully paid
for the unit was not the owner
thereof, consequently was not the
holder of a separate interest which
would make her a stockholder, and
that hence the case was not an intra-
corporate dispute.
Securities and Exchange Commission The case was brought before the
WESTERN Villasis and Enriquez filed
Is this an intra- shall have original and exclusive Regional Trial Court. It is outrightly
INSTITUTE complaints against private
corporate jurisdiction to hear and decide cases dismissible for having been wrongfully
OF respondents - one for falsification
controversy under involving: filed in the regular court devoid of any
TECHNOLOG of a public document under Article
the jurisdiction of xxx xxx xxx jurisdiction to entertain the complaint.
Y V. SALAS 171 of the Revised Penal Code and
SEC? b) Controversies arising out of intra- The ease should have been filed with the
the other for estafa, which were filed
corporate or partnership relations, between Securities and Exchange Commission
 G.R. NO. before the Regional Trial Court of and among stockholders, members, or which exercises original and exclusive
113032 Iloilo City. associates; between any or all of them and the jurisdiction over derivative suits, they
AUGUST 21, corporation, partnership or association of being intra-corporate disputes.
1997 The charge for falsification of public which they are stockholders, members or
document was anchored on the associates, respectively; and between
private respondents' submission of such corporation, partnership or
WIT's income statement for the association and the State insofar as it
fiscal year 1985-1986 with the concerns their individual franchise or
Securities and Exchange right to exist as such entity.
Commission, reflecting the
disbursement of corporate funds for
the compensation of private
respondents based on Resolution
No. 4, series of 1986, making it
appear that the same was passed by
the board on March 30, 1986, when
in truth, the same was actually
passed on June 1, 1986, a date not
covered by the corporation's fiscal
year 1985-1986.
Teodorico P. Fernandez filed a
An election contest is involved in this
Complaint for Invalidation of
case, as Fernandez is also questioning the
Corporate Acts and Resolutions
authority of the BOD of VVCCI to
with Application for Writ of
The 15-day reglementary period within suspend him when he claimed that the
Preliminary Injunction against the
which to file an election contest under individual petitioners were elected as
May Fernandez individual petitioners who allegedly
EIZMENDI V. the Interim Rules is meant to hasten the members thereof despite the supposed
question the constituted themselves as new
FERNANDEZ submission and resolution of corporate lack of quorum during an annual meeting
authority of members of the Board of
election controversies, so that the state of on February 23, 2013.
petitioners to act as Directors of Valle Verde Country
G.R. uncertainty in the corporate leadership is
BOD and approve Club, Inc., despite lack of quorum
NO. 215280 settled; and that the said period not Since Fernandez's complaint is partly an
the board resolution during the annual members'
SEPTEMBER meant to block suits questioning the election contest, and there being no
suspending his meeting on February 23, 2013.
5, 2018 unlawful acts of winning directors, provision in VVCCI's by-laws that lay
membership?
including the legitimacy of their down a procedure for resolution of the
The hearing of Fernandez's
authority. controversy from which the 15-day
application for issuance of a writ of
period to file such contest may be
preliminary injunction was held
reckoned with, the first cause of action
before the Hon. Maria Rowena
should be dismissed for having been
Modesto San Pedro, Presiding
 Judge of the Regional Trial Court of
Pasig City. During the hearing,
Judge San Pedro stressed that she
will not touch on the election
contest aspect of the Complaint, but
only on the issue of his suspension
from the VVCCI.
Petitioners specifically denied the
material allegations of Fernandez's
Complaint, and sought the dismissal
thereof on the ground that the case
is an election contest filed more
than 15 days from the date of
election, in violation of Section 3,
Rule 6 of the Rules Governing
Intra-Corporate Controversies.
Maglaya learned that the Bishops
created an Ad Hoc Committee to
plan the efficient and orderly
turnover of the administration of
the WUP in view of the alleged
"gentleman's agreement", and that
WESLEYAN the Bishops have appointed the
UNIVERSITY incoming corporate members and
V. MAGLAYA Does the NLRC trustees. He clarified that there was
have the jurisdiction no agreement and any discussion of
over the illegal the turnover because the corporate
G. R. NO. dismissal case filed members still have valid and existing
212774 by Maglaya? corporate terms.
JANUARY 23,
2017 The Bishops, through a formal
notice to all the officers, deans, staff,
and employees of WUP, introduced
the new corporate members,
trustees, and officers. In the said
notice, it was indicated that the new
Board met, organized, and elected
filed beyond the 15-day reglementary
period from the date of the election.
The CA gravely erred in allowing
Fernandez in Commercial Case No. 13-
190 to present evidence in connection
with the election of the individual
petitioners as members of the BOD of
VVCCI conducted on February 23, 2013
to invalidate their claims to the office of
director, because that is akin to
entertaining an election contest filed
beyond the 15-day period under
the Interim Rules.
A corporate officer's dismissal is always
a corporate act, or an intracorporate
“Corporate officers" in the context of controversy which arises between a
Presidential Decree No. 902- A are those stockholder and a corporation, and the
officers of the corporation who are given nature is not altered by the reason or
that character by the Corporation Code wisdom with which the Board of
or by the corporation's by-laws. There areDirectors may have in taking such
three specific officers whom a action.59 The issue of the alleged
corporation must have under Section 25 termination involving a corporate
of the Corporation Code. These are the officer, not a mere employee, is not a
president, secretary and the treasurer. simple labor problem but a matter that
The number of officers is not limited to comes within the area of corporate
these three. A corporation may have such affairs and management and is a
other officers as may be provided for by corporate controversy in contemplation
its by-laws like, but not limited to, the of the Corporation Code.
vice-president, cashier, auditor or general
manager. The number of corporate The alleged "appointment" of Maglaya
officers is thus limited by law and by the instead of "election" as provided by the
corporation's by-laws. by-laws neither convert the president of
university as a mere employee, nor
amend its nature as a corporate officer.
 the new set of officers on April 20,
2009. Manuel Palomo, the new
Chairman of the Board, informed
Maglaya of the termination of his
services and authority as President
of University.
Maglaya filed on March 22, 2011 the
present illegal dismissal case against
WUP, Palomo, Bishop Lito C.
Tangonan, and Bishop Leo A.
Soriano.
Cosare claimed that he was
employed as a salesman by Arevalo,
who was then in the business of
selling broadcast equipment needed
by television networks and
production houses. Arevalo set up
the company Broadcom, where
Cosare was named as an
COSARE V. incorporator. Cosare was promoted
BROADCOM to the position of Assistant Vice
Is this an intra-
ASIA President for Sales and Head of the
corporate
Technical Coordination
controversy under
G.R. NO. Alex F. Abiog was appointed as
the jurisdiction of
201298 Broadcom’s Vice President for Sales
SEC?
FEBRUARY 5, and thus, became Cosare’s
2014 immediate superior. Cosare sent a
confidential memo7 to Arevalo to
inform him of the following
anomalies which were allegedly
being committed by Abiog against
the company. Cosare ended his
memo by clarifying that he was not
interested in Abiog’s position, but
only wanted Arevalo to know of the
With the office specifically mentioned in
the by-laws, the NLRC erred in taking
cognizance of the case, and in
concluding that Maglaya was a mere
employee and subordinate official
because of the manner of his
appointment, his duties and
responsibilities, salaries and allowances,
and considering the Identification Card,
the Administration and Personnel Policy
Manual which specified the retirement of
the university president, and the check
disbursement as pieces of evidence
supporting such finding.
The mere fact that Cosare was a
stockholder and an officer of Broadcom
at the time the subject controversy
developed failed to necessarily make the
case an intra-corporate dispute.
An intra-corporate controversy, which
falls within the jurisdiction of regular
Under the nature of the controversy test,
courts, has been regarded in its broad
the incidents of that relationship must
sense to pertain to disputes that involve
also be considered for the purpose of
any of the following relationships: (1)
ascertaining whether the controversy
between the corporation, partnership or
itself is intra-corporate. The controversy
association and the public; (2) between
must not only be rooted in the existence
the corporation, partnership or
of an intra-corporate relationship, but
association and the state in so far as its
must as well pertain to the enforcement
franchise, permit or license to operate is
of the parties’ correlative rights and
concerned; (3) between the corporation,
obligations under the Corporation Code
partnership or association and its
and the internal and intra-corporate
stockholders, partners, members or
regulatory rules of the corporation. If the
officers; and (4) among the stockholders,
relationship and its incidents are merely
partners or associates, themselves.
incidental to the controversy or if there
will still be conflict even if the
relationship does not exist, then no intra-
corporate controversy exists.
 irregularities for the corporation’s The mere fact that Cosare was a
sake. stockholder of Broadcom at the time of
Apparently, Arevalo failed to act on the case’s filing did not necessarily make
Cosare’s accusations. Cosare the action an intra- corporate
claimed that he was instead called controversy. "Not all conflicts between
for a meeting by Arevalo wherein he the stockholders and the corporation are
was asked to tender his resignation classified as intra-corporate. There are
in exchange for "financial other facts to consider in determining
assistance". Cosare refused to whether the dispute involves corporate
comply with the directive., as matters as to consider them as intra-
signified in the letter. corporate controversies." In
determining the existence of an intra-
corporate dispute, the status or
relationship of the parties and the nature
of the question that is the subject of the
controversy must be taken into
account. Considering that the pending
dispute particularly relates to Cosare’s
rights and obligations as a regular officer
of Broadcom, instead of as a stockholder
of the corporation, the controversy
cannot be deemed intra-corporate.
Renato Real was removed from his Petitioner negates his status as a
An intra-corporate controversy, which
position as Manager through Board corporate officer by pointing out that
falls within the jurisdiction of regular
Resolution 2001-03 adopted by although he was removed as Manager
courts, has been regarded in its broad
respondent corporation’s Board of through a board resolution, he was never
sense to pertain to disputes that involve
Directors. Petitioner complained elected to said position nor was he
REAL V. any of the following relationships: (1)
that he was neither notified of the appointed thereto by the Board of
SANGU PHIL. Is this an intra- between the corporation, partnership or
Board Meeting during which said Directors. While the By-Laws of
corporate association and the public; (2) between
board resolution was passed nor respondent corporation provides that
G.R. NO. controversybeyond the corporation, partnership or
formally charged with any the Board may from time to time appoint
168757 the jurisdiction of association and the state in so far as its
infraction. such officers as it may deem necessary or
JANUARY 19, the Labor Arbiter? franchise, permit or license to operate is
proper, he avers that respondents failed
2011 concerned; (3) between the corporation,
Sangu Phil. terminated the services to present any board resolution that he
partnership or association and its
of petitioner for the following was appointed pursuant to said By-Laws.
stockholders, partners, members or
reasons: (1) his continuous absences He instead alleges that he was hired as
officers; and (4) among the stockholders,
at his post at Ogino Philippines, Inc; Manager of respondent corporation
partners or associates, themselves.
(2) respondents’ loss of trust and solely by respondent Abe. For these
 confidence on petitioner; and, (3) to reasons, petitioner claims to be a mere
cut down operational expenses to employee of respondent corporation
reduce further losses being rather than as a corporate officer.
experienced by the corporation.
Hence, petitioner filed a complaint Further, the reasons given by
for illegal dismissal and sought respondents for dismissing petitioner
reinstatement, backwages, moral have something to do with his being a
damages and attorney’s fees. Manager of respondent corporation and
nothing with his being a director or
stockholder.

With the elements of intra-corporate

controversy being absent in this case, we
thus hold that petitioner’s complaint for
illegal dismissal against respondents is
not intra-corporate. Rather, it is a
termination dispute and, consequently,
falls under the jurisdiction of the Labor
Arbiter pursuant to Section 217 of the
Labor Code.
Before Marc II Marketing was A mere employee. The position of
Under Section 5 of Presidential Decree
incorporated, Alfredo Joson was General Manager was not among those
No. 902-A, intra-corporate controversies
engaged by President Lucila to act as enumerated as corporate officers under
Is Joson as General are those controversies arising out of
a General Manager of the the by-laws of Marc II Marketing.
Manager of Marc II intra-corporate or partnership relations,
corporation.
Marketing a between and among stockholders,
corporate officer or members or associates; between any or all
MARC II Although the corporation's by-laws
a mere employee of of them and the corporation, partnership
MARKETING In 1994, Marc II Marketing was empowered its Board of Directors to
the latter? Does his or association of which they are
V. JOSON, 12 officially incorporated and appoint such other officers as it may
dismissal from stockholders, members or associates,
DECEMBER registered with the SEC. Pursuant to determine necessary or proper, the
2011 office amount to an respectively; and between such
Section 1, Article IV of the Matling doctrine clearly enunciated that
intra-corporate corporation, partnership or association
corporation's by-laws, its corporate the board of directors has no power to
controversy. and the State insofar as it concerns their
officers are as follows: Chairman, create other corporate offices without
individual franchise or right to exist as
President, one or more Vice- first amending the corporate by-laws so
such entity. It also includes controversies
President(s), Treasurer and as to include therein the newly created
in the election or appointments of
Secretary. Its Board of Directors, corporate office. Though the board of
directors, trustees, officers or managers
however, may, from time to time, directors may create appointive positions
appoint such other officers as it may of such corporations, partnerships or other than the positions of corporate
determine to be necessary or associations. officers, the persons occupying such
proper. positions cannot be viewed as corporate
officers under Section 25 of the
In order to determine whether a dispute Corporation Code.
Per an undated Secretary's constitutes an intra-corporate
Certificate, the corporation's Board controversy or not, the Court considers
of Directors conducted a meeting two elements instead, namely: (a) the Though occupying the General Manager
on 29 August 1994 where Joson was status or relationship of the parties; and position, Joson was not a corporate
appointed as one of its corporate (b) the nature of the question that is the officer of the corporation rather he was
officers with the designation or title subject of their controversy. merely its employee occupying a high-
of General Manager to function as a ranking position.
managing director with other duties
and responsibilities that the Board Jurisprudential tenet provides that
of Directors may provide and corporate officers are those officers of a Accordingly, his dismissal as the
authorized. However, in 1997 the corporation who are given that character corporation's General Manager did not
corporation decided to stop and either by the Corporation Code or by the amount to an intra-corporate
cease its operations, as evidenced by corporation's by-laws. Section 25 [34] of controversy.
an Affidavit of Non-Operation, due the Corporation Code specifically
to poor sales collection aggravated enumerated who are these corporate
by the inefficient management of its officers, to wit: (1) president; (2)
affairs. Joson was apprised of the secretary; (3) treasurer; and (4) such other
termination of his services as officers as may be provided for in the by-
General Manager since his services laws.
as such would no longer be
necessary for the winding up of its
affairs. Conformably with Section 25, a position
must be expressly mentioned in the
by-laws in order to be considered as a
Joson filed a Complaint for corporate office. Thus, the creation of
Reinstatement and Money Claim an office pursuant to or under a [b]y-[l]aw
against Marc II Marketing before enabling provision is not enough to make
the Labor Arbiter. a position a corporate office. The only
officers of a corporation were those
given that character either by the
 In his complaint, Joson averred that Corporation Code or by the [b]y-[l]aws;
Lucila dismissed him from his the rest of the corporate officers could be
employment due to the feeling of considered only as employees or
hatred she harbored towards his subordinate officials.
brother, who is Lucila’s estranged
husband.
Coros was dismissed by Matling as No.
An "office" is created by the charter of
its Vice President for Finance and the corporation and the officer is elected
Administration. Coros filed a Coros was appointed vice president for
by the directors or stockholders. On the nationwide expansion by Malonzo,
complaint for illegal suspension and other hand, an employee occupies no
illegal dismissal against Matling and Matling's general manager, not by the
office and generally is employed not by
some of its corporate officers in the board of directors of Matling. It was also
the action of the directors or
NLRC. stockholders but by the managing officer Malonzo who determined the
of the corporation who also determines compensation package of Coros. Thus,
the compensation to be paid to such coroswas an employee, not a "corporate
officer."
Matling moved to dismiss the employee.
complaint, raising the ground,
among others, that the complaint
Is Ricardo Coros a pertained to the jurisdiction of the Section 25 of the Corporation Code
corporate officer of plainly states that the corporate officers
MATLING V. Securities and Exchange
Matling? Does his are the President, Secretary, Treasurer
COROS, 13 Commission (SEC) due to the
dismissal from and such other officers as may be
OCTOBER controversy being intra-corporate
office amounts to provided for in the By-Laws.
2010 inasmuch as Coros was a member of
an intra-corporate Accordingly, the corporate officers in
constroversy? Matling’s Board of Directors aside
from being its Vice-President for the context of PD No. 902-A are
Finance and Administration prior to exclusively those who are given that
his termination. character either by the Corporation
Code or by the corporation’s By-Laws.
Coros opposed Matling’s motion to
dismiss, insisting that his status as a
member of Matling’s Board of The power to create new offices and the
Directors was doubtful, considering
power to appoint the officers to occupy
that he had not been formally
them vested by By-Law No. V merely
elected as such; that he did not own
a single share of stock in Matling, allowed Matling’s President to create
considering that he had been made non-corporate offices to be occupied by
to sign in blank an undated ordinary employees of Matling. Such
indorsement of the certificate of
stock he had been given in 1992;
that Matling had taken back and
retained the certificate of stock in its
custody; and that even assuming
that he had been a Director of
Matling, he had been removed as
the Vice President for Finance and
Administration, not as a Director, a
fact that the notice of his
termination showed.
powers were incidental to the President’s
duties as the executive head of Matling
to assist him in the daily operations of
the business.
Moreover, his dismissal cannot be
deemed to be an intra-corporate
controversy.
The criteria for distinguishing between
corporate officers who may be ousted
from office at will, on one hand, and
ordinary corporate employees who may
only be terminated for just cause, on the
other hand, do not depend on the nature
of the services performed, but on the
manner of creation of the office.
Even though Coros might have become
a stockholder of Matling in 1992, his
promotion to the position of Vice
President for Finance and
Administration in 1987 was by virtue of
the length of quality service he had
rendered as an employee of Matling. His
subsequent acquisition of the status of
Director/stockholder had no relation to
his promotion. Besides, his status of
Director/stockholder was unaffected by
his dismissal from employment as Vice
President for Finance and
Administration.
 During Martial Law, two Muslim
groups sprung from the Islamic
Directorate of the Philippines
(ICP): the Carpizo group and the
Abbas group. Both groups claimed
to be the legitimate IDP.
Significantly, the SEC, in a suit
between these two contending
groups, came out with a Decision
declaring the election of both the
Carpizo Group and the Abbas
Group as IDP board members to be
null and void for being violative of
the Articles of Incorporation of
IDP.
ISLAMIC
DIRECTORA
Is there an intra-
TE V. CA, 272 corporate dispute in Neither group, however, took the
S 454 this case? necessary steps prescribed by the
SEC in its Decision, and, thus, no
valid election of the members of the
Board of Trustees of IDP was ever
called. Although the Carpizo Group
attempted to submit a set of by-
laws, the SEC found that, aside
from Engineer Farouk Carpizo and
Atty. Musib Buat, those who
prepared and adopted the by-laws xxx xxx xxx
were not bona fide members of the
IDP, thus rendering the adoption of
the by-laws likewise null and void. c) Controversies in the selection or
In 1989, without having been corporations,
properly elected as new members of
Sections 3 and 5(c) of Presidential Decree
The Tandang Sora property, it appears
No. 902-A:
from the records, constitutes the only
property of the IDP. Hence, its sale to a
third-party is a sale or disposition of all
Sec. 3. The Commission shall have the corporate property and assets of IDP
absolute jurisdiction, supervision and falling squarely within the contemplation
control over all corporations, partnership of the foregoing section. For the sale to
or associations, who are the grantees of be valid, the majority vote of the
primary franchises and/or a license or legitimate Board of Trustees, concurred
permit issued by the government to in by the vote of at least 2/3 of the bona
operate in the Philippines . . . . fide members of the corporation should
have been obtained. These twin
requirements were not met as the
xxx xxx xxx Carpizo Group which voted to sell the
Tandang Sora property was a fake Board
of Trustees, and those whose names and
Sec. 5. In addition to the regulatory and signatures were affixed by the Carpizo
adjudicative functions of the Securities Group together with the sham Board
and Exchange Commission over Resolution authorizing the negotiation
corporations, partnerships and other for the sale were, from all indications,
forms of associations registered with it as not bona fide members of the IDP as
expressly granted under existing laws and they were made to appear to be.
decrees, it shall have original and Apparently, there are only fifteen (15)
exclusive jurisdiction to hear and decide official members of the petitioner
cases involving: corporation including the eight (8)
members of the Board of Trustees.
All told, the disputed Deed of Absolute
Sale executed by the fake Carpizo Board
and private respondent INC was
appointment of directors, trustees, intrinsically void ab initio.
officers, or managers of such
partnerships or
associations. . . . .
 the Board of Trustee of IDP, the Thus, the question on whether the sale
Carpizo Group caused to be signed of the Tandang Sora property by the
an alleged Board Resolution of the Carpiza Group constitutes an intra-
IDP, authorizing the sale of the corporate dispute and whether or not the
subject two parcels of land to the SEC had jurisdiction to declare the
INC for a consideration of subject sale null and void is rendered
moot and academic by the inherent
P22,343,400.00, which sale was
nullity of the highly dubious sale due to
evidenced by a Deed of Absolute
lack of consent of the IDP, owner of the
Sale. subject property.

In 1991, the 1971 IDP Board of

Trustees headed by former Senator
Mamintal Tamano, or the Tamano
Group, filed a petition before the
SEC, seeking to declare null and
void the Deed of Absolute Sale
signed by the Carpizo Group and
the INC since the group of
Engineer Carpizo was not the
legitimate Board of Trustees of the
IDP.

Does the National

Labor Relations Apodaca was an employee of ART. 113. Wage Deduction. — No Firstly, the NLRC has no jurisdiction to
Commission Intrans Phils Inc. In 1985, he was employer, in his own behalf or in behalf determine such intra-corporate dispute
(NLRC) have persuaded by Jose M. Mirasol to of any person, shall make any deduction between the stockholder and the
APODACA V. jurisdiction to subscribe to 1,500 shares Intrans from the wages of his employees, except: corporation as in the matter of unpaid
NLRC, 172 S resolve a claim for Phils at P100.00 per share or a total subscriptions. This controversy is within
442 non-payment of of P150,000.00. He made an initial the exclusive jurisdiction of the
stock subscriptions payment of P37,500.00. In 1975, he (a) In cases where the worker is insured Securities and Exchange Commission. 1
to a corporation? was appointed President and with his consent by the employer, and the
Assuming that it General Manager of the deduction is to recompense the employer
has, can an
 obligation arising corporation. However, on January for the amount paid by him as premium Secondly, assuming arguendo that the
therefrom be offset 2, 1986, he resigned. on the insurance; NLRC may exercise jurisdiction over the
against a money said subject matter under the
claim of an circumstances of this case, the unpaid
employee against On December 19, 1986, Apodaca (b) For union dues, in cases where the subscriptions are not due and payable
the employer?
instituted with the NLRC a right of the worker or his union to until a call is made by the corporation for
complaint against Mirasol and checkoff has been recognized by the payment. 2 Private respondents have not
Intrans Phils for the payment of his employer or authorized in writing by the presented a resolution of the board of
unpaid wages, his cost of living individual worker concerned; and directors of respondent corporation
allowance, the balance of his calling for the payment of the unpaid
gasoline and representation subscriptions. It does not even appear
expenses and his bonus (c) In cases where the employer is that a notice of such call has been sent to
compensation for 1986. Intrans authorized by law or regulations issued petitioner by the respondent
Phils admitted that the amount of by the Secretary of Labor. corporation.
P17,060.07 is due to Apodaca but
this was applied to the unpaid
balance of his subscription in the What the records show is that the
amount of P95,439.93. Apodaca respondent corporation deducted the
questioned the set-off alleging that amount due to petitioner from the
there was no call or notice for the amount receivable from him for the
payment of the unpaid subscription unpaid subscriptions. 3 No doubt such
and that, accordingly, the alleged set-off was without lawful basis, if not
obligation is not enforceable. premature. As there was no notice or call
for the payment of unpaid subscriptions,
the same is not yet due and payable.
The labor arbiter sustained the claim
of Apodaca for P17,060.07 on the
ground that the employer has no Lastly, assuming further that there was a
right to withhold payment of wages call for payment of the unpaid
already earned under Article 103 of subscription, the NLRC cannot validly
the Labor Code. Upon the appeal to set it off against the wages and other
the NLRC, the decision of the labor benefits due petitioner. Article 113 of the
arbiter was reversed. The NLRC Labor Code allows such a deduction
held that a stockholder who fails to from the wages of the employees by the
pay his unpaid subscription on call employer, only in three instances.
 becomes a debtor of the
corporation and that the set-off of
said obligation against the wages
and others due to Apodaca is not
contrary to law, morals and public
policy.

TAN is one of the principal Presidential Decree No. 902-A vests in No.
stockholders of PSBA. He was a the Securities and Exchange Commission fundamentally, the controversy is intra-
Director and the Executive Vice corporate in nature. It revolves around
President enjoying salaries and the election of directors, officers or
allowances. ". . . original and exclusive jurisdiction to managers of the PSBA, the relation
hear and decide cases between and among its stockholders,
and between them and the corporation.
In 1981, during a regular meeting, Private respondent also contends that
the Board declared all corporate "a) Devices or schemes employed by or his "ouster" was a scheme to intimidate
positions vacant except those of the any acts, of the board of directors, him into selling his shares and to deprive
Chairman and President, and at the business associates, its officers or him of his just and fair return on his
Is the ouster of Tan same time elected a new set of partners, amounting to fraud and investment as a stockholder received
PSBA V. a case of illegal officers. TAN was not re-elected as misrepresentation which may be through his salary and allowances as
LEANO, 127 S dismissal which is Executive Vice-President. detrimental to the interest of the public Executive Vice-President.
778 within the and/or stockholders, partners, members
jurisdiction of the of associations or organizations
NLRC? TAN filed with the NLRC a registered with the Commission. The situation is that of a corporate office
complaint for Illegal Dismissal having been declared vacant, and of
against PSBA alleging that he was TAN’s not having been elected
"summarily, illegally, irregularly and "b) Controversies arising out of intra- thereafter. The matter of whom to elect
improperly removed from his corporate or partnership relations, is a prerogative that belongs to the
position as Executive Vice- between and among stockholders, Board, and involves the exercise of
President . . . without cause, members, or associates; between any or deliberate choice and the faculty of
investigation or notice" all of them and the corporation, discriminative selection. Generally
partnership or association of which they speaking, the relationship of a person to
are stockholders, members or associates, a corporation, whether as officer or as
TAN lodged before the SEC respectively; and between such agent or employee, is not determined by
another complaint essentially corporation, partnership or association the nature of the services performed, but
questioning the validity of the PSBA and the state insofar as it concerns their by the incidents of the relationship as
elections of August 1, 1981 and individual franchise or right to exist as they actually exist.
September 5, 1981, and of his such entity;
An intracorporate controversy would
"ouster" as Executive Vice-
call for SEC jurisdiction. A labor dispute,
President.
that of the NLRC.
"c) Controversies in the election or
appointments of directors, trustees,
PSBA moved for the dismissal of officers or managers of such
TAN’s complaint, invoking the corporations, partnerships or
principle against split jurisdiction. associations.
They contend that labor arbiter
illegally assumed jurisdiction over
the complaint for ‘Illegal Dismissal.’
The failure of the Tan to be re-
elected to the corporate position of
Executive Vice-President was an
intra-corporate question over which
the Securities and Exchange
Commission had already assumed
jurisdiction.

TAN counter-argues that his sole

and exclusive cause of action is
illegal dismissal, falling within the
jurisdiction of the NLRC, for he was
dismissed suddenly and summarily
without cause in violation of his
constitutional rights to due process
and security of tenure. He prays that
his dismissal be declared illegal and
that his reinstatement be ordered
with full backwages and without
loss of other benefits.
 FINANCIAL REHABILITATION AND INSOLVENCY ACT
Primetown Property Group, Inc. is
primarily engaged in holding,
owning and developing real estate.
However, its shares were brought
down by the 1997 Asian financial
crisis. It experienced financial
difficulties due to the devaluation of
the Philippine peso, the increase in
interest rates and lack of access to
adequate credit. In 2003, Primetown
filed a petition for corporate
rehabilitation with prayer for
Is Dela Torre suspension of payments and actions
DELA TORRE
allowed to make her with the RTC of Makati City. On
V. August 15, 2003, the rehabilitation
claim against a
PRIMETOWN
corporation during court issued a Stay Order.
, G.R 221932, 14
corporate
FEBRUARY
rehabilitation?
2018 Patricia Cabrieto dela Torre filed a
Motion for Leave to Intervene
seeking judicial order for specific
performance: that Primetown
should execute in her favor a deed
of sale covering Unit 3306, Makati
Prime Citadel Condominium which
she bought from the former as she
had allegedly fully paid the purchase
price. Primetown opposed the
motion arguing that it was filed out
of time considering that the Stay
Order was issued on August 15,
2003 and under the Interim Rules of
Corporate rehabilitation contemplates a
continuance of corporate life and
activities in an effort to restore and
reinstate the corporation to its former
position of successful operation and
solvency, the purpose being to enable the
company to gain a new lease on life and
allow its creditors to be paid their claims
out of its earnings.12 An essential
function of corporate rehabilitation is the
Stay Order which is a mechanism of
suspension of all actions and claims
against the distressed corporation upon
the due appointment of a management
committee or rehabilitation receiver.
It is provided under Rule 4, Section 6 of
the Interim Rules that if the RTC finds
the petition to be sufficient in form and
substance, it shall issue, not later than five
(5) days from the filing of the petition, an
Order as follows:
(a) appointing a Rehabilitation Receiver
and fixing his bond;
(b) staying enforcement of all claims,
whether for money or otherwise and
whether such enforcement is by court
action or otherwise, against the debtor,
No.
Primetown filed a petition for
rehabilitation and suspension of
payments with the RTC which issued a
Stay Order on August 15, 2003. The
initial hearing was set on September 24,
2003; thus, any comment or opposition
to the petition should have been filed 10
days before the initial hearing but Dela
Torre did not file any and already barred
from participating in the proceedings.
However, Dela Torre filed a motion for
leave to intervene on October 15, 2004,
one year after, praying that Primetown
be ordered to execute in her favor a deed
of absolute sale over Unit 3306 of the
Makati Prime Citadel Condominium,
subject matter of their earlier contract to
sell. It bears stressing that intervention is
prohibited under Section 1, Rule 3 of the
Interim Rules. Hence, the RTC should
not have entertained the petition for
intervention at all.
 Procedure on Corporate its guarantors and sureties not solidarity
Rehabilitation, any claimants and liable with the debtor;
creditors shall file their claim before
(c) prohibiting the debtor from selling,
the rehabilitation court not later
encumbering, transferring, or disposing
than ten (10) days before the date of
in any manner any of its properties except
the initial hearing; and that since the
in the ordinary course of business;
Stay Order was issued on August 15,
2003 and the publication thereof (d) prohibiting the debtor from making
was done in September 2003 with any payment of its liabilities outstanding
the initial hearing on the petition set as at the date of filing of the petition.
on September 24 2003, the motion
for intervention should have been
filed on or before September 14, Moreover, all creditors and all interested
2003. parties are directed to file and serve on
the debtor a verified comment on or
opposition to the petition not later than
RTC finds the intervention to have ten (10) days before the date of the initial
been filed on time. However, the hearing and their failure to do so will bar
CA annulled the RTC decision. them from participating in the
proceedings.

Dela Torre contends that her claim

against Primetown was not
suspended with the issuance of the
Stay Order because when the order
was issued on August 15, 2003, she
had long already fully paid the
purchase price of the condominium
unit she bought as of July 25, 1996.

May a liquidation In 1985, the Central Bank of the Liquidation, in corporation law, connotes No.
PVB V. VEGA, court continue with Philippines petitioned Branch 39 of a winding up or settling with creditors R.A No. 7169 provides in part for the
28 JUNE 2001 liquidation RTC of Manila for Assistance in the and debtors.9 It is the winding up of a reopening of the Philippine Veterans
proceedings of the Liquidation of the Philippine corporation so that assets are distributed Bank together with all its branches
Philippine Veterans Veterans Bank. The Bank to those entitled to receive them. It is the within the period of three (3) years from
Bank (PVB) when Employees Union-N.U.B.E filed process of reducing assets to cash, the date of the reopening of the head
Congress had claims for accrued and unpaid discharging liabilities and dividing surplus office. The law likewise provides for the
mandated its employee wages and benefits with or loss. creation of a rehabilitation committee in
rehabilitation and said court. order to facilitate the implementation of
reopening? the provisions of the same.
On the opposite end of the spectrum is
After lengthy proceedings, partial rehabilitation which connotes a
payment of the sums due to the reopening or reorganization. On August 3, 1992, the Philippine
employees were made. However, Rehabilitation contemplates a Veterans Bank opened its doors to the
due to the piecemeal hearings on the continuance of corporate life and public and started regular banking
benefits, many remain unpaid. activities in an effort to restore and operations.
reinstate the corporation to its former
position of successful operation and
On January 2, 1992, the Congress solvency.10 Clearly, the enactment of Republic Act
enacted Republic Act No. 7169 No. 7169, as well as the subsequent
providing for the rehabilitation of developments has rendered the
the Philippine Veterans Bank. It is crystal clear that the concept of liquidation court functus officio.
liquidation is diametrically opposed or Consequently, Judge Vega has been
contrary to the concept of rehabilitation, stripped of the authority to issue orders
Sometime in May 1992, the Central such that both cannot be undertaken at involving acts of liquidation.
Bank issued a certificate of authority the same time. To allow the liquidation
allowing the PVB to reopen. proceedings to continue would seriously
hinder the rehabilitation of the subject
bank.
Despite the legislative mandate for
rehabilitation and reopening of
PVB, Judge Benjamin Vega of
Branch 39 continued with the
liquidation proceedings of the bank.

PVB argue that with the passage of

R.A. 7169, the liquidation court
became functus officio, and no longer
 had the authority to continue with
liquidation proceedings.

Bayantel executed several credit line Whenever a distressed corporation asks

agreements with numerous banks During rehabilitation receivership, the the SEC for rehabilitation and
and financial institutions. assets are held in trust for the equal
suspension of payments, preferred
benefit of all creditors to preclude one
Foreseeing that it could not pay all from obtaining an advantage or creditors may no longer assert
its obligations, Bayantel proposed preference over another by the preference but shall stand on equal
the restructuring of its debts to the expediency of an attachment, execution footing with other creditors. preferred
Bank Creditors and the Holders of or otherwise. For what would prevent an creditors of distressed corporations shall
Notes. To facilitate the negotiations alert creditor, upon learning of the stand on equal footing with all other
between Bayantel and its creditors, receivership, from rushing posthaste to creditors only after a rehabilitation
an Informal Steering Committee the courts to secure judgments for the receiver or management committee has
EXPRESS
was formed. been appointed. The guidelines for the
INVESTMEN satisfaction of its claims to the prejudice
treatment of claims against corporations
T V. Should the claims of of the less alert creditors.
undergoing rehabilitation are laid down
BAYANTEL, 5 secured creditors
In its initial proposal, Bayantel as such:
DECEMBER against a
2012 ON suggested a 25% write-off of the As between the creditors, the key phrase
corporation under
“PARI PASSU” principal owing to the Holders of is "equality is equity." When a
rehabilitation be 1. All claims against corporations,
PRINCIPLE Notes. The Informal Steering corporation threatened by bankruptcy is
given preference partnerships, or associations that are
AS Committee rejected the idea, but taken over by a receiver, all the creditors
over unsecured pending before any court, tribunal, or
COMPARED accepted Bayantel’s proposal to pay should stand on equal footing. Not
creditors? board, without distinction as to whether
WITH the restructured debt, pari passu, anyone of them should be given any
out of its cash flow. This pari passu preference by paying one or some of or not a creditor is secured or unsecured,
or equal treatment of debts, them ahead of the others. This is shall be suspended effective upon the
however, was opposed by the Bank precisely the reason for the suspension of appointment of a management
Creditors who invoked their all pending claims against the corporation committee, rehabilitation receiver,
security interest under the under receivership. Instead of creditors board, or body in accordance with the
Assignment Agreement. provisions of Presidential Decree No.
vexing the courts with suits against the
902-A.
distressed firm, they are directed to file
their claims with the receiver who is a
Bayantel continued to pay reduced duly appointed officer of the SEC.
interest on its debt to the Bank 2. Secured creditors retain their
Creditors but stopped paying the preference over unsecured creditors, but
Holders of Notes starting July 17, enforcement of such preference is
2000. By May 31, 2003, Bayantel’s
total indebtedness had reached
US$674 million or P35.928 billion in
unpaid principal and interest, based
on the prevailing conversion rate of
US$1 = P53.282. Out of its total
liabilities, Bayantel allegedly owes
43.2% or US$291 million (P15.539
billion) to the Holders of the Notes.
The Bank of New York filed a
petition for the corporate
rehabilitation of Bayantel upon the
instructions of the Informal
Steering Committee.
The Pasig RTC, Branch 158, issued
a Stay Order which directed, among
others, the suspension of all claims
against Bayantel and required the
latter’s creditors and other
interested parties to file a comment
or opposition to the petition.
Subsequently, negotiations for the
restructuring of Bayantel’s debt
reached an impasse when the
Informal Steering Committee
insisted on a pari passu treatment of
the claims of both secured and
unsecured creditors.
Since then, the principle of equality in
equity has been cited as the basis for
placing secured and unsecured creditors
in equal footing or in pari passu with each
other during rehabilitation. In legal
parlance, pari passu is used especially of
creditors who, in marshaling assets, are
entitled to receive out of the same fund
without any precedence over each other.
equally suspended upon the
appointment of a management
committee, rehabilitation receiver,
board, or body. In the event that the
assets of the corporation, partnership, or
association are finally liquidated,
however, secured and preferred credits
under the applicable provisions of the
Civil Code will definitely have preference
over unsecured ones.
Basically, once a management committee
or rehabilitation receiver has been
appointed in accordance with PD 902-A,
no action for claims may be initiated
against a distressed corporation and
those already pending in court shall be
suspended in whatever stage they may
be.
Notwithstanding, secured creditors shall
continue to have preferred status but the
enforcement thereof is likewise held in
abeyance. However, if the court later
determines that the rehabilitation of the
distressed corporation is no longer
feasible and its assets are liquidated,
secured claims shall enjoy priority in
payment.
The Rehabilitation Court upheld
that the creditors of Bayantel,
whether secured or unsecured,
should be treated equally and on the
same footing or pari passu until the
rehabilitation proceedings is
terminated in accordance with the
Interim Rules. This ruling was
affirmed by the CA.

The secured creditors argue

primarily that the pari passu
treatment of creditors during
rehabilitation has no basis in law. In
line with this, Express Investments
assert priority under the Assignment
Agreement to receive from
Bayantel’s surplus cash flow and to
be paid in full, ahead of all other
creditors.

The secured creditors contend that

the pari passu treatment of claims
impairs the Omnibus Agreement
and the Assignment Agreement.
Such impairment, they posit, cannot
be justified as a proper exercise of
police power for three reasons: first,
there is no law which authorizes the
equal treatment of claims; second,
there is no enabling law; and third, it
 is not reasonably necessary for the
success of the rehabilitation.

WGC is engaged in the business of Section 1 of the Interim Rules of No. But there is a caveat. While
mechanized bulk handling, Procedure on Corporate Rehabilitation TIDCORP is correct in arguing that
transport and storage, warehousing, provides: intervention is not the proper mode for
drying, and milling of grains. It Section 1. Nature of Proceedings. – Any RBC coming to the CA since it is already
incurred loans amounting to P2.66 proceeding initiated under these Rules a party to the rehabilitation proceedings,
billion from RBC and other banks shall be considered in rem. Jurisdiction this merely highlights the former’s error
and entities such as herein private over all those affected by the proceedings in not allowing the latter to participate in
respondent Trade and Investment shall be considered as acquired upon the proceedings in CA-G.R. SP No.
Development Corporation of the publication of the notice of the 104141 just as it underscores the
Philippines (TIDCORP). It appears commencement of the proceedings in appellate court’s blunder in not ordering
that RBC is both a secured and any newspaper of general circulation in that RBC be allowed to comment or
unsecured creditor, while the Philippines in the manner prescribed participate in the case so that they may
TIDCORP is a secured creditor. by these Rules. be given the opportunity to be heard on
ROBINSON’S Can RBC file a TIDCORP’s allegations and accusations.
BANK V. motion for And while RBC chose the wrong mode
GAERLAN, 24 intervention in a Thus, in 2006, WGC filed a Petition The proceedings shall also be summary for interposing its comments and
SEPTEMBER rehabilitation for Rehabilitation with Prayer for and non-adversarial in nature. The objections in CA-G.R. SP No. 104141,
2014 preceeding? Suspension of Payments, Actions following pleadings are prohibited: this does not necessarily warrant the
and Proceedings before the RTC of outright denial of its chosen remedy; the
Lucena City. a. Motion to Dismiss; Court is not so rigid as to be precluded
from adopting measures to insure that
b. Motion for Bill of Particulars;
justice would be administered fairly to all
The RTC issued a Stay Order c. Motion for New Trial or For parties concerned. If TIDCORP must
staying the enforcement of Reconsideration; pursue its Petition for Review, then RBC
creditors’ claims; prohibiting WGC should be allowed to comment and
d. Petition for Relief; participate in the proceedings. There is
from disposing or encumbering its
properties and paying its
e. Motion for Extension; no other solution to the impasse.
outstanding liabilities; prohibiting
f. Memorandum;
its suppliers from withholding their
goods and services; appointing a g. Motion for Postponement; Finally, the CA committed another
rehabilitation receiver; and directing patent error in declaring that RBC’s
creditors and interested parties to h. Reply or Rejoinder; proper remedy was not to move for
file their respective comments to the i. Third Party Complaint; intervention, but to file a Petition for
Petition. Review of the trial court’s June 6, 2008
j. Intervention;
Order. It failed to perceive the obvious
fact that there is nothing about the trial
The RTC gave due course to the court’s order that RBC questioned; quite
The prohibited pleadings enumerated the contrary, it sought to affirm the said
Petition for Rehabilitation and
above are those filed in the rehabilitation order in toto and simply prayed for the
directed the receiver to evaluate the
proceedings. Once the trial court decides dismissal of TIDCORP’s Petition for
rehabilitation plan submitted by
the case and an aggrieved party appeals, Review. There is thus no legal and
WGC, and thereafter submit his
the procedure to be followed is that logical basis for its conclusion that RBC
recommendations thereon.
prescribed by the Rules of Court as should have resorted to a Petition for
Accordingly, the receiver submitted
mandated by Section 5, Rule 3, of the Review just the same.
his Report with Recommendation
same Interim Rules, thus:
and proposing, among others, a pari
passu – or equal – sharing between The review of any order or decision of
the secured and unsecured creditors the court or on appeal therefrom shall be
of the proceeds from WGC’s cash in accordance with the Rules of Court.
flow made available for debt
servicing.

TIDCORP among others took

exception to the proposed pari
passu sharing, insisting that as a
secured creditor, it should enjoy
preference over unsecured
creditors, citing law and
jurisprudence to the effect that the
law on preference of credits shall be
observed in resolving claims against
corporations under rehabilitation.

The RTC ruled that all obligations

of the WGC should be settled on a
pari-passu basis. TIDCORP prayed
 in its Petition before the CA that the
portion of the RTC Order
specifically directing that all WGC
obligations be settled on a pari passu
basis be reversed and set aside.

RBC filed an Urgent Motion for

Intervention which is anchored on
its original claim and objection to
TIDCORP’s position – that the
latter may not enjoy preferential
treatment over the other WGC
creditors.

TIDCORP maintained that

intervention is not allowed in
rehabilitation proceedings, citing
Rule 3, Section 1 of the Interim
Rules of Procedure on Corporate
Rehabilitation. The CA sided with
TIDCORP and RBC was prohibited
from intervening.

ADVENT Is cash dividends Advent Capital filed a petition for Rehabilitation proceedings are summary No. Advent Capital or its rehabilitation
CAPITAL held by Belson and rehabilitation with the RTC which and non-adversarial in nature, and do not receiver cannot unilaterally decide to
AND claimed by both the named Atty. Danilo L. Concepcion contemplate adjudication of claims that apply the entire amount of cash
FINANCE Alcantaras and as rehabilitation receiver. Atty. must be threshed out in ordinary court dividends retroactively to cover the
CORPORATI Advent Capital Concepcion found that respondents proceedings. Adversarial proceedings accumulated trust fees. It was merely
ON V. constitute corporate owed Advent Capital similar to that in ordinary courts are managed in trust for the benefit of
NICASIO I. assets of the latter ₱27,398,026.59, representing trust inconsistent with the commercial nature Alcantaras, the latter’s portfolio.
ALCANTARA that the fees that it supposedly earned for of a rehabilitation case. The latter must Here, Advent Capital’s claim is disputed
AND EDITHA rehabilitation court managing their several trust be resolved quickly and expeditiously for and requires a full trial on the merits. It
I. may, upon motion, accounts. Thus, Atty. Concepcion the sake of the corporate debtor, its must be resolved in a separate action
ALCANTARA require to be filed a motion before the creditors and other interested parties. where the Alcantaras’ claim and defenses
 (G.R. NO. conveyed to the rehabilitation court to direct Belson
183050; rehabilitation to release the money to him. He said
JANUARY 25, receiver for his that he had the duty to take custody
2012) disposition? and control of Advent Capital’s
assets. The Alcantaras claimed that
the money in the trust account
belonged to them under their Trust
Agreement with Advent Capital.
For this reason, Atty. Concepcion
had no right to compel the delivery
of the dividends to him as receiver.
The Alcantaras concluded that,
under the circumstances, the
rehabilitation court had no
jurisdiction over the subject
dividends.
Thus, the Interim Rules "incorporate the
concept of prohibited pleadings, affidavit
evidence in lieu of oral testimony,
clarificatory hearings instead of the
traditional approach of receiving
evidence, and the grant of authority to
the court to decide the case, or any
incident, on the basis of affidavits and
documentary evidence."
may also be presented and heard. Advent
Capital cannot say that the filing of a
separate action would defeat the purpose
of corporate rehabilitation. In the first
place, the Interim Rules do not exempt a
company under rehabilitation from
availing of proper legal procedure for
collecting debt that may be due it.
Secondly, Court records show that
Advent Capital had in fact sought to
recover one of its assets by filing a
separate action for replevin involving a
car that was registered in its name.

No. In the present case, the RTC hastily

As provided in the Interim Rules, the approved the rehabilitation plan in the
basic procedure is as follows: same order giving due course to the
petition. As an officer of the court and
1. The petition is filed with the an expert, the rehabilitation receiver
Is it within the Petitioners are domestic appropriate Regional Trial Court; plays an important role in corporate
RTC's discretion to corporations of the Siochi family.
rehabilitation proceedings.
disregard the They are engaged in various 2. If the petition is found to be The Court disagrees that the RTC had
SIOCHI
procedural businesses and have interlocking sufficient in form and substance, the factual basis in giving due course to the
FISHERY V.
formalities, and the stockholders and directors. In the trial court shall issue a Stay Order. petition for corporate rehabilitation, and
BPI
lower court has course of their business, petitioners
(G.R. NO. in approving the rehabilitation plan.
factual basis in its borrowed from respondent BPI and 3. Publication of the Stay Order;
193872; The Court notes that, contrary to the
finding that from Ayala Life Assurance, Inc.
OCTOBER 19, 4. Initial hearing on any matter relating factual finding of the RTC, petitioners
petitioners are Which amounted to
2011) to the petition or on any comment do not own all of the properties. Some
capable of P85,362,262.05. Petitioners filed
rehabilitated? with the RTC a petition for and/or opposition filed in of the properties are owned by
connection therewith. Ferdinand, Gerald and Jose Patrick
corporate rehabilitation.
Siochi, and Mario Siochi, Jr., not by
5. Referral for evaluation of the petitioners. A corporation has a legal
rehabilitation plan to the personality distinct from its stockholders
rehabilitation receiver who shall and directors. Incidentally, since the
time of filing of the petition for
 submit his recommendations to the corporate rehabilitation, there has been
court; no showing that petitioners' situation has
improved or that they have complied
6. Modifications or revisions of the faithfully with the terms of the
rehabilitation plan as necessary; rehabilitation plan.

7. Submission of final rehabilitation

plan to the trial court for approval;

8. Approval/disapproval of
rehabilitation plan by the trial court.
No. The rehabilitation of SIHI and the
settlement of claims against the
A criminal action has a dual purpose,
corporation is not a legal ground for the
namely, the punishment of the offender
extinction of petitioners' criminal
and indemnity to the offended party. The
Petitioner, as corporate officers of liabilities. There is no reason why
dominant and primordial objective of the
SIHI, filed with the Regional Trial criminal proceedings should be
criminal action is the punishment of the
Court a petition for Suspension of suspended during corporate
offender. The civil action is merely
Does the Payments and Rehabilitation. The rehabilitation, more so, since the prime
incidental to and consequent to the
JOSE suspension of "all RTC issued an Order staying all purpose of the criminal action is to
conviction of the accused. On the other
MARCEL claims" as an claims against SIHI upon finding punish the offender in order to deter him
hand, the action between the private
PANLILIO incident to a the petition sufficient in form and and others from committing the same or
complainant and the accused is intended
ET. AL. V. corporate substance. similar offense, to isolate him from
solely to indemnify the former.
REGIONAL rehabilitation also At the time, however, of the filing of society, reform and rehabilitate him or,
Therefore, public interest requires that
TRIAL contemplate the the petition for rehabilitation, there in general, to maintain social order. It
the said criminal acts be immediately
COURT suspension of were a number of criminal would be absurd for one who has
investigated and prosecuted for the
(G.R. NO. criminal charges charges pending against engaged in criminal conduct to escape
protection of society.
173846; filed against the petitioners. Petitioners argued that punishment by the mere filing of a
The Court pointed out that Congress has
FEBRUARY corporate officers the stay order should also apply to petition for rehabilitation by the
recently enacted the Financial
02, 2011) of the distressed the criminal charges that are corporation of which he is an officer.
Rehabilitation and Insolvency Act of
corporation? pending. The prosecution of the officers of the
2010 that explicitly provides that criminal
corporation has no bearing on the
actions against the individual officer of a
pending rehabilitation of the
corporation are not subject to the Stay or
corporation, especially since they are
Suspension Order in rehabilitation
charged in their individual capacities.
proceedings.
Such being the case, the purpose of the
law for the issuance of the stay order is
not compromised, since the appointed
 rehabilitation receiver can still fully
discharge his functions as mandated by
law.
Corporate rehabilitation connotes the
restoration of the debtor to a position of
successful operation and solvency, if it is
Petitioner filed for illegal dismissal No. It is, thus, not difficult to see why
shown that its continued operation is
against respondents Uniwide the subject action for illegal dismissal
economically feasible and its creditors
Warehouse Club, Inc. and its and damages against the respondent
can recover by way of the present value
president, Jimmy N. Gow. The corporation ought to have been
of payments projected in the
complaint contained a prayer for the suspended. Respondent corporation was
rehabilitation plan, more if the
payment of worked Saturdays for undergoing proceedings for
corporation continues as a going concern
the year 2001; holiday pay; rehabilitation and was later on declared
RICARDO V. than if it is immediately liquidated. An
separation pay; actual, moral and to be in a state of suspension of
CASTILLO V. essential function of corporate
exemplary damages; and attorney's payments. In fact, a Certification issued
UNIWIDE Should illegal rehabilitation is the mechanism of
fees. However, almost two months by the SEC and signed by its General
WAREHOUSE dismissal case suspension of all actions and claims
after the filing of the Complaint, Counsel, Vernette G. Umali-Paco, states
CLUB, INC. proceedings be against the distressed corporation, which
respondents submitted a Motion to that the petition of Uniwide Sales, Inc.
AND/OR suspended? operates upon the due appointment of a
Suspend Proceedings on the ground for declaration of suspension of
JIMMY GOW management committee or rehabilitation
that the Uniwide Group of payments and rehabilitations was still
(G.R. NO. receiver. The governing law is P.D. No.
Companies had petitioned the SEC pending with it, and that the company
169725; APRIL 902-A. Section 6(c) of the law mandates
for suspension of payments and for was still under its rehabilitation
30, 2010) that, upon appointment of a management
approval of its proposed proceedings. Hence, since petitioner's
committee, rehabilitation receiver, board,
rehabilitation plan. SEC declared claim was one for wages accruing from
or body, all actions for claims against
the Uniwide Group of Companies the time of dismissal, as well as for
corporations, partnerships or
to be in a state of suspension of benefits and damages, the same should
associations under management or
payments and approved its have been suspended pending the
receivership pending before any court,
rehabilitation plan. rehabilitation proceedings.
tribunal, board, or body shall be
suspended.

PACIFIC Does the Under the Rules of Procedure on No. The justification for the suspension
WIDE rehabilitation court Puerto Azul Land, Inc.is the owner Corporate of actions or claims pending
REALTY AND erred when it and developer of the Puerto Azul Rehabilitation, "rehabilitation" is defined rehabilitation proceedings is to enable
DEVELOPME allowed the Complex situated in Ternate, as the restoration of the debtor to a the management committee or
NT foreclosure of the Cavite. In order to finance its position of successful operation and rehabilitation receiver to effectively
CORPORATI accommodation operations, it obtained loans from solvency, if it is shown that its exercise its/his powers free from any
ON V. mortgagee's various banks. In the beginning, continuance of operation is economically judicial or extrajudicial interference that
PUERTO property and PALI's business did very well. feasible and its creditors can recover by might unduly hinder or prevent the
AZUL LAND, excluded the same However, it started encountering
INC. from the coverage problems when the Philippine Stock
of the stay order? Exchange rejected the listing of its
shares in its initial public offering
(G.R. NO. which sent a bad signal to the real
178768; estate market. One of its creditors,
NOVEMBER the Export and Industry Bank, later
25, 2009) substituted by Pacific Wide Realty
and Development Corporation,
filed foreclosure proceedings on
PALI's mortgaged properties. PALI
filed a petition for suspension of
payments and rehabilitation. The
Regional Trial Court (RTC) issued a
Stay Order and appointed Patrick V.
Caoile as rehabilitation receiver.
EIB entered its appearance before
the rehabilitation court and moved
for the clarification of the stay order
and/or leave to continue the
extrajudicial foreclosure of the real
estates owned by PALI's
accommodation mortgagors. In
opposition, PALI argued that the
foreclosure sought would preempt
the rehabilitation proceedings and
would give EIB undue preference
over PALI's other creditors.
PHILIPPINE Is the approval of Petitioners Philippine National
NATIONAL the Rehabilitation Bank and Equitable PCI Bank are
BANK AND Plan impairs the members of the consortium of
EQUITABLE MTI by forcing creditor banks constituted pursuant
PCI BANK V. petitioners to to the Mortgage Trust Indenture by
way of the present value of payments
projected in the plan, more if the
corporation continues as a going concern
than if it is immediately liquidated.
The governing law concerning
rehabilitation and suspension of actions
for claims against corporations is .
Section 6(c) of P.D. No. 902-A which
mandates that, upon appointment of a
management committee, rehabilitation
receiver, board, or body, all actions for
claims against corporations, partnerships
or associations under management or
receivership pending before any court,
tribunal, board, or body shall be
suspended. Stated differently, all actions
for claims against a corporation pending
before any court, tribunal or board
shall ipso jure be suspended in whatever
stage such actions may be found.
Section 6 [c] of P.D. No. 902-A provides
that "upon appointment of a
management committee, rehabilitation
receiver, board or body, pursuant to this
Decree, all actions for claims against
"rescue" of the debtor company. To
allow such other action to continue
would only add to the burden of the
management committee or rehabilitation
receiver, whose time, effort and
resources would be wasted in defending
claims against the corporation instead of
being directed toward its restructuring
and rehabilitation.
In excluding the property from the
coverage of the stay order and allow
PWRDC to foreclose on the mortgage
and settle the realty tax delinquency of
the property with Pasay City, the
rehabilitation court used as justification
Section 12, Rule 4 of the Interim Rules
on Corporate Rehabilitation.
Furthermore, the newly adopted Rules
of Procedure on Corporate
Rehabilitation has a specific provision
for this special arrangement among a
debtor, its creditor and its
accommodation mortgagor. Section
7(b), Rule 3 of the said Rules explicitly
allows the foreclosure by a creditor of a
property not belonging to a debtor under
corporate rehabilitation. Thus, there is
no question that the action of the
rehabilitation court in G.R. No. 178768
was justified.
The court is not convinced that the
approval of the Rehabilitation Plan
impairs petitioner bank's lien over the
mortgaged properties. By that statutory
provision, it is clear that the approval of
 COURT OF release the real and between Rizal Commercial corporations, partnerships or the Rehabilitation Plan and the
APPEALS properties secured Banking Corporation-Trust and associations under management or appointment of a rehabilitation receiver
(G.R. NO. in their favor Investments Division, acting as receivership pending before any court, merely suspend the actions for claims
165571; resulting in violation trustee for the consortium, and ASB tribunal, board or body shall be against respondent corporations. The
JANUARY 20, of right against non- Development Corporation. Under suspended." loan agreements between the parties
2009) impairment of the MTI, petitioners granted a loan have not been set aside and petitioner
contracts? to ASBDC secured by a mortgage of bank may still enforce its preference
five parcels of land with when the assets of ASB Group of
improvements. Private respondents Companies will be liquidated.
filed with the SEC a verified petition Considering that the provisions of the
for rehabilitation with prayer for loan agreements are merely suspended,
suspension of actions and there is no impairment of contracts,
proceedings pending specifically its lien in the mortgaged
rehabilitation.Finding the petition properties. This arrangement provided
sufficient in form and substance, the by law is intended to give the receiver a
SEC issued an order suspending for chance to rehabilitate the corporation if
60 days all actions for claims against there should still be a possibility for
the ASB Group, enjoining the latter doing so, without being unnecessarily
from disposing its properties in any disturbed by the creditors' actions
manner except in the ordinary against the distressed corporation.
course of business and from paying However, in the event that rehabilitation
outstanding liabilities, and is no longer feasible and the claims
appointing Atty. Fortunato as against the distressed corporation would
interim receiver of the ASB Group. eventually have to be settled, the secured
creditors, like petitioner bank, shall enjoy
preference over the unsecured creditors.
Pryce Corporation is engaged in the Section 6 of the Interim Rules of Yes. The petition for rehabilitation does
PRYCE
development of memorial parks, Procedure on Corporate not allege that there is a clear and
CORPORATI
operated a major hotel in Cagayan Rehabilitation provides the petition must imminent danger that the petitioner will
ON V. THE
Is the denial of de Oro City, and produced be "sufficient in form and substance." lose its corporate assets if a receiver is
COURT OF
petition for industrial gases. The 1997 Asian Under Section 6(c) of P.D. No. 902- not appointed. In other words, the
APPEALS
rehabilitation to financial crisis, however, badly A, receivers may be appointed whenever: "serious situation test" has not been
AND CHINA
petitioner Pryce affected its operations, resulting in (1) necessary in order to preserve the met or at least substantially complied
BANKING
Corporation valid? heavy losses. It could not meet its rights of the parties-litigants; and/or (2) with. In appointing Mr. Gener T.
CORPORATI
obligations as they became due. protect the interest of the investing Mendoza as Rehabilitation Receiver, the
ON
Petitioner filed with the Regional public and creditors. The situations only basis of the lower court was its
(G.R. NO.
Trial Court a petition for contemplated in these instances are finding that "the petition is sufficient in
172302;
rehabilitation. The RTC issued a serious in nature. There must exist a clear form and substance." However, it did
FEBRUARY 4, "Stay Order" directing that: all and imminent danger of losing the not specify any reason or ground to
2008) claims against petitioner be corporate assets if a receiver is not sustain such finding. Clearly, the petition
deferred. The petition was opposed appointed. Simply put, the purpose of failed to comply with the "serious
by petitioner's bank-creditors. The the law in directing the appointment of situation test."
China Banking Corporation, receivers is to protect the interests of the
respondent herein, allege that corporate investors and creditors.
petitioner is solvent and that it filed
the petition to force its creditors to
accept dacion payments. In effect,
petitioner passed on to the creditors
the burden of marketing and
financing unwanted memorial lots,
while exempting it from paying
interests and penalties.

Presidential Decree (PD) No. 902-A

provides for the definition of the term
"claim" refers to debts or demands of
pecuniary nature. It is the assertion of
However, we would still find no cogent
rights for the payment of money. The
Petitioner and respondent Jandecs reason to reverse the resolution denying
reason for suspending actions for claims
UNIWIDE Transportation Co., Inc. entered petitioner's appeal even if the
against the corporation is to enable the
HOLDINGS, into a contract of "Assignment of proceedings here were to be suspended
management committee or the
INC., Leasehold Rights" under which the in the meantime. Petitioner's extreme
rehabilitation receiver to effectively
V. JANDECS latter was to operate food and snack bad faith in dealing with respondent was
exercise its/his powers free from any
TRANSPORT stalls at petitioner's Uniwide Coastal too glaring for the Court to
Is the suspension of judicial or extra-judicial interference that
ATION CO., Mall. Respondent paid the contract ignore.ÏPetitioner's lack of good and
proceedings might unduly hinder or prevent the
INC. price in full. Petitioner, however, honest intentions, as well as the evasive
warranted? "rescue" of the debtor [corporation]. To
(G.R. NO. failed to turn over the stall units as manner by which it was able to frustrate
allow such other action to continue
168522; agreed upon. Respondent sought respondent's claim for a decade, should
would only add to the burden of the
DECEMBER the rescission of the contract and not go unsanctioned. Parties in a
management committee or rehabilitation
19, 2007) the refund of its payment. Petitioner contract cannot be allowed to engage in
receiver, whose time, effort and
refused both. After trial, the RTC double-dealing schemes to dupe those
resources would be wasted in defending
ruled in favor of the respondent. who transact with them in good faith.
claims against the corporation instead of
being directed toward its restructuring
and rehabilitation. All actions for claims
against a corporation pending before any
court, tribunal or board shall ipso jure be

The Bank of the Philippine Islands
extended credit accommodations to
the ASB Group secured by a real
estate mortgage over two (2)
properties. The ASB Group filed a
petition for rehabilitation and
suspension of payments before the
SEC. The Rehabilitation Plan
provides, among others, a dacion en
pago by the ASB Group to BPI of
BANK OF one of the properties mortgaged to
THE the latter at the ASB Group as
PHILIPPINE selling value against the total
ISLANDS V. amount of the ASB Group’s
SECURITIES Did the SEC’s exposure to the bank. In turn, ASB
AND approval of the Group would require the release of
EXCHANGE Rehabilitation Plan the other property mortgaged to
COMMISSION impair BPI’s right to BPI, to be thereafter placed in the
(G.R. NO. contract? asset pool. The dacion would
164641; constitute full payment of the entire
DECEMBER obligation due to BPI because the
20, 2007) balance was then to be considered
waived, as per the Rehabilitation
Plan.
BPI opposed the Rehabilitation
Plan and moved for the dismissal of
the ASB Group’s petition for
rehabilitation but the SEC hearing
panel issued an order approving
ASB Group’s proposed
rehabilitation plan and appointed
Mr. Fortunato Cruz as rehabilitation
receiver.
suspended in whatever stage such actions
may be found upon the appointment by
the SEC of a management committee or
a rehabilitation receiver."
No. The Court reiterates that the SEC’s
approval of the Rehabilitation Plan did
not impair BPI’s right to contract. As
correctly contended by private
respondents, the non-impairment clause
is a limit on the exercise of legislative
power and not of judicial or quasi-
Rehabilitation proceedings have
judicial power. Besides, the mere fact
equitable and rehabilitative purposes. On
that the Rehabilitation Plan proposes
the one hand, they attempt to provide for
a dacion en pago approach does not
the efficient and equitable distribution of
render it defective on the ground of
an insolvent debtor’s remaining assets to
impairment of the right to
its creditors; and on the other, to provide
contract. There is no element of
debtors with a "fresh start" by relieving
compulsion in the dacion en
them of the weight of their outstanding
pago provision of the Rehabilitation
debts and permitting them to reorganize
Plan. It was not the only solution
their affairs. The rationale of P.D. No.
presented by the ASB to pay its
902-A, as amended, is to "effect a feasible
creditors.
and viable rehabilitation," by preserving a
Thus, if BPI does not find the dacion en
foundering business as going concern,
pago modality acceptable, the ASB
because the assets of a business are often
Group can propose to settle its debts at
more valuable when so maintained than
such amount as is equivalent to the
they would be when liquidated.
selling price of the mortgaged properties.
If BPI still refuses this option, it can
assert its rights in the liquidation and
distribution of the ASB Group’s assets.
It will not lose its status as a secured
creditor, retaining its preference over
unsecured creditors when the assets of
the corporation are finally liquidated.
 YES.

Petitioner had been placed by the

Zamora was a cargo representative Securities and Exchange Commission
assigned at the International Cargo under a Permanent Rehabilitation
Operations - Import Operations Receiver. Such being the case, a
Division of petitioner Philippine suspension of all actions for claims
Airlines, Inc. Zamora received a Corporate Rehabilitation shall refer to against petitioner pending before any
Memorandum informing him of his the restoration of the debtor-corporation court, tribunal or board was, ipso jure, in
temporary transfer to the Domestic to a condition of successful operation order. The suspension of all actions for
Cargo Operations Zamora refused and solvency, if it is shown that its claims against a corporation embraces all
PHILIPPINE to follow the directive. The transfer continuance of operation is economically phases of the suit, be it before the trial
was for the purpose of diffusing the feasible and its creditors can recover by court or any tribunal or before this
AIRLINES
tension between him and his Court. No other action may be taken,
way of the present value of payments
VS. immediate superior. The including the rendition of judgment
Should the projected in the plan, more if the debtor-
management issued several during the state of suspension. It must
HEIRS OF proceedings be corporation continues as a going concern
directives informing Zamora of his be stressed that what are automatically
ZAMORA suspended for the than if it is immediately liquidated.
transfer. However, Zamora refused stayed or suspended are the proceedings
rehabilitation of the
to receive these and continued of a suit and not just the payment of
G.R. NO. company?
reporting to the ICO- claims during the execution stage after
164267 IOD. Consequently, he was the case had become final and executory.
The creditors do not have a say in the
NOVEMBER reported absent at the DCO. His Once the process of rehabilitation,
approval of a rehabilitation plan which
23, 2007 salaries were subsequently however, is completed, this Court will
has the effect of suspending all actions
withheld. He also ignored the for all claims against the debtor proceed to complete the proceedings on
management’s directive requiring corporation by secured and unsecured the suspended actions.
him to explain in writing his creditors alike, and even in the case where
continued absence. He was the corporation is already insolvent. Furthermore, the actions that are
informed of his termination due to suspended cover all claims against the
Insubordination/Neglect of corporation whether for damages
Customer, Disrespect to Authority, founded on a breach of contract of
and AWOL. carriage, labor cases, collection suits or
any other claims of a pecuniary nature.
No exception in favor of labor claims is
mentioned in the law.
BF HOMES, BF Homes, Inc. is a domestic YES.
INCORPORA corporation previously engaged in
TED the business of developing and Under Sec. 6(d) of P.D. No. 902-A, the
selling residential lots and houses management committee or rehabilitation
 VS. and other related realty matters. On
July 19, 1984, BF contracted a loan
COURT OF from Rosalinda R. Roa and Vicente
APPEALS Mendoza in the amount of
G.R.NO. 77143 P250,000.00 with interest at the rate
of 33% per annum payable after 32
OCTOBER 3,
days. The obligation was embodied
1990 in a promissory note and secured by
G.R. NO. 76879 two post-dated checks issued by BF
OCTOBER 3, in favor of the lenders. On
1990 September 25, 1984, BF filed a
Petition for Rehabilitation and for a
Declaration in a State of Suspension
of Payments under Sec. 5(d) of P.D.
No. 902-A with a prayer that upon
the filing of the petition and in the
meantime, all claims against it for
any and all accounts or indebtedness
be suspended, but allowing
petitioner to continue with its
normal operations. It also asked for
the approval of the proposed
rehabilitation plan. Roa and
Mendoza filed a complaint against
BF for the recovery of the loan of
P250,000.00, with interest and
attorney's fees. The complaint also
prayed for the issuance of a writ of
preliminary attachment against the
properties of BF. The trial court
issued the writ against properties of
BF sufficient to satisfy the principal
claim in the amount of P257,333.33.
The SEC, finding an urgent need to
rehabilitate BF issued an order
creating a management committee
and suspending all actions for
receiver is empowered to take custody
and control of all existing assets and
properties of such corporations under
management; to evaluate the existing
assets and liabilities, earnings and
operations of such corporations; to
determine the best way to salvage and
protect the interest of investors and
creditors; to study, review and evaluate
the feasibility of continuing operations
and restructure and rehabilitate such
entities if determined to be feasible by
the SEC.
In light of these powers, the reason for
suspending actions for claims against the
corporation should not be difficult to
discover. It is not really to enable the
management committee or the
rehabilitation receiver to substitute the
defendant in any pending action against
it before any court, tribunal, board or
body. Obviously, the real justification is
to enable the management committee or
rehabilitation receiver to effectively
exercise its/his powers free from any
judicial or extra-judicial interference that
might unduly hinder or prevent the
"rescue" of the debtor company. To
allow such other action to continue
would only add to the burden of the
management committee or rehabilitation
receiver, whose time, effort and
resources would be wasted in defending
claims against the corporation instead of
being directed toward its restructuring
and rehabilitation.
 claims against BF pending before
any court, tribunal or board.
Petitioner Bank of Philippine filed
YES.
with the Regional Trial Court a
complaint against respondent Ruby
In the instant case, the action of
Industrial Corporation for
petitioner for foreclosure of real estate
foreclosure of real estate mortgage.
mortgage had been filed against
After filing its answer with
respondent RUBY and was pending with
counterclaim, respondent RUBY
the trial court when RUBY was placed by
submitted to the trial court a motion
SEC under rehabilitation through the
for suspension of the proceedings
creation of a management committee
on the ground that the Securities
pursuant to Sec. 6, par. (d), P.D. 902-A.
and Exchange Commission issued
In its order of 10 August 1984, SEC
an Order placing RUBY under a
BANK OF directed that all actions or claims against
rehabilitation plan.Petitioner BPI
THE RUBY pending before any court,
filed a motion for reopening of the
tribunal, branch or body be deemed
PHILIPPINE proceedings, invoking our ruling
suspended. On the basis of this order,
ISLANDS order of suspension of payments of
the jurisdiction of this trial court over the
Philfinance as well as for all actions
VS. case was also considered suspended. As
or claims against Philfinance could
a result, SEC acquired jurisdiction, which
COURT OF only be applied to claims of
is bolstered by the fact that it had already
unsecured creditors. Such order can
APPEALS appointed a rehabilitation receiver for
not extend to creditors holding a
the distressed corporation and had
G.R. NO. 97178 mortgage, pledge or any lien on the
directed that all proceedings or claims
JANUARY 10, property unless they give up the
against it be suspended.
1994 property, security or lien in favor of
all the creditors of Philfinance. The
While it is recognized that petitioner is a
trial court denied the motion of BPI
preferred creditor whose claim is secured
on the basis that the suspension of
by real estate mortgage on the properties
payment applies to all creditors,
of respondent RUBY, its right to enforce
whether secured or unsecured, in
its claim in court is suspended with the
order to place them on equal
placing by SEC of respondent under
footing.
rehabilitation. This rule will enable the
management committee or rehabilitation
Petitioner then filed with the Court
receiver to effectively exercise his/its
of Appeals a petition for certiorari
power free from any judicial or
and mandamus to set aside the
extrajudicial interference that might
Orders of 22 August 1990 and 19
 October 1990, alleging grave abuse unduly hinder the rescue of the
of discretion on the part of the trial distressed company.
judge in refusing to reopen the case.
In the instant petition, it is alleged
that the Court of Appeals has
decided a question of substance not
in accord with the applicable
decision of this Court and/or
sanctioned a departure by the trial
court from the accepted and usual
course of judicial proceedings as to
call for the exercise by this Court of
its power of supervision
G.A. Yupangco and Co. Inc. filed YES.
an action for collection of a sum of
money with prayer for damages and During rehabilitation receivership, the
preliminary attachment against assets are held in trust for the equal
Alemar's Bookstore, a business benefit of all creditors to preclude one It is the general rule that once a decision
entity owned and managed by from obtaining an advantage or becomes final and executory, its
petitioner Alemar's Sibal & Sons, preference over another by the enforcement becomes the ministerial
Inc. Subsequently Ledesma, Saludo expediency of an attachment, execution duty of the court. Equally settled is that
ALEMAR'S Can the court
and Associates, as intervenor- or otherwise. As between creditors, the the rule admits of certain exceptions, one
SIBAL & validly proceed with
movant, filed an omnibus motion key phrase is equality is equity. When a of which is where it becomes imperative
SONS, INC. the execution of a
informing the respondent trial court corporation threatened by bankruptcy is in the higher interest of justice to direct
final decision for
VS. that the petitioner Alemar's has taken over by a receiver, all the creditors the deferment of execution. In the
the payment of a
been placed under rehabilitation should stand on an equal footing. Not instant case, the stay of execution is
JESUS M. sum of money
receivership by the Securities and anyone of them should be given any warranted by the fact that petitioner has
despite the fact that
ELBINIAS Exchange Commission and that preference by paying one or some of
the judgment debtor been placed under rehabilitation
movant has been appointed as its them ahead of the others. This is
G.R. NO. 75414 has been placed receivership. It must be stressed that the
receiver. In its opposition, G.A. precisely the reason for the suspension of
JUNE 4, 1990 under receivership? SEC had earlier ordered the suspension
Yupangco maintained that it all pending claims against the corporation
received notice of the receivership under receivership. Instead of creditors of all actions for claims against Alemar's
only on January 10, 1985 or after vexing the courts with suits against the in order that all the assets of said
one month after the collection suit. distressed firm, they are directed to file petitioner could be inventoried and kept
It further averred that the motion to their claims with the receiver who is a intact for the purpose of ascertaining an
intervene by the receiver was not duly appointed officer of the SEC. equitable scheme of distribution among
seasonably made. G.A. Yupangco its creditors.
urged the issuance of a writ of
 execution to implement the default
judgment which had become final
and executory, there being no
motion for reconsideration or
appeal. The corresponding writ was
issued on January. Petitioner
Alemar's moved for the discharge of
the writ on the ground that its
issuance was improper since the
proceedings have been suspended
pursuant to the court order
Pittsburgh Trade Center Co., Inc.,
filed a complaint for a sum of
money against BAROTAC. Instead
of filing an answer, BAROTAC
filed a Motion to Suspend
Proceedings on the ground that a
Petition for Suspension of
Payments With Prayer for the
BAROTAC Appointment of a Management or
SUGAR Rehabilitation Committee had been
MILLS, INC. filed with the Securities and
Will the mere filing Exchange Commission. This
VS. with the SEC of motion met opposition from
such petition PITTSBURGH. The court issued
COURT OF suspend the an Order denying petitioner’s
APPEALS proceedings in the motion ruling that upon the filing of
RTC?
G.R. NO. the petition, the SEC has not yet
123379 JULY placed it under receivership. At the
15, 1997 time the Complaint in the instant
case was filed with the respondent
court, there was no order yet from
the SEC for the appointment of a
management or rehabilitation
committee or that which will
indicate that petitioner had been
placed under management or
receivership.
Sub-paragraph (c) of the aforementioned
Section 6, taken together with sub-
paragraph (d) of Section 5 and sub-
paragraph (d) of Section 6, a court is
ipsojure suspended only upon the
appointment of a management
committee or a rehabilitation receiver.
NO.
The appointment of a management
committee or rehabilitation receiver may
only take place after the filing with the
SEC of an appropriate petition for
suspension of payments. This is clear
from a reading of sub-paragraph (d) of
Section 5 and sub-paragraph (d) of
Section 6 of P.D. No. 902-A, as
amended by P.D. Nos. 1653 and 1758.
The conclusion then is inevitable that
pursuant to the underscored proviso in
sub-paragraph (c) of the aforementioned
Section 6, taken together with sub-
paragraph (d) of Section 5 and sub-
paragraph (d) of Section 6, a court is
ipsojure suspended only upon the
appointment of a management
committee or a rehabilitation receiver.
Since there is no showing at all that a
management committee or rehabilitation
receiver for BAROTAC has been

On September 19, 1980, private
respondents Filand Manufacturing
and Estate Development Co., Inc.
and Emilio Ching obtained from
petitioner Land Bank of the
Philippines a loan in the amount of
Ten Million Pesos (P10,000,000.00).
Private respondents having failed to
pay the loan on its due date,
petitioner instituted a complaint for
recovery thereof. During the
pendency of the collection suit,
Is it the SEC which private respondents filed a petition
has jurisdiction over for declaration of insolvency. Cited
proceedings for as ground therefore was their
CHING V.
suspension of inability to pay the various debts and
LAND BANK
payments and liabilities incurred by them, either
OF THE
voluntary and jointly or solidarily or guaranteed by
PHILIPPINES
involuntary one for the other, in the course of
, 201 S 191
insolvency? their businesses, such inability being
due to business reserves brought
about by the fire on January 2, 1984
which gutted the old Holiday Plaza
Building then owned and operated
by Filand Manufacturing, as well as
the economic crisis which gripped
the country following the
assassination of former Senator
Benigno S. Aquino in 1983.
appointed by the SEC, suspension of the
proceedings before the RTC of Quezon
City is not warranted.
This qualification effectively YES.
circumscribes the jurisdiction of the SEC
over insolvent corporations, partnerships
and associations, and consequently, over As declared by the law itself, these are
proceedings for the declaration of merely ancillary powers to enable the
insolvency. It demonstrates beyond SEC to effectively exercise its
doubt that jurisdiction over insolvency jurisdiction. These additional ancillary
proceedings pertains neither in the first powers can be exercised only in
instance nor exclusively to the SEC but connection with an action pending
only in continuation of or as an incident before the SEC and therefore had to be
to the exercise of its jurisdiction over viewed in relation to Section 5 which
petitions to be declared in a state of defines the SEC's original and exclusive
suspension of payments wherein the jurisdiction. Section 6 does not enlarge
petitioning corporation, partnership or or add to the exclusive and original
association had previously been placed jurisdiction of the SEC as particularly
under a rehabilitation receiver or enumerated under Section 5 of said
management committee by the SEC Presidential Decree, as amended.
itself. Construing P.D. 902-A, as amended, in
relation to Act 1956, the court ruled that
Viewed differently, where the petition insofar as petitions for declaration of
filed is one for declaration of a state of insolvency of private corporations are
suspension of payments due to a concerned, it is the regular court that has
recognition of the inability to pay one's exclusive and original jurisdiction
debts and liabilities, and where the thereon. The SEC may entertain such
petitioning corporation either: (a) has petitions only as an incident of and in
sufficient property to cover all its debts continuation of its already acquired
but foresees the impossibility of meeting jurisdiction over petitions to be declared
them when they fall due. However, if the in the state of suspension of payments in
petitioning corporation has no sufficient the two cases provided in Section 5 (d)
assets to cover its liabilities and is not of P.D. 902-A, as amended.
under a rehabilitation receiver or a
management committee created under
P.D. No. 902-A and does not seek merely
to have the payments of its debts

On March 3, 1981, Philippine
Underwriters Finance Corporation
executed a pledge agreement
involving certain shares of stocks
and bonds in favor of Insular Bank
of Asia and America now PCIB as a
security for its outstanding
obligation. On June 18, 1981, the
Securities and Exchange
Commission placed Philfinance
under suspension of payments upon
PHILIPPINE
the directive of the President of the
COMMERCIA
L Philippines to conserve the assets of
INTERNATIO the Corporation and obtain an
NAL BANK Will the suspension equitable payment to all its
VS. of payments apply creditors. On August 7, 1981, SEC
COURT OF only to unsecured appointed a Receivership
APPEALS creditors? Committee to conserve the assets of
G.R. NO. L- Phil-finance and determine the best
76853 way to protect the creditors, as well
APRIL 18, 1989 as make the necessary
representations with any court or
other body for the consolidation of
all claims against Philfinance which
are pending before such court or
body in order to forestall the
probability of inequitable
disposition/satisfaction of said
claims. Upon the basis of the
findings of the Receivership
Committee and on its own, SEC
ordered the dissolution and
suspended, but seeks a declaration of
insolvency, as in this case.
There was no substantial difference NO.
between the suspension of actions in the
instant case and that under the
Insolvency Law.
SEC's order for suspension of payments
of Philfinance as well as for all actions of
claims against Philfinance could only be
applied to claims of unsecured creditors.
Such order cannot extend to creditors
holding a mortgage, pledge or any lien on
the property unless they give up the
property, security or lien in favor of all
the creditors of Philfinance. The rights
of a preferred creditor remain to be
respected and recognized in every
existing situation. To hold otherwise
would render the said rights inutile and
illusory. Besides, there was no substantial
difference between the suspension of
actions in the instant case and that under
the Insolvency Law. Consequently, the
herein order of suspension, could not
have a different interpretation as regards
secured credits than that already given by
this Court. The records show that PCIB
neither surrendered the pledged shares
of stock and bonds nor participated in
the proceedings before the SEC
regarding the suspension of payments or
actions of claims against Philfinance or
in the latter's subsequent dissolution and
liquidation. The pledged properties
being still in PCIB's possession, the
 liquidation of Philfinance. From this
order, some concerned parties
appealed to this Court and
respondent Court of Appeals.
Meanwhile, Philfinance failed to
satisfy its outstanding obligation
with PCIB which prompted the
latter to post a Notice of Auction
Sale of the pledged shares of stocks
and bonds on August 18, 1986 by
the other petitioner, Notary Public
Melchor B. Francisco. On August
15, 1986, the Receiver filed a
petition for a writ of preliminary
injunction with the Regional Trial
Court to stop the aforementioned
auction sale which the trial court
denied but which denial was
reversed by the CA.
On July 2, 1980, three creditors filed
a petition for the involuntary
RADIOLA- insolvency of Carlos Gatmaytan and
TOSHIBA Was the levy on Teresita Gatmaytan, the private
PHILIPPINES attachment in favor respondents herein. On July 9, 1980,
, INC. of the petitioner the respondent court issued an
VS. dissolved by the order taking cognizance of the said
INTERMEDI insolvency petition and stating that the Court
ATE proceedings against forbids the payment of any debts,
APPELLATE respondent spouses and the delivery of any property
COURT commenced four owing and belonging to said
G.R. NO. 75222 months after said respondents-debtors from other
JULY 18, 1991 attachment? persons, or, to any other persons for
the use and benefit of the same
respondents-debtors and/or the
transfer of any property by and for
Sec. 32 states that as soon as an assignee
is elected or appointed and qualified, the
clerk of the court shall, by an instrument
under his hand and seal of the court,
assign and convey to the assignee all the
real and personal property, estate, and
effects of the debtor with all his deeds,
books, and papers relating thereto, and
such assignment shall relate back to the
commencement of the proceedings in
insolvency, and shall relate back to the
acts upon the adjudication was founded,
and by operation of law shall vest the title
to all such property, estate, and effects in
the assignee, although the same is then
attached on process, as the property of
Receiver could not possess the same for
equitable distribution to the creditors of
Philfinance.
The fact that the SEC order for the
dissolution and liquidation of
Philfinance has already been upheld by
the court had been taken judicial notice
of. In view of this development, it
appears that the Rehabilitation Receiver
has no more right to enjoin the auction
sale since its prayer for injunctive relief
was based on the order for suspension of
payments which was in turn based on the
directive of the President of the
Philippines to conserve the assets of the
corporation and obtain an equitable
payment to all its creditors.
NO.
The provision is very clear that
attachments dissolved are those levied
within one month next preceding the
commencement of the insolvency
proceedings and judgments vacated and
set aside are judgments entered in any
action, including judgment entered by
default or consent of the debtor, where
the action was filed within thirty days
immediately prior to the commencement
of the insolvency proceedings.
 the said respondents-debtors to the debtor. Such assignment shall operate
another, upon petitioners' putting to vest in the assignee all of the estate of
up a bond by way of certified and the insolvent debtor not exempts by law There is a cut off period of one month
reputable sureties. On April 12, from execution. in attachment cases and thirty days in
1983, petitioners-creditors filed judgments entered in actions
second urgent motion for issuance commenced prior to the insolvency
of insolvency order and resolution proceedings. Section 79, on the other
of the case, alleging among other hand, relied upon by private respondents
things, they caused to be provides for the right of the plaintiff if
investigated the real properties in the attachment is not dissolved before
the names of Carlos Gatmaytan and the commencement of proceedings in
Teresita Gatmaytan and they were insolvency, or is dissolved by an
surprised to find out that some of undertaking given by the defendant, if
the aforesaid properties were the claim upon which the attachment
already transferred to Radiola- suit was commenced is proved against
Toshiba Phil. Inc. Judgment was the estate of the debtor. Therefore, there
rendered declaring the insolvency of is no conflict between the two
respondents-debtors Carlos provisions.
Gatmaytan and Teresita Gatmaytan.
Petitioner filed a supplemental
opposition to the same second
urgent motion and motion to direct
respondent sheriff to issue a final
certificate of sale for the properties
in its favor. On September 21, 1982,
the court ordered the consolidation
of ownership of petitioner over said
properties but respondent sheriff of
Angeles City refused to issue a final
certificate of sale in favor of
petitioner.
Do preferred On September 28, 1984, BF Homes Paragraph (c), Section 6 of Presidential YES.
RIZAL
creditors of filed a Petition for Rehabilitation Decree 902-A, provides that upon
COMMERCIA
distressed and for Declaration of Suspension appointment of a management
L BANKING
corporations stand of Payments with the SEC. One of committee, rehabilitation receiver, board The issue of whether or not preferred
CORPORATI
on the same footing the creditors listed in its inventory or body, pursuant to this Decree, all creditors of distressed corporations
ON
with all other of creditors and liabilities was actions for claims against corporations,
VS. stand on equal footing with all other
creditors? RCBC. On October 26, 1984, partnerships or associations under
INTERMEDI RCBC requested the Provincial
ATE Sheriff of Rizal to extra-judicially
APPELLATE foreclose its real estate mortgage on
COURT some properties of BF Homes. A
G.R. NO. 74851 notice of extra-judicial foreclosure
DECEMBER sale was issued by the Sheriff on
9, 1999 October 29, 1984, scheduled on
November 29, 1984, copies
furnished both BF Homes as
mortgagor and RCBC as mortgagee.
On motion of BF Homes, the SEC
a temporary restraining order
effective for 20 days, enjoining
RCBC and the sheriff from
proceeding with the public auction
sale. The sale was rescheduled to
January 29, 1985. On January 25,
1985, the SEC ordered the issuance
of a writ of preliminary injunction
upon petitioners filing of a bond.
However, petitioner did not file a
bond until January 29, 1985, the
very day of the auction sale, so no
writ of preliminary injunction was
issued by the SEC. Presumably,
unaware of the filing of the bond,
the sheriffs proceeded with the
public auction sale on January 29,
1985, in which RCBC was the
highest bidder for the properties
auctioned. On February 5, 1985, BF
Homes filed in the SEC a
consolidated motion to annul the
auction sale and to cite RCBC and
the sheriff for contempt. RCBC
opposed the motion.
management or receivership pending
before any court, tribunal, board or body
shall be suspended accordingly. It is thus
adequately clear that suspension of claims
against a corporation under rehabilitation
is counted or figured up only upon the
appointment of a management
committee or a rehabilitation receiver.
creditors gains relevance and materiality
only upon the appointment of a
management committee, rehabilitation
receiver, board, or body. Insofar as
petitioner RCBC is concerned, the
provisions of Presidential Decree No.
902-A are not yet applicable and it may
still be allowed to assert its preferred
status because it foreclosed on the
mortgage prior to the appointment of
the management committee on March
18, 1985. Paragraph (c), Section 6 of
Presidential Decree 902-A, provides that
upon appointment of a management
committee, rehabilitation receiver, board
or body, pursuant to this Decree, all
actions for claims against corporations,
partnerships or associations under
management or receivership pending
before any court, tribunal, board or body
shall be suspended accordingly. It is thus
adequately clear that suspension of
claims against a corporation under
rehabilitation is counted or figured up
only upon the appointment of a
management committee or a
rehabilitation receiver.
In other words, once a management
committee, rehabilitation receiver, board
or body is appointed pursuant to P.D.
902-A, all actions for claims against a
distressed corporation pending before
any court, tribunal, board or body shall
be suspended accordingly. This
 Because of the proceedings in the
SEC, the sheriff withheld the
delivery to RCBC of a certificate of
sale covering the auctioned
properties. On February 13, 1985,
the SEC belatedly issued a writ of
preliminary injunction stopping the
auction sale which had been
conducted by the sheriff two weeks
earlier.
Rubber world filed with the SEC a
petition for suspension of payments
praying that it be declared in a state
of suspension of payments. The
SEC granted such petition. The LA
held that the injunction contained in
the SEC Order applied only to the
RUBBER
enforcement of established rights
WORLD V.
and did not include the suspension
NLRC
Should the labor of proceedings involving claims
proceedings be against Rubber world which have
(G.R. NO.
suspended? yet to be ascertained. The order of
126773
the SEC suspending all actions for
APRIL 14,
claims against Rubber world does
1999)
not cover the claims of the
employees in the labor cases
because said claims and the
concomitant liability of petitioners
still had to be determined, thus
carrying no dissipation of the assets
of petitioners.
UNION BANK Can the SEC validly EYCO Group of Companies
OF THE acquire jurisdiction alleged that the present combined
PHILIPPINES over a petition for financial condition of the Union
V. CA suspension of Bank clearly indicates that their
payments filed assets are more than enough to pay
P.D. 902-A, as amended provides that
upon the appointment by the SEC of a
management committee or a enable the management committee or
rehabilitation receiver, all actions for
claims against the corporation pending
before any court, tribunal or board shall
ipso jure be suspended.
SEC jurisdiction on matters of
suspension of payment is confined only
to those initiated by corporations,
partnerships or associations.
Administrative agencies like the SEC, are
suspension shall not prejudice or render
ineffective the status of a secured
creditor as compared to a totally
unsecured creditor. P.D. 902-A does not
state anything to this effect. What it
merely provides is that all actions for
claims against the corporation,
partnership or association shall be
suspended. This should give the receiver
a chance to rehabilitate the corporation
if there should still be a possibility for
doing so.
No. The justification for the automatic
stay of all pending actions for claims is to
the rehabilitation receiver to effectively
exercise its power free from any judicial
or extrajudicial interference that might
unduly hinder or prevent the rescue of
the debtor company. To allow such
other actions to continue would only add
to the burden of the management
committee or rehabilitation recovery,
whose time, effort and resources would
be wasted in defending claims against the
corporation instead of being directed
toward its restructuring and
rehabilitation.
No. In a case of misjoinder of parties
which in this case is the co-filing of the
petition for suspension of payments by
both the Yutingcos and the EYCO
(G.R. 131729, pursuant to Sec. 5 off the credits but that due to tribunals of limited jurisdiction and, as group, the remedy has never been to
MAY 19, 1998) (d) of P.D. No. 902- factors beyond the control and such, can exercise only those powers dismiss the petition in its entirety but to
A as amended? anticipation of the management the which are specifically granted to them by dismiss it only as against the party upon
inability of the EYCO Group of their enabling statutes. whom the tribunal or body cannot
Companies to meet the obligations acquire jurisdiction. The result,
as they fall due on the schedule therefore, is that the petition with
agreed with the creditors has now
respect to EYCO shall subsist and may
become a stark reality. The SEC
be validly acted upon by the SEC. The
issued an order and directed the
suspension of all actions, claims and Yutingcos, on the other hand, shall be
proceedings against private dropped from the petition and be
respondents pending before any required to pursue their remedies in the
court, tribunal, office, board and/or regular courts of competent jurisdiction.
commission. Without notifying the
members of the consortium,
petitioner, however, decided to
break away from the group by suing
private respondents in the regular
courts.

WHAT IS A SECURITY?
Howey owned a large citrus grove Article 2(a)(1) of the Securities Act of Yes. As defined by Article 2(a)(1) of the
and solicited investors to participate 1933 states that a security includes the Act, a security includes the documents
in his business venture. He documents traded for investment or traded for investment or conjecture,
Does the term implemented a land sale contract for conjecture, having substance over form, having substance over form, regulating
security refer to any a small portion of the grove to the regulating the type of a specific the type of a specific document or
document that investors while also having them document or agreement. agreement. Howey is offering an
SEC V. W.J.
provides evidence enter into a service contract for
HOWEY CO., arrangement to invest money in and
of a monetary cultivation of that land. The service
obtain a portion of the profits of a large
investment in a contract granted Howey the
(328 U.S. 293 citrus fruit operation. Therefore, the
common enterprise complete right to possession due to
1946) documents in this case are representative
whose profits come the investor not taking part in
only through the cultivation of any sort. Howey of shares in the company. The court
labors of others? utilized various agencies of rejects the court of appeals’ idea that due
interstate commerce when to the business being unpredictable and
endorsing this arrangement but promotional in nature, that this deal did
failed to register the contracts and
 securities with the SEC. This led to
the SEC bringing an action seeking
an injunction against the use of
interstate commerce on the grounds
that Howey established sales of
unregistered securities, violating
Article 5(a) of Securities Act of
1933.
Ng Wee was a valued client of
Westmont Bank. He was enticed to
make money placements with
Westmont Investment Corporation
(Wincorp) a corporation organized
and licensed to operate as an
investment house, and one of the
bank's affiliates. What was offered
to him were "sans recourse"
transactions. Ng Wee then invested
VIRATA V. the amount of ₱213,290,410.36. Ng
NG WEE Wee's initial investments were
Does Wincorp
engaged in the sale matched with Hottick Holdings
(G.R. NO. Corporation (Hottick), one of
of unregistered
220926 Wincorp's accredited
Securities?
JULY 5, 2017) borrowers. Later on, Power
Merger’s application for a credit line
was approved by Wincorp. The
investors were induced to invest by
Wincorp with promises of high
yield. Ng Wee’s fund yielded a large
sum of money upon attainment of
the maturity dates.
SEC V. Does PCI’s scheme Prosperity.Com, Inc. (PCI) sold For an investment contract to exist, the No. Here, PCI’s clients do not make
PROSPERITY. constitute an computer software and hosted Howey test comprising of the following such investments. They buy a product of
COM, INC investment contract websites without providing internet elements must concur: (1) a contract, some value to them: an Internet website
Under the Howey test, the following
must concur for an investment contract
to exist: (1) a contract, transaction, or
scheme; (2) an investment of money; (3)
investment is made in a common
enterprise; (4) expectation of profits; and
(5) profits arising primarily from the
efforts of others.
not represent the sale of securities.
Transference of something with tangible
value is not enough to exclude the
agreement from the 1933 Act.
Yes. all of the elements are present in the
extant case.
First, Wincorp offered what it purported
to be "sans recourse" transactions
wherein the investment house would
allegedly match investors with pre-
screened corporate borrowers in need of
financial assistance; Second, Ng Wee
invested the aggregate amount of
₱213,290,410.36 in the "sans recourse"
transactions; Third, prior to being
matched with a corporate borrower, all
the monies infused by the investors are
pooled in an account maintained by
Wincorp; Fourth, the investors were
induced to invest by Wincorp with
promises of high yield; Fifth, the
profitability of the enterprise depended
largely on whether or not Wincorp, on
best effort basis, would be able to match
the investors with their approved
corporate borrowers.
 that requires service. To make a profit, PCI transaction, or scheme; (2) an investment of a 15-MB capacity. The client can use
(G.R. NO. registration under devised a scheme in which, for the of money; (3) investment is made in a this website to enable people to have
164197, R.A. 8799? price of US$234.00), a buyer could common enterprise; (4) expectation of internet access to what he has to offer to
JANUARY 25, acquire from it an internet website profits; and (5) profits arising primarily them, say, some skin cream. The buyers
2012) of a 15- Mega Byte (MB) capacity. from the efforts of others. of the website do not invest money in
Apparently, PCI patterned its PCI that it could use for running some
scheme from that of Golconda
business that would generate profits for
Ventures, Inc. (GVI), which
the investors. These can hardly be
company stopped operations. GVI
filed a complaint with the SEC regarded as profits from investment of
against PCI, alleging that the latter money under the Howey test.
had taken over GVI’s operations.
The SEC issued a CDO against PCI
ruling that PCI’s scheme constitutes
an Investment contract and,
following the Securities Regulations
Code, it should have first registered
such contract or securities with the
SEC.
Power Homes Unlimited primary The Howey Test is the test established to Yes. The business operation or the
purpose is to engage in the determine whether a transaction falls scheme of petitioner constitutes an
transaction of promoting, acquiring, within the scope of an investment investment contract that is a security
managing, leasing, obtaining contract. It requires that a person: under R.A. No. 8799. Thus, it must be
Does the business
options on, development, and 1. Makes an investment of money; registered with the public respondent
POWER of petitioner involve
improvement of real estate 2. In a common enterprise; SEC before its sale or offer for sale or
HOMES an investment
properties for subdivision and allied 3. With the expectation of profits; and
UNLIMITED contract that is distribution to the public. As petitioner
purposes, and in the purchase, sale 4. To be derived primarily from the
CORPORATI considered security failed to register the same, its
and/or exchange of said subdivision efforts of others.
ON VS. SEC and thus, must be
and properties through network offering to the public was rightfully
registered prior to
marketing. Manero claimed that he enjoined by public respondent SEC.
(G.R. NO. sale or offer for sale
attended a seminar conducted by
164182 or distribution to
petitioner where the latter claimed
FEBRUARY the public pursuant
to sell properties that were
26, 2008) to Section 8.1 of
nonexistent and without any
R.A. No. 8799?
broker‘s license. SEC found that the
petitioner is engaged in the sale or
offer for sale or distribution of
investment contracts, which are
 considered securities under Sec. 3.1
(b) of R.A. No. 8799 but failed to
register them in violation of Sec. 8.1
of the same Act, and issued a Cease-
and-Desist Order.
Performance Foreign Exchange
Corporation is a domestic
corporation duly registered under
the SEC. After two years of
operation, it received from the SEC
requiring it to appear before the
SEC V.
Compliance and Enforcement
PERFORMAN Does SEC acted
Department (CED) for a restrained, will operate as a fraud on
CE FOREIGN with grave abuse of
clarificatory conference regarding
EXCHANGE discretion in issuing
its business operations. A Cease-
CORPORATI the Cease-and-
and-Desist Order was issued against
ON Desist Order and its
it since the outcome of the inquiry
subsequent Order
shows that respondent is engaged in
(G.R. NO. making it
the trading of foreign currency
154131 J permanent?
futures contracts on behalf of its
ULY 20, 2006)
clients without the necessary license;
that such transaction can be deemed
as a direct violation of Section 11 of
R.A. No. 8799. Later the SEC issued
an Order making the Cease-and-
Desist Order permanent.
Suzuki Beach Hotel, Inc. (SBHI)
was registered with the SEC. Hikoi
HIKOI Suzuki, et al., acting as Board of
SUZUKI Directors of SBHI, issued a
VS. Resolution declaring due and
Does the SEC have
DE GUZMAN demandable all unpaid shares of
jurisdiction over the
stock and gave the stockholders to
case?
(G.R. NO. pay their unpaid subscription. A
146979 J Resolution to sell all delinquent
ULY 27, 2006) shares of stock at a public auction
was set. Respondent asked for the
issuance of a Temporary Restraining
Section 64 of R.A. No. 8799 provides for
two essential requirements that must be
complied with by the SEC before it may
issue a cease-and-desist order: First, it
must conduct proper investigation or
verification; and Second, there must be a
finding that the act or practice, unless
investors or is otherwise likely to cause
grave or irreparable injury or prejudice to
the investing public.
Section 5.2 of R.A. No. 8799, provides:
The Commission's jurisdiction over all
cases enumerated under Section 5 of
P.D. No. 902-A is hereby transferred to
the Courts of general jurisdiction or the
appropriate Regional Trial Court.
The Commission shall retain jurisdiction
over pending cases involving intra-
corporate disputes submitted for final
resolution which should be resolved
No. Here, the first requirement is not
present. Petitioner did not conduct
proper investigation or verification
before it issued the challenged orders.
The clarificatory conference undertaken
by petitioner regarding respondent’s
business operations cannot be
considered a proper investigation or
verification process to justify the
issuance of the Cease-and-Desist Order.
It was merely an initial stage of such
process, considering that after it issued
the said order following the clarificatory
conference, petitioner still sought
verification from the BSP on the nature
of respondent’s business activity.
No. The original and exclusive
jurisdiction to hear and decide cases
involving intra-corporate controversies
have been transferred to courts of
general jurisdiction or the appropriate
Regional Trial Court.43 The case
involving herein parties has not been
submitted for final resolution on the
merits in the SEC. Only the issue on
jurisdiction was dealt with by the SEC
which is the subject of herein petition.
 Order and Writ of Preliminary
Injunction but the SEC denied it.
Hence, an auction sale ensued. It
again asked for the nullity of the
auction sale. However, petitioners
filed a Motion to Dismiss
Supplemental Pleading on the
ground of lack of jurisdiction,
claiming that the case is cognizable
by civil courts.
SCB is a foreign banking
corporation duly licensed to engage
in banking, trust, and other fiduciary
business in the Philippines. The
conduct of SCB’s business in this
BAVIERA V.
jurisdiction is subject to the
PAGLINAWA Was Baviera’s
numerous conditions. SCB did not
N action of filing a
comply with the above conditions.
complaint directly
Instead, it acted as a stock broker,
(G.R. NO. before the
soliciting from local resident’s
168380 F Department of
foreign securities These securities
EBRUARY 8, Justice?
were not registered with the SEC.
2007)
Manuel Baviera, the former head of
the HR Service Delivery and
Industrial Relations of SCB filed a
complaint before the Department
of Justice
Justina Callangan, the Director of
PHILIPPINE
the Corporation Finance
VETERANS
Department of the SEC sent a letter
BANK V.
to Philippine Veterans Bank,
JUSTINA Is Philippine
informing it that it qualifies as a
CALLANGAN Veterans Bank
public company under Sec. 17.2 of
G.R. NO. considered as a
the Securities Regulation Code. The
191995; public company?
Bank is thus required to comply
AUGUST 3,
with the reportorial requirements.
2011
The bank explained that it should
not be considered as public
within one (1) year from the enactment Thus, herein case does not fall within the
of this Code. exception adverted to in the afore
quoted Section 5.2.
For violation of the Securities Regulation No. A criminal charge for violation of
Code, Section 53.1 of the Securities the Securities Regulation Code is a
Regulation Code provides: specialized dispute. Hence, it must first
be referred to an administrative agency
That all criminal complaints for of special competence
violations of this Code and the
implementing rules and regulations
enforced or administered by the
Commission shall be referred to the Hence, all complaints for any violation
Department of Justice for preliminary of the Code and its implementing rules
investigation and prosecution before the and regulations should be filed with the
SEC. Where the complaint is criminal in
proper court
nature, the SEC shall indorse the
complaint to the DOJ for preliminary
investigation and prosecution.
Rule 3(1)(m) of the Amended YES. It is clear that a public company, as
Implementing Rules and Regulations of contemplated by the SRC, is not limited
the SRC, defines a public company as any to a company whose shares of stock are
corporation with a class of equity publicly listed. Even companies like the
securities listed on an Exchange or with Bank, whose shares are offered only to a
assets in excess of Fifty Million Pesos specific group of people, are considered
(₱50,000,000.00) and having two
a public company, provided they meet
hundred (200) or more holders, at least
the requirements. The Bank has assets
two hundred (200) of which are holding
exceeding ₱50,000,000.00 and has
at least one hundred (100) shares of a
class of its equity securities. 395,998 shareholders. It is thus
 company because it is a private considered a public company that must
company whose shares of stocks are comply with the reportorial
available only to a limited class i.e. requirements set forth in Section 17.1 of
World War II veterans and not to the SRC.
the general public.

Callangan rejected the explanation

and assessed the Bank a total Additionally, and contrary to the Bank‘s
penalty of ₱1,937,262.80 for failing claim, the Bank‘s obligation to provide
to comply with the reportorial its stockholders with copies of its annual
requirements from 2001 to 2003. report is actually for the benefit of the
veterans- stockholders, as it gives these
stockholders access to information on
the Bank‘s financial status and
operations, resulting in greater
transparency on the part of the Bank.

For many stockholders, these annual

reports are the only means of keeping in
touch with the state of health of their
investments; to them, these are
invaluable and continuing links with the
Bank that immeasurably contribute to
the transparency in public companies
that the law envisions.

SECURITIES On or about the first half of 1988, To constitute a violation of the Revised YES. The first aspect of the SEC
AND certificates of stock of PHILEX Securities Act that can warrant an decision appealed to the Court of
EXCHANGE representing one million four imposition of a fine under Section 29(3), Appeals, i.e., that portion which orders
COMMISSION hundred [thousand] (1,400,000) in relation to Section 46 of the Act, fraud the two stock transfer agencies to
V. COURT OF Are both parties shares were stolen from the or deceit, not mere negligence, on the ―jointly replace the subject shares and
APPEALS, negligent? premises of FIDELITY. These part of the offender must be established. for FIDELITY to cause the transfer
CUALOPING stock certificates consisting of stock Fraud here is akin to bad faith which
thereof in the names of the buyers‖
SECURITIES dividends of certain PHILEX implies a conscious and intentional
shareholders had been returned to design to do a wrongful act for a clearly calls for an exercise of SEC‘s
CORPORATI
FIDELITY for lack of forwarding dishonest purpose or moral obliquity; it adjudicative jurisdiction.
ON AND
 FIDELITY addresses of the shareholders is unlike that of the negative idea of
STOCK concerned.
TRANSFERS,
INC. Later, the stolen stock certificates affirmatively operating with furtive
G.R. NOS. ended in the hands of a certain objectives.
106425 & Agustin Lopez, a messenger of New
106431-32; World Security Inc., an entirely
JULY 21, 1995 different stock brokerage firm. In
the first half of 1989, Agustin Lopez
brought the stolen stock certificates
to CUALOPING for trading and
sale with the stock exchange.
When the said stocks were brought
to CUALOPING, all of the said
stock certificates bore the
―apparent‖ indorsement (signature)
in blank of the owners (the
stockholders to whom the stocks
were issued by PHILEX) thereof.
At the side of these indorsements
(signatures), the words ―Signature
Verified‖ apparently of FIDELITY
were stamped on each and every
certificate. Further, on the words
―Signature Verified‖ showed the
usual initials of the officers of
FIDELITY.
negligence in that fraud or bad faith
contemplates a state of mind
This case, it might be recalled, has started
only on the basis of a request by
FIDELITY for an opinion from the
SEC. The stockholders who have been
deprived of their certificates of stock or
the persons to whom the forged
certificates have ultimately been
transferred by the supposed indorsee
thereof are yet to initiate, if minded, an
appropriate adversarial action. Neither
have they been made parties to the
proceedings now at bench.
A justiciable controversy such as can
occasion an exercise of SEC‘s exclusive
jurisdiction would require an assertion of
a right by a proper party against another
who, in turn, contests it. 5 It is one
instituted by and against parties having
interest in the subject matter appropriate
for judicial determination predicated on
a given state of facts. That controversy
must be raised by the party entitled to
maintain the action. He is the person to
whom the right to seek judicial redress or
relief belongs which can be enforced
against the party correspondingly
charged with having been responsible
for, or to have given rise to, the cause of
action.
 A person or entity tasked with the power
to adjudicate stands neutral and impartial
and acts on the basis of the admissible
representations of the contending
parties.

The Puerto Azul Land Inc. (PALI), A corporation is but an association of YES. This is in accord with the
a domestic real estate corporation, individuals, allowed to transact under an ―Business Judgement Rule‖ whereby the
offered its shares to the public in assumed corporate name, and with a SEC and the courts are barred from
order to raise funds allegedly to distinct legal personality. In organizing intruding into business judgements of
develop its properties and pay its itself as a collective body, it waives no corporations, when the same are made in
loans with several banking constitutional immunities and perquisites
good faith. The same rule precludes the
PHILIPPINE institutions. appropriate to such a body. As to its
reversal of the decision of the PSE, to
STOCK corporate and management decisions,
EXCHANGE, In January 1995, PALI was issued a therefore, the state will generally not which PALI had previously agreed to
INC. V. permit to sell its shares to the public interfere with the same. comply, the PSE retains the discretion to
COURT OF by the SEC. To facilitate the trading accept of reject applications for listing.
APPEALS, of its shares among investors, PALI Questions of policy and of management Thus, even if an issuer has complied with
SECURITIES sought to course the trading of its are left to the honest decision of the the PSE listing rules and requirements,
AND shares through the PSE, for which officers and directors of a corporation, PSE retains the discretion to accept or
Is the denial of
EXCHANGE purpose it filed with the said stock and the courts are without authority to reject the issuer‘s listing application if the
PALI‘s application
COMMISSION exchange an application to list its substitute their judgment for the PSE determines that the listing shall not
proper?
AND shares, with supporting documents judgment of the board of directors. The serve the interests of the investing
PUERTO attached pending the approval of board is the business manager of the public.
AZUL LAND, the PALI‘s listing application, a corporation, and so long as it acts in good
INC. letter was received by PSE from the faith, its orders are not reviewable by the
G.R. NO. heirs of Ferdinand Marcos to which courts.
125469; the latter claims to be the legal and Petitioner PSE is not an ordinary
OCTOBER 27, beneficial owner of some of the corporation, in that although it is clothed
1997 properties forming part of PALI‘s with the markings of a corporate entity,
assets. it functions as the primary channel
through which the vessels of capital
As a result, PSE denied PALI‘s trade ply.
application which caused the latter
to file a complaint before the SEC.
The SEC issued an order to PSE to
 grant listing application of PALI on Thus, notwithstanding the regulatory
the ground that PALI have power of the SEC over the PSE, and the
certificate of title over its assets and resultant authority to reverse the PSE's
properties and that PALI have decision in matters of application for
complied with all the requirements listing in the market, the SEC may
to enlist with PSE. exercise such power only if the PSE's
judgment is attended by bad faith.

The absolute reliance on the full

disclosure method in the registration of
securities is, therefore, untenable. As it is,
the Court finds that the private
respondent PALI, on at least two points
(nos. 1 and 5) has failed to support the
propriety of the issue of its shares with
unfailing clarity, thereby lending support
to the conclusion that the PSE acted
correctly in refusing the listing of PALI
in its stock exchange. This does not
discount the effectivity of whatever
method the SEC, in the exercise of its
vested authority, chooses in setting the
standard for public offerings of
corporations wishing to do so. However,
the SEC must recognize and implement
the mandate of the law, particularly the
Revised Securities Act, the provisions of
which cannot be amended or supplanted
by mere administrative issuance.

TIMESHARE On October 6, 1996, petitioner sold Section 8. Procedure for registration. - (a) NO. The Court held by referring to the
Does registration as
REALTY to respondents, one timeshare of All securities required to be registered provisions of BP Blg. 178 which does
a Corporation
CORPORATI Laguna de Boracay under a Contract under subsection (a) of Section four of not support the contention that mere
authorizes the
ON V. CESAR payable in eight months and fully this Act shall be registered through the registration as a corporation already
Corporation to sell
LAO AND paid by the respondents. Sometime filing by the issuer or by any dealer or
CYNTHIA V. unregistered in February 1998, the SEC issued a
CORTEZ timeshares? resolution to the effect that
G.R. NO. petitioner was without authority to
158941; sell securities, like timeshares, prior
FEBRUARY to February 11, 1998. It further
11, 2008 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.
Petitioner sought a reconsideration
of the aforesaid order but the SEC
denied the same. Respondents
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. But despite
repeated demands, petitioner failed
and refused to refund or pay
respondents.
MAKATI Is the order of the This is a review of the resolution of
STOCK Securities and the Securities and Exchange
EXCHANGE, Exchange Commission which would deny the
INC. Commission, that Makati Stock Exchange, Inc.,
V. SECURITI double or multiple permission to operate a stock
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:
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.
The Legislature has specified the
conditions under which a stock exchange
may legally obtain a permit (sec. 17,
Securities Act); it is not for the
Commission to impose others. If the
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.
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.
NO. There can be no valid objection to
the discussion of this issue of double
listing now, because even if the Makati
Stock Exchange, Inc. may be held to
have accepted the permission to operate
 ES AND listing of securities exchange unless it agreed not to list existence of two competing exchanges with the condition against double listing
EXCHANGE should be for trading on its board, securities jeopardizes public interest which is (for having failed to appeal the order of
COMMISSION prohibited for the already listed in the Manila Stock doubtful let the Congress speak. May 27, 1963), still it was not precluded
AND MANILA protection of the Exchange. from afterwards contesting the validity
STOCK investors, correct? Undoubtedly, the opinion and of such condition or rule.
EXCHANGE Objecting to the requirement, recommendation of the Commission will
G.R. NO. L- Makati Stock Exchange, Inc. be given weight by the Legislature, in
23004; JUNE contends that the Commission has judging whether or not to restrict
30, 1965 no power to impose it and that, individual enterprise and business The petition for review has suitably been
anyway, it is illegal, discriminatory opportunities. coursed. And making reasonable
and unjust. allowances for the presumption of
But until otherwise directed by law, the regularity and validity of administrative
operation of exchanges should not be so action, the Court is constrained to reach
regulated as practically to create a the conclusion that the SEC possesses
monopoly by preventing the no power to impose the condition of the
establishment of other stock exchanges rule, which, additionally, results in
and thereby contravening: discrimination and violation of
a. the organizers' Constitutional right to constitutional rights.
equality before the law;
b. their guaranteed civil liberty to pursue
any lawful employment or trade; and
c. the investor's right to choose where to
buy or to sell, and his privilege to select
the brokers in his employment.

"La Orden" floated a bond issue, Section 1(E), Republic Act No. 62: NO. The determination as to whether or
LA ORDEN maturing from two to fifteen years, Upon satisfactory proofs of ownership of not the issuer of the securities or bonds
DE PP. with the Philippine Trust," as securities, the issuer corporation or had discharged its obligation, until
Is the determination
BENEDICTIN trustee. As security for the bonds, association shall issue new share otherwise provided by law, lies within
as to whether or not
OS DE LAS the former corporation executed a certificates or bonds to the persons the province of the court of Securities
the issuer of the
ISLAS first mortgage and deed of trust entitled thereto, or, in case of securities and Exchange Commission is powerless
securities or bonds
FILIPINAS V. over certain parcels of land in favor which have not been fully paid, or for
had discharged its to pass upon it.
J. A. STIVER of the latter company, for the which no payment whatsoever has been
obligation lies
AND THE benefits of the bondholders. Most made, the issuer shall recognize all valid
within the province
PHILIPPINE of the bonds having matured and claims of ownership thereto or interest
of the SEC? The bondholder having established his
TRUST unpaid, the "Philippine Trust" therein.
COMPANY instituted an action in the CFI, for ownership to ten bonds issued by the
the purpose of selling the property petitioner at P500 each which had been
 G. R. NO. L- mortgaged, or portions thereof, and
4568; JUNE 16, applying the proceeds to the
1953 redemption of the matured bonds
plus accrued interests. The court
placed the property mortgaged
under receivership, and sold the
same during the Japanese
occupation. An amount of Japanese
occupation currency, sufficient to
redeem the entire bond issue,
together with all accrued interest,
was then turned over by the receiver
to the "Philippine Trust" and the
mortgage and deeds of trust was
cancelled with the approval of the
court. In its order closing the
receivership, the Court also released
"la Orden" from all obligation it
contracted with respect to the
bonds.
After receipt of the redemption
money, the "Philippine Trust"
notified the bondholders, by
publication, of its readiness to
redeem the bonds. Some of the
bondholders surrendered their
bonds and were paid the value
thereof, in the currency then
existing. Others failed to do so,
however, and as the redemption
money became worthless after the
liberation of the Philippines by the
American Forces; their bonds have
not been redeemed up to this date.
The petitioner contends that the
SEC erred in ordering it to issue a
The phrases "which have not been fully
paid, or for which no payment
whatsoever has been made," refers to
subscription not fully paid or for which
no payment whatsoever has been made,
and upon the satisfactory proof of valid
claims of ownership to such securities or
interest therein, "the issuers shall
recognize all valid claims of ownership
thereto or interest therein.‖ The cessation
or extinction of the obligation of the
issuer of the securities or bonds to issue
replacement securities or bonds upon
proof of their loss or destruction is not
provided therein.
lost or destroyed during the battle for
liberation of the City of Manila, the
issuer of the bonds, the herein petitioner,
is in duty bound to issue bonds to
replace them. If the lost or destroyed
bonds are not to be replaced by the
issuance of other bonds, how may the
bondholder go to the trustee who had
received the payment of the mortgage
obligation represented by the bonds to
claim payment of their bonds?
Whether the payment made by the issuer
of the bonds of the whole amount of the
mortgage obligation or bonded
indebtedness to the trustee who is still in
possession of part of the said amount
has discharged the issuer from its
obligation to pay the bondholders, and
whether the trustee after calling upon the
bondholders to receive the amount due
to them upon their bonds has been
discharged from liability to the
bondholders who have not been paid
because of their failure to call upon and
receive from the trustee what is due them
upon their bonds, are matters foreign to
the functions of the SEC because they
fall within the field of judicial
determination and adjudication.
 replacement bond when the
obligation represented by the bond
no longer exist because the bond
had been paid and the issuer thereof
was discharged from its obligation.
PALI, a domestic real estate
corporation, had sought to offer its
shares to the public in order to raise
funds allegedly to develop its
properties and pay its loans with
several banking institutions. PALI
was issued a Permit to Sell its shares
PHILIPPINE to the public by the SEC. To
STOCK facilitate the trading of its shares
EXCHANGE, among investors, PALI sought to
INC. V. course the trading of its shares
COURT OF through the Philippine Stock
APPEALS, Exchange, Inc. (PSE), for which
SECURITIES purpose it filed with the said stock
AND Does the SEC have exchange an application to list its
EXCHANGE the authority to shares, with supporting documents
COMMISSION order the PSE to list attached. Before acting upon the
AND PALI‘s shares? application, it came to PSE‘s
PUERTO attention, through a letter, that the a
AZUL LAND, number of PALI‘s properties are
INC. part of the Marcos ill-gotten wealth.
G.R. NO. PALI has previously secured a TRO
125469; against the Marcoses, to enjoin the
OCTOBER 27, latter from interfering with the
1997 public offering in the PSE.
The Board of Governors of the PSE
reached its decision to reject PALI‘s
application, citing the existence of
serious claims, issues and
circumstances surrounding PALI‘s
ownership over its assets. PALI
Sec. 3 of P.D. 902-A, give the SEC the
special mandate to be vigilant in the
supervision of the affairs of stock
exchanges so that the interests of the
investing public may be fully safeguard.
SEC shall have absolute jurisdiction,
supervision, and control over all
corporations, partnerships or
associations, who are the grantees of
primary franchises and/or a license or
permit issued by the government to
operate in the Philippines. The SEC‘s
regulatory authority over private
corporations encompasses a wide margin
of areas, touching nearly all of a
corporation‘s concerns. This authority
springs from the fact that a corporation
owes its existence to the concession of its
corporate franchise from the state.
SEC is the entity with the primary say as
to whether or not securities, including
shares of stock of a corporation, may be
traded or not in the stock exchange. This
is in line with the SEC‘s mission to ensure
proper compliance with the laws, such as
the Revised Securities Act and to regulate Thus, notwithstanding the regulatory
the sale and disposition of securities in power of the SEC over the PSE, and the
the country.
YES, but only if the exercise of the PSE‘s
powers was attended with bad faith. The
denial of the application of PALI is
proper due to the controversies
surrounding its ownership.
This is not to say that the PSE‘s
management prerogatives are under the
absolute control of the SEC. The PSE is,
after all, a corporation authorized by its
corporate franchise to engage in its
proposed and duly approved business.
One of the PSE‘s main concerns, as
such, is still the generation of profit for
its stockholders. Moreover, the PSE has
all the rights pertaining to corporations,
including the right to sue and be sued, to
hold property in its own name, to enter
(or not to enter) into contracts with third
persons, and to perform all other legal
acts within its allocated express or
implied powers.
resultant authority to reverse the PSE‘s
decision in matters of application for
wrote a letter to the SEC bringing to
its attention the action taken by the
PSE in the application of PALI for
the listing of its shares with the PSE,
and requesting that the SEC, in the
exercise of its supervisory and
regulatory powers over stock
exchanges under Section 6(j) of
P.D. No. 902-A, review the PSE‘s
action on PALI‘s listing application
and institute such measures as are
just and proper under the
circumstances.
The SEC rendered a decision
reversing the denial of application
by PALI, ordering the PSE to
immediately list the shares of PALI.
listing in the market, the SEC may
exercise such power only if the PSE‘s
judgment is attended by bad faith. Bad
faith does not simply connote bad
judgment or negligence. It imports a
dishonest purpose or some moral
obliquity and conscious doing of wrong.
It means a breach of a known duty
through some motive or interest of ill
will, partaking of the nature of fraud.
The petitioner was in the right when it
refused application of PALI, for a
contrary ruling was not to the best
interest of the general public. The
purpose of the Revised Securities Act,
after all, is to give adequate and effective
protection to the investing public against
fraudulent representations, or false
promises, and the imposition of
worthless ventures.
In sum, the Court finds that the SEC had
acted arbitrarily in arrogating unto itself
the discretion of approving the
application for listing in the PSE of
PALI, since this is a matter addressed to
the sound discretion of the PSE, a
corporation entity, whose business
judgments are respected in the absence
of bad faith.
 REGISTRATION OF SECURITIES
On February 21, 1983, the
Authorized Capital Stock (ACS) of
petitioner Nestle was increased
from P300 million divided into 3
million shares with a par value of
P100 per share, to P600 million
divided into 6 million shares with a corporation showing that at least 25% of
par value of P100 per share. Nestle
underwent the necessary procedures
involving Board and stockholders‘
approvals and the necessary filings
NESTLE to secure the approval of the
PHILIPPINES increase of ACS. It was approved by
, INC. V. respondent SEC.
COURT OF
APPEALS Nestle issued 344,500 shares out of requirements of the Corporation Code
AND Should Nestle’s its previously authorized but for increasing its authorized capital stock.
SECURITIES application for unissued capital stock exclusively to
AND exemption be its principal stockholders San
EXCHANGE granted? Miguel Corporation and to Nestle
COMMISSION S.A. San Miguel Corporation
subscribed to and completely paid
G.R. NO.
up 168,800 shares, while Nestle S.A.
86738;
NOVEMBER subscribed to and paid up the
13, 1991 balance of 175,700 shares of stock.
In 1985, petitioner Nestle filed a
letter to SEC seeking exemption of
its proposed issuance of additional
shares to its existing principal
shareholders, from the registration
requirement of Section 4 of the
Revised Securities Act and from
payment of the fee referred to in
Section 6(c) of the same Act.
Under Sec 38 of the Corporation Code, a
corporation engaged in increasing its
authorized capital stock, with the
required vote of its Board of Directors
and of its stockholders, must file a sworn
statement of the treasurer of the
―such increased capital stock‖ has been
subscribed and that at least 25% of the
amount subscribed has been paid either
in actual cash or in property transferred
to the corporation. The corporation must
issue at least 25% of the newly or
contemporaneously authorized capital
stock in the course of complying with the
NO. In the case at bar, since the 344,500
shares of Nestle capital stock are
proposed to be issued from already
authorized but still unissued capital stock
and since the present authorized capital
stock of 6,000,000 shares with a par
value of P100.00 per share is not
proposed to be further increased, the
SEC and the CA correctly rejected
Nestle‘s petition.
When capital stock is issued in the course
of and in compliance with the
requirements of increasing its authorized
capital stock under Section 38 of the
Corporation Code, the SEC examines
the financial condition of the
corporation, and hence there is no real
need for exercise of SEC authority under
the Revised Securities Act.
Thus, one of the requirements under the
current regulations of the SEC in respect
of filing a certificate of increase of
authorized capital stock, is submission
of―a financial statement duly certified
by an independent CPA as of the latest
date possible or as of the date of the
meeting when stockholders approved
the increase/decrease in capital stock or
thereabouts.
 When all or part of the newly authorized
capital stock is proposed to be issued as
stock dividends, the SEC requirements
are even more exacting; they require, in
addition to the regular audited financial
statements, the submission by the
corporation of a ―detailed or Long
Form Report of the certifying Auditor.

Moreover, since approval of an increase

in authorized capital stock by the
stockholders holding 2/3 of the
outstanding capital stock is required by
Section 38 of the Corporation Code, at a
stockholders meeting held for that
purpose, the directors and officers of the
corporation may be expected to inform
the shareholders of the financial
condition and prospects of the
corporation and of the proposed
utilization of the fresh capital sought to
be raised.

SEC issued an Order revoking In A.Z. Arnaiz, Realty, Inc. v. Office of The Court finds that there was
SECURITIES
URPHI’s Registration of Securities the President, the Court held that due substantial compliance with the
AND
and Permit to Sell Securities to the process, as a constitutional precept, does requirements of due process when
EXCHANGE
Does the Public for its failure to filed its yearly not always, and in all situations, require a URPHI was given opportunity to be
COMMISSION
respondent Annual Report pursuant to trial-type proceeding. Litigants may be heard. Upon receipt of the SEC Order,
V.
accorded Securities Regulation Code. The heard through pleadings, written URPHI filed the letters dated September
UNIVERSAL
opportunity to be Order was lifted and the SEC gave explanations, position papers, 13 and 28, 2004, seeking a final extension
RIGHTFEILD
heard? URPHI’s time to comply with the memoranda or oral arguments. The to submit the reportorial requirements,
PROPERTY
reportorial requirements, however, standard of due process that must be met and admitting that its failure to submit its
HOLDINGS,
the same failed to do so. Eventually, in administrative tribunals allows a 2nd Quarterly Report for 2004 was due
INC.
the SEC suspended the permit of certain degree of latitude as long as to the same reasons that it was unable to
 G.R. NO. URPHI. The SEC, through its
181381 (2015) Corporation Finance Department,
informed URPHI that it failed to
submit its 2004 2nd Quarter Report
in violation of the Amended
Implementing Rules and
Regulations of the SRC Rule
17.1(1)(A)(ii). It also directed
URPHI to file the said report, and
to show cause why it should not be
held liable for violation of the said
rule. URPHI requested for a final
extension. URPHI filed with the
SEC its Annual Report. However,
days after, SEC revoked URPHIs
registration. URPHI appealed the
SEC Order of Revocation.
WHAT ARE THE SAFEGUARDS FOR INVESTOR PROTECTION?
Respondent opened a cash or
regular account with petitioner for
buying and selling securities as
evidenced by the Account
Application Form. The parties’
business relationship was governed
ABACUS by the terms and conditions states
SECURITIES therein. Since then respondent
What are the
CORPORATI actively traded his account, and as a
safeguards for result of such trading activities, he
ON V. AMPIL
investor protection? accumulated an outstanding
G.R. NO.
160016 (2006) obligation in favor of petitioner.
Respondent failed to pay petitioner
his liabilities. Petitioner sold
respondent’s securities to set off
against his unsettled obligations.
After the sale of respondent’s
securities and application of the
fairness is not ignored. It is, therefore,
not legally objectionable for being
violative of due process for an
administrative agency to resolve a case
based solely on position papers, affidavits
or documentary evidence submitted by
the parties.
Sections 23 and 25 and Rule 25-1,
otherwise known as the “mandatory
close-out rule,” clearly vest upon
petitioner the obligation, not just the
right, to cancel or otherwise liquidate a
customer’s order, if payment is not
received within three days from the date
of purchase. For transactions subsequent
to an unpaid order, the broker should
require its customer to deposit funds into
the account sufficient to cover each
purchase transaction prior to its
execution.
“Margin trading” allows investors to buy
more securities than their cash position
would normally allow. Investors pay only
a portion of the purchase price of the
submit its 2003 Annual Report and 1st
Quarterly Report for 2004. Notably, in
its Order of Revocation, the SEC
considered URPHI's letters and stated
that it still failed to submit the required
reports, despite the lapse of the final
extension requested.
Petitioner failed to enforce the terms and
conditions of its Agreement with
respondent, specifically paragraph 8
thereof, purportedly acting on the
plea of respondent to give him time to
raise funds therefor. By failing to ensure
respondent’s payment of his first
purchase transaction within the period
prescribed by law, thereby allowing him
to make subsequent purchases,
petitioner effectively converted
respondent’s cash account into a credit
account. However, extension or
maintenance of credits on non-margin
transactions, are specifically prohibited
under Section 23(b). Thus, petitioner
was remiss in its duty and cannot be said
 proceeds thereof against his securities; their broker advances for them to have come to court with “clean
account, there still remaining the balance of the purchase price and hands” insofar as it intended to collect
unsettled obligation. Petitioner keeps the securities as collateral for the on transactions subsequent to the initial
demanded that respondent settle his advance or loan. Brokers take these trades.
obligation plus the agreed penalty securities/stocks to their bank and
charges accruing thereon equivalent borrow the “balance” on it, since they
to the average 90-day Treasury Bill have to pay in full for the traded stock.
rate plus 2% per annum. Despite Hence, increasing margins i.e., decreasing
said demand and the lapse of said the amounts which brokers may lend for
requested extension, respondent the speculative purchase and carrying of
failed and/or refused to pay his stocks is the most direct and effective
accountabilities to petitioner. method of discouraging an abnormal
Respondent claims that he was attraction of funds into the stock market
induced to trade in a stock security and achieving a more balanced use of
with petitioner because the latter such resources.
allowed offset settlements wherein
he is not obliged to pay the purchase
price. Rather, it waits for the
customer to sell. And if there is a
loss, petitioner only requires the
payment of the deficiency (i.e., the
difference between the higher
buying price and the lower selling
price). In addition, it charges a
commission for brokering the sale.
However, if the customer sells and
there is a profit, petitioner deducts
the purchase price and delivers only
the surplus – after charging its
commission.
The plaintiff Carolina Industries It has been uniformly held that if a
CAROLINA
Inc. filed a case against the broker extends credit to a customer in
INDUSTRIES
defendant CMS Stock brokerage, violation of the Securities Act or the
V. CMS
Inc., which is engaged in the regulations promulgated pursuant
BROKERAGE
business of buying and selling of thereto, all to induce a customer to
INC.
stocks and securities for and in purchase securities, then the broker has
G.R. NO. L-
behalf of investors. The defendant
46908 (1980) violated the law and the customer may
made a stock purchases in favor of
 plaintiff notwithstanding that the
plaintiff’s account was under margin
or above the 50% ceiling required
under Section 18 (a) (1) of the
Securities Act.
The Puerto Azul Land Inc. (PALI),
a domestic real estate corporation,
had sought to offer its shares to the
public in order to raise funds
allegedly to develop its properties
and pay its loans with several
PHILIPPINE banking institutions. In January,
ASSOCIATIO
1995, PALI was issued a permit to
N OF STOCK
sell its shares to the public by the
TRANSFER SEC. To facilitate the trading of its
AND shares among investors, PALI
REGISTRY sought to course the trading of its
AGENCIES V. shares through the Philippine Stock
COURT OF Exchange Inc. (PSEi), for which
APPEALS purpose it filed with the said stock
G.R. NO. exchange an application to list its
137321 (2007) shares, with supporting documents
attached pending the approval of
the PALI’s listing application, a
letter was received by PSE from the
heirs of Ferdinand Marcos to which
the latter claims to be the legal and
“Business Judgement Rule” whereby the
SEC and the courts are barred from
intruding into business judgements of
corporations, when the same are made in
good faith.
recover from him any loss proximately
resulting therefrom. The customer’s
right of action is not affected by his
participation in the transaction “Since
the legislation regarded him as incapable
of protecting himself.” It has been held
that such protection was intended to
apply only to innocent investors as
distinguished from those who lose their
innocence and wait to see how their
investments turn out before deciding to
invoke the act. The acts of protecting of
investors extend to corporations as well
as to individuals.
It precludes the reversal of the decision
of the PSE, to which PALI had
previously agreed to comply, the PSE
retains the discretion to accept of reject
applications for listing. Thus, even if an
issuer has complied with the PSE listing
rules and requirements, PSE retains the
discretion to accept or reject the issuer’s
listing application if the PSE determines
that the listing shall not serve the
interests of the investing public. It is
undeniable that the petitioner PSE is not
an ordinary corporation, in that although
it is clothed with the markings of a
corporate entity, it functions as the
primary channel through which the
vessels of capital trade ply. The PSEi’s
relevance to the continued operation and
filtration of the securities transaction in
the country gives it a distinct color of
importance such that government
 beneficial owner of some of the
properties forming part of PALI’s
assets. As a result, PSE denied
PALI’s application. The SEC issued
an order to PSE to grant listing
application of PALI on the ground
that PALI have certificate of title
over its assets and properties and
that PALI have complied with all
the requirements to enlist with PSE.
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 with17.03%.
Majority of UCHC’s stocks were
owned by BCI with 21.31% and
CEMCO
ACC with 29.69%. Cemco, on the
HOLDINGS,
other hand, owned 9% of UCHC
INC. V.
stocks. In a disclosure letter, BCI
NATIONAL
informed the Philippine Stock
LIFE
Exchange (PSE) that it and its
INSURANCE
subsidiary ACC had passed
COMPANY
resolutions to sell to Cemco BCI’s
OF THE
stocks in UCHC equivalent to
PHILIPPINES
21.31% and ACC’s stocks in UCHC
, INC.
equivalent to 29.69%.
G.R. NO.
As a consequence of this disclosure,
171815 (2007)
the PSE inquired as to whether the
Tender Offer Rule under Rule 19 of
the Implementing Rules of the
Securities Regulation Code is not
applicable to the purchase by
petitioner of the majority of shares
of UCC. The SEC en banc had
resolved that the Cemco transaction
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. It
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.
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.
intervention in its affairs becomes
justified, if not necessarily.
In matters of application for listing in the
market the SEC may exercise such
power only if the PSE’s judgment is
attended by bad faith. The petitioner was
in the right when it refused application
of PALI, for a contrary ruling was not to
the best interest of the general public.
The SEC and the Court of Appeals
ruled that the indirect acquisition by
petitioner of 36% of UCC shares
through the acquisition of the non-listed
UCHC shares is covered by
the mandatory tender offer rule. The
legislative intent of Section 19 of the
Code is to regulate activities relating to
acquisition of control of the listed
company and for the purpose of
protecting the minority stockholders of a
listed corporation. Whatever may be the
method by which control of a public
company isobtained, either through the
direct purchase of its stocks or through
an indirect means, mandatory tender
offer applies. The petitioner posits that
what it acquired were stocks of UCHC
and not UCC. By happenstance, as a
result of the transaction, it became an
indirect owner of UCC.
 was not covered by the tender offer
rule. Feeling aggrieved by the
transaction, respondent National
Life Insurance Company of the
Philippines, Inc., a minority
stockholder of UCC, sent a letter to
Cemco demanding the latter to
comply with the rule on mandatory
tender offer. Cemco, however,
refused.
Cualoping Securities Corporation is
a stockholder and Fidelity Stock
Transfer, Inc. is the stock transfer
agent of PHILEX Mining
Corporation. Certificates of stocks
of PHILEX of 1,400,000 shares
were stolen from the premises of
Fidelity. These stock certificates
consisting of stock dividends of
certain PHILEX shareholders had
SECURITIES
AND been returned to Fidelity for lack of
forwarding addresses of the
EXCHANGE
What liabilities arise shareholders concerned. The stolen
COMMISSION
from the violation certificates ended in the hands of
V. COURT OF
of the Securities Agustin Lopez. He bought the
APPEALS
Regulation Code? certificates to Cualoping for trading
G.R. NOS.
106425 & 106431 and sale with the stock exchange.
(1995) The stock exchange awarded and
confirmed the sale of stocks
represented by said certificates to
different buyers, the same were
delivered to Fidelity for the
cancellation and issuance of new
certificates. Lopez paid Cualoping
for the value of stocks.
The Revised Securities Act (Batas
Pambansa Blg. 178) is designed, in main,
to protect public investors from
fraudulent schemes by regulating the sale
and disposition of securities, creating, for
this purpose, a Securities and Exchange
Commission to ensure proper
compliance with the law. Here, the SEC
has aptly invoked the provisions of
Section 29, in relation to Section 46, of
the Revised Securities Act. This law
provides:
Sec. 29. Fraudulent transactions. — (a) It
shall be unlawful for any person, directly
or indirectly, in connection with the
purchase or sale of any securities —
xxx xxx xxx
(3) To engage in any act, transaction
practice, or course of business which
operates or would operate as a fraud or
deceit upon any person.
FIDELITY and CUALOPING have
been guilty of negligence in the conduct
of their affairs involving the questioned
certificates of stock. To constitute,
however, a violation of the Revised
Securities Act that can warrant an
imposition of a fine under Section 29(3),
in relation to Section 46 of the Act, fraud
or deceit, not mere negligence, on the
part of the offender must be established.
Fraud here is akin to bad faith which
implies a conscious and intentional
design to do a wrongful act for a
dishonest purpose or moral obliquity; it
is unlike that of the negative idea of
negligence in that fraud or bad faith
contemplates a state of mind
affirmatively operating with furtive
objectives. Given the factual
circumstances found by the appellate
court, neither FIDELITY nor
CUALOPING, albeit indeed remiss in
the observance of due diligence, can be
held liable under the above provisions of
the Revised Securities Act.
 This is an insider trading case arising The character of a commercial broker The machinations with which the
from the sale of stock in the can be established only by strict proof; defendant is charged consist in the
Philippine Sugar Estates the intervention of a mere general broker suppression of his identity while
Development Company to one of will no protect the purchaser of securities negotiating for the stock and were paying
the directors of the company. The payable to bearer, under article 544 of the for it and also of his intention as majority
defendant, while negotiating the Code of Commerce. As to commercial stockholder in the company to close the
purchase of the plaintiff’s stock, was brokers under the presents system in the
negotiation then pending with the
simultaneously negotiating the sale Philippine Islands—quare.
ELEANOR Government for the sale of the friar
of the corporate land assets to the
ERICA Philippine government. The Their accountability is expressly confined lands owned by the company. The
STRONG defendant took extraordinary to property "with the administration or prospect of such a sale would have
AND efforts to conceal the information alienation of which they are charged." materially affected the price of the stock.
RICHARD P. about the negotiations. As a result, They are not charged with the The court found nothing irregular with
STRONG V. the purchaser was able to obtain the administration or alienation of the shares the defendant’s acts. He was its
FRANCISCO stock from the stockholder for in the hands of the members and in managing director and conducted this
GUTIERREZ about one-tenth of its actual value. respect to them they are not mandatories transactions without formal
REPIDE and hold no trust relation to the owners. authorization by his society but after
G.R. NO 2101
informal discussion of the director’s
(1906)
meeting. He was also in person the
holder of a large majority of the stock,
thus not only controlling the
negotiations with the Government
through all its stages but also its ultimate
result by his own vote in the
shareholders’ meeting.

Under the “Full Material Disclosure RSA Rules 11(a)-1, 34(a)-1 and 34(c)-1 Petitioner is under the supervision of the
UNION BANK Rule” on banks, the Revised require the submission of certain reports BSP and the Philippine Stock Exchange
OF THE Securities Act which exempts to ensure full, fair and accurate disclosure does not exempt it from complying with
PHILIPPINES securities issued or guaranteed by of information for the protection of the the continuing disclosure requirements
V. Who are covered banking institutions from the investing public. These Rules were embodied in the assailed
SECURITIES under Securities and registration requirement provided issued by respondent pursuant to the Rules. Petitioner, as a bank, is primarily
AND Exchange by Section 4 of the same Act. authority conferred upon it by Section 3
subject to the control of the BSP; and as
EXCHANGE Commission Rules? Chairman Yasay informed of the RSA. The said Rules do not amend
COMMISSION a corporation trading its securities in the
petitioner that while the Section 5(a)(3) of the Revised Securities
G.R. NO. requirements of registration do not Act, because they do not revoke or stock market, it is under the supervision
138949 (2001) apply to securities of banks which amend the exemption from registration of the SEC. It must be pointed out that
even the PSE is under the control and
 are exempt under Section 5(a) (3) of
the Revised Securities Act, however,
banks with a class of securities listed
for trading on the Philippine Stock
Exchange, Inc. are covered by
certain Revised Securities Act Rules
governing the filing of various
reports with respondent
Commission, i.e., (1) Rule 11(a)-1
requiring the filing of Annual,
Quarterly, Current, Predecessor and
Successor Reports; (2) Rule 34-(a)-1
requiring submission of Proxy
Statements; and (3) Rule 34-(c)-1
requiring submission of
Information Statements, among
others.
Petitioner ONAPAL and Chua
concluded a “Trading Contract”.
The trading contract signed by
private respondent and Albert
Chiam, representing petitioner, is a
ONAPAL contract for the sale of products for
PHILIPPINES future delivery, in which either seller
COMMODITI Is the agreement or buyer may elect to make or
demand delivery of goods agreed to
ES , INC. V. illegal as it is
be bought and sold, but where no
COURT OF considered a
APPEALS gambling contract? such delivery is actually made. But
G.R. NO. 90707 when the transaction which was
(1993) carried out to implement the written
contract deviates from the true
import of the agreement as when no
such delivery, actual or constructive,
of the commodity or goods is made,
and final settlement is made by
of the securities enumerated
thereunder. They are reasonable
regulations imposed upon petitioner as a
banking corporation trading its securities
in the stock market.
Commodity futures Contract shall refer
to an agreement to buy or sell a specified
quantity and grade of a commodity at a
future date at a price established at the
floor of the exchange.
If a contract which purports to be for the
delivery of goods, securities or shares of
stock is entered into with the intention
that the difference between the price
stipulated and the exchange or market
price at the time of the pretended delivery
shall be paid by the loser to the winner,
the transaction is null and void. The loser
may recover what he has paid.
supervision of respondent. There is no
over-supervision here. Each regulating
authority operates within the sphere of
its powers. That stringent requirements
are imposed is understandable,
considering the paramount importance
given to the interests of the investing
public.
These regulations are meant to assure
full, fair and accurate disclosure of
information for the protection of
investors in the stock market. Imposing
such regulations is a function within the
jurisdiction of the SEC. Since petitioner
opted to trade its shares in the exchange,
then it must abide by the reasonable rules
imposed by the SEC.
The written trading contract in question
is not illegal but the transaction between
the petitioner and the private respondent
purportedly to implement the contract is
in the nature of a gambling agreement.
After considering all the evidence in this
case, it appears that petitioner and
private respondent did not intend, in the
deals of purchasing and selling for future
delivery, the actual or constructive
delivery of the goods/commodity,
despite the payment of the full price
therefor. The contract between them
falls under the definition of what is called
“futures”. The payments made under
payment and receipt of only the
difference in prices at the time of
delivery from that prevailing at the
time the sale is made, the dealings in
futures become mere speculative
contracts in which the parties
merely gamble on the rise or fall in
prices.
said contract were payments of
difference in prices arising out of the rise
or fall in the market price above or below
the contract price thus making it purely
gambling and declared null and void by
law.