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Cases 1

1.NDC v Phil Veterans Bank (1990)

FACTS: PD 1717 ordered the rehabilitation of the Agrix Group of Companies to be administered by NDC.
Sec 4(1) provides that all mortgages and liens presently attached be extinguished, and that all accrued
obligations shall not bear interest. Among those ordered extinguished was a lien in favor of Phil Veterans
Bank over property in LB. NDC filed to foreclose the mortgage.

HELD: New Agrix was created by special decree even if 1973 Constitution mandates that Batasang
Pambansa, cannot, except by general law, provide for formation, organization and regulation of private
corporations, unless for GOCCs. NDC was only mandated to extend loan and to manage the company.
New Agrix was entirely private and should have been organized under Corporation Law.

2. Morato v CA (2004)

FACTS: Petitioners, stockholders of TF Ventures, Inc., filed a petition with the SEC against private
respondents for the declaration of nullity of stockholders’ and directors’ meetings and damages. They
assail the validity of the notice and stockholders’ meeting of TF Ventures, Inc. and the organizational
meeting of the members of the BOD. The petition was referred to the Securities Investigation and Clearing
Department (SICD) of the SEC for investigation and resolution. Meanwhile, one of the private respondents
(Matsura, Chairman of the BOD), wrote a letter to the Examiners and Appraisers Dept of the SEC,
requesting for an examination of the basis for the capital increase of T.F. Ventures, Inc. from P10,000,000
to P100,000,000, alleging the commission of devices, schemes and criminal acts. The letter was forwarded
by the SEC to the Prosecution and Enforcement Dept (PED). Petitioners contended that with the filing of
the letter-petition with the PED, Matsura resorted to forum shopping.

HELD: Matsura is not guilty of forum shopping. There is no identity of causes of action or identity of rights
asserted by the parties in both cases. In this case, SEC Case is pending before the SICD, which has exclusive
jurisdiction to investigate and resolve intra-corporate disputes. The respondent’s letter-petition, on the
other hand, was referred by the SEC to the PED and is pending before the Prosecution and Enforcement
Department of the SEC.

Section 8 of P.D. No. 902-A, as amended, provides: SECTION 8. The Prosecution and Enforcement
Department shall have, subject to the Commission’s control and supervision, the exclusive authority to
investigate, on complaint or motu propio, any act or omission of the Board of Directors/Trustees of
corporations, or of partnerships, or other associations, or of their stockholders, officers or partners,
including any fraudulent devices, schemes or representations, in violation of any law or rules and
regulations administered and enforced by the Commission; to file and prosecute in accordance with law
and rules and regulations issued by the Commission and in appropriate cases, the corresponding criminal
or civil case before the Commission or the proper court or body upon prima facie finding of violation of
any laws or rules and regulations administered and enforced by the Commission; and to perform such
other powers and functions as may be provided by law or duly delegated to it by the Commission.
Prosecution under this Decree or any Act, Law, Rules and Regulations enforced and administered by the
Commission shall be without prejudice to any liability for violation of any provision of the Revised Penal
Code. Under the said provision, the SEC, through the PED, is vested with authority to investigate, either
motu proprio or upon complaint, any act or omission, fraudulent schemes, devices or misrepresentations
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in violation of any law, rules or regulations, administered and enforced by the SEC, and to file and
prosecute appropriate civil or criminal cases upon a prima facie finding of violation of such laws, rules or
regulations.

The petitioners, in the SEC case, sought the nullification of the Notice for the Annual Stockholders’
Meeting, the stockholders’ meeting and organizational meeting held on September 22, 1997, on their
claim that the holding of the same was in violation of the Corporation Code and the By-Laws of the
petitioner corporation.

In his answer to the petition, the respondent asserted the validity of the said meeting and prayed, by way
of counterclaim, for the nullification of the October 20, 1997 meeting of the petitioners, and for damages.
In contrast, the respondent alleged in his letter petition in the PED case that the petitioners were engaged
in fraudulent schemes, devices or misrepresentations in violation of the law, and SEC rules and
regulations.

The complainant Matsuura asked the PED to investigate the complaint and file the corresponding
administrative, civil or criminal cases before the SEC, the proper court or body, for violation of the laws,
rules or regulations administered and enforced by the SEC. The fact that the SICD has not yet resolved the
SEC case does not constitute a bar to the resolution of the PED case. The proceedings in the said cases are
independent and separate of each other and may thus proceed separately.

Note that while this case was pending in the SC, RA 8799, Securities Regulation Code, took effect on
August 8, 2000. Section 5.2 of the law provides that SEC’s jurisdiction over all cases under Sec 5 of PD 902-
A is transferred to the RTCs.

Among the powers and functions of the SEC which were transferred to the RTC include the following:

(a) jurisdiction and supervision over all corporations, partnerships or associations who are the grantees
of primary franchises and/or a license or permit issued by the Government;

(b) the approval, rejection, suspension, revocation or requirement for registration statements, and
registration and licensing applications;

(c) the regulation, investigation or supervision of the activities of persons to ensure compliance;

(d) the supervision, monitoring, suspension or take over the activities of exchanges, clearing agencies and
other SROs;

(e) the imposition of sanctions for the violation of laws and the rules, regulations and orders issued
pursuant thereto;

(f) the issuance of cease-and-desist orders to prevent fraud or injury to the investing public;

(g) the compulsion of the officers of any registered corporation or association to call meetings of
stockholders or members thereof under its supervision; and,

(h) the exercise of such other powers as may be provided by law as well as those which may be implied
from, or which are necessary or incidental to the carrying out of, the express powers granted the
Commission to achieve the objectives and purposes of these laws. However, Section 8 of P.D. No. 902-A,
as amended, has already been repealed, as provided for in Section 76 of RA 8799. Thus, under the new
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law, the PED ceased to exist. However, the SEC retains jurisdiction to continue with its investigation of the
letter-petition of respondent Matsuura. When RA 8799 took effect, the SEC case had not yet been
submitted for decision by the SEC. Hence, the said case should be transferred to the RTC of Makati City,
to be raffled to the appropriate branch thereof assigned to try such cases. Despite the repeal of Section 8
of P.D. No. 902-A and the abolition of the PED, the SEC may continue with its investigation of the letter-
petition of respondent Matsuura.

3. Union Bank v. Danilo Concepcion GR No. 160727 June 26, 2007

FACTS: EYCO Group of Companies filed a petition for suspension of payment, appointment of
receiver/committee and approval of rehabilitation plan with alternative prayer for liquidation and
dissolution of corporations. Suspension was granted by the SEC Hearing Panel. Union Bank became part
of the ManCom which represented the creditor banks but later on broke away without notifying the
group. It filed a slew of cases with the Makati RTC and applied for preliminary attachment. Union Bank
filed a motion to dismiss the case pending with the SEC, and when the SEC issued an order appointing
regular members of the ManCom, Union Bank filed a petition for certiorari with the CA seeking the
nullification of the SEC Order and again assailing the jurisdiction of the SEC. It alleged that the jurisdiction
over a basic petition for suspension of payments was with the RTC under Act No. 1956 (Insolvency Law).
The CA and later on the SC ruled that the jurisdiction is with the SEC pursuant to PD 902-A. The proceeding
in the RTC was thus suspended. Concepcion was later appointed as liquidator by the SEC en banc and he
filed a motion to intervene and set aside order of attachment in the said RTC case. The SEC en banc
approved of the liquidation plan that Concepcion submitted but his motion to intervene with the RTC was
denied for lack of standing. The RTC also declared EYCO in default in the said case, proceeded to receive
evidence ex parte and later rendered partial judgment ordering EYCO to pay P400M to Union Bank.
Concepcion appealed the decision and was sustained by the CA, which modified the partial judgment of
the RTC. Union Bank now comes to the SC assailing the CA’s order.

HELD: Denied. CA Order AFFIRMED. What is being assailed is the validity of the appointment of
Concepcion as liquidator and his standing to intervene in the RTC case. Albeit jurisdiction over a petition
to declare a corporation in a state of insolvency strictly lies with regular courts, the SEC possessed, during
the period material, ample power under P.D. No. 902-A as amended, to declare a corporation insolvent
as an incident of and in continuation of its already acquired jurisdiction over the petition to be declared
in the state of suspension of payments in the two instances provided in Section 5(d) thereof. Said Section
5(d) vests the SEC with exclusive and original jurisdiction over petitions for suspension of payments which
may either be: (a) a simple petition for suspension of payments based on the provisions of the Insolvency
Law, i.e., the petitioning corporation has sufficient assets to cover all its debts, but foresees the
impossibility of meeting the obligations as they fall due, or (b) a similar petition filed by an insolvent
corporation accompanied by a prayer for the creation of a management committee and/or rehabilitation
receiver based on the provisions of P.D. No. 902-A, as amended by P.D. No. 1758. The petition of EYCO in
this case was a mix of both situations. EYCO’s petition for suspension for payment was, for all intents and
purposes, still pending with the SEC as of June 30, 2000. Accordingly, the SEC’s jurisdiction thereon, by
the express terms of R.A. No. 8999, still subsists “until [the suspension of payment case and its incidents
are] finally disposed.”
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4. Viva Footwear v. SEC GR No. 163235 April 27, 2007

FACTS: Petitioner Viva Footwear Manufacturing Corporation is a domestic corporation engaged in the
manufacture of rubber footwear. Respondents Philippine National Bank (PNB) and Philippine Bank of
Communications (PBCom) are two of petitioner’s creditors. The SEC, upon petition by Viva, declared the
latter to be in a state of suspension of payments. The petition for rehabilitation was eventually dismissed
because it was not viable to do so as it was not financially sound. Viva now claims that its right to due
process was violated when the SEC referred the rehabilitation plan to the Financial Analysis and Audit
Division without notice to petitioner.

HELD: NO MERIT. DISMISSED. In administrative proceedings, due process simply means an opportunity to
seek a reconsideration of the order complained of; it cannot be fully equated to due process in its strict
jurisprudential sense. It is the administrative order, not the preliminary report, which is the basis of any
further remedies the losing party in an administrative case may pursue. Thus, petitioner has no right to
be notified of the preliminary report by the Financial Analysis and Audit Division of the SEC. Petitioner’s
claim that the SEC’s referral of the petition for rehabilitation to the said division violated its right to due
process deserves no consideration. Petitioner’s right to administrative due process only entitles it to an
opportunity to be heard and to a decision based on substantial evidence. No more, no less.

5. CIR vs. Club Filipino, Inc de Cebu (1962)

FACTS: Club Filipino is a civic corporation organized to develop and cultivate sport of all class and
denomination for the healthful recreation and entertainment of its SH and members. Its AOI and by-laws
are silent as to dividends and their distribution but it was provided that upon its dissolution, the Club’s
remaining assets after paying debts shall be donated to a charitable Phil. Institution.

HELD: Club Filipino is a non-stock corporation. According to Section 3 of the Corporation Code, there are
two elements for a stock corporation to exist: 1) capital stock divided into shares, and 2) an authority to
distribute to the holders of such shares, dividends or allotments of the surplus profits on the basis of
shares held. Nowhere in Club Filipino’s AOI or BL could be found an authority for the distribution of its
dividends or surplus profits.

6. Philips Export BV (PEBV) v CA (1992)

FACTS: PEBV is a foreign corp under the law of Netherlands, although not engaged in business in the Phils.
It is the registered owner of the Philips trademark, and owns two local companies with the name Philips
also. PEBV asked the cancellation of the word Philips from Standard Philips, a local manufacture alleging
infringement of its exclusive right to use the same. SEC and CA ruled for Std Philips, saying there was no
confusion (unlike in Converse case).

HELD: Corp’s right to use its corp and trade name is a property right, a right in rem. General Rule: Corp
must have a name by which it is to sue and be sued and do all legal acts. Accdg to Corp Code, no corp
name may be allowed 1) if complainant corp acquired a prior right over name and 2) proposed name is a)
identical or b) deceptively or confusingly similar or c) patently deceptive, confusing or contrary to existing
law PEBV’s local companies were incorporated 26 yrs before Std Philips. TEST OF CONFUSING SIMILARITY
IN CORP NAMES: Whether similarity is such as to mislead a person using ordinary care and discrimination
Philips is the dominant word. No need to prove that there was actual confusion, as long as probable or
likely to occur. Std Philips’ purpose, as per its articles of incorp also includes sale and manufacture of
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electrical products, which is PEBV’s line of business. Even if SEC guidelines mandate that a corp could add
2 other words to proposed name, only one word “Std” was added. “Corp” not counted. Note: A prior user
can consent to the use of its name