NORA A.

BITONG
vs.
COURT OF APPEALS (FIFTH DIVISION), EUGENIA D. APOSTOL, JOSE A.
APOSTOL, MR. & MS. PUBLISHING CO., LETTY J. MAGSANOC, AND ADORACION
G. NUYDA
G.R. No. 123553. July 13, 1998
NORA A. BITONG
vs.
COURT OF APPEALS (FIFTH DIVISION) and EDGARDO B. ESPIRITU
(CA-G.R. No. 33873) July 13, 1998

FACTS:

Bitong alleged that she was the treasurer and member of the BoD of Mr. & Mrs.
Corporation. She filed a complaint with the SEC to hold respondent spouses Apostol
liable for fraud, misrepresentation, disloyalty, evident bad faith, conflict of interest and
mismanagement in directing the affairs of the corporation to the prejudice of the
stockholders. She alleges that certain transactions entered into by the corporation were
not supported by any stockholder’s resolution. The complaint sought to enjoin Apostol
from further acting as president-director of the corporation and from disbursing any
money or funds.
Apostol contends that Bitong was merely a holder-in-trust of the JAKA shares of
the corporation, hence, not entitled to the relief she prays for. SEC Hearing Panel issued
a writ enjoining Apostol. After hearing the evidence, SEC Hearing Panel dissolved the
writ and dismissed the complaint filed by Bitong. Bitong appealed to the SEC en banc
which reversed SEC Hearing Panel decision. Apostol filed petition for review with the
CA. CA reversed SEC en banc ruling holding that Bitong was not the owner of any share
of stock in the corporation and therefore, not a real party in interest to prosecute the
complaint.

ISSUE:

Was Bitong the real party in interest?

RULING:

No. It could be gleaned that Bitong was not a bona fide stockholder of the
corporation. Several corporate documents disclose that the true party in interest was
JAKA. Although her buying of the shares were recorded in the Stock and Transfer Book
of the corporation, and as provided by Sec. 63 of the Corp Code that no transfer shall
be valid except as between the parties until the transfer is recorded in the books of the
corporation, and upon its recording the corporation is bound by it and is estopped to
deny the fact of transfer of said shares, this provision is not conclusive even against the
corporation but are prima facie evidence only.
Parol evidence may be admitted to supply the omissions in the records, explain
ambiguities, or show what transpired where no records were kept, or in some cases
where such records were contradicted.
The certificate of stock itself once issued is a continuing affirmation or
representation that the stock described therein is valid and genuine and is at least prima
facie evidence that it was legally issued in the absence of evidence to the contrary.
However, this presumption may be rebutted. However, the books and records of a
corporation are not conclusive even against the corporation but are prima facie evidence
only. The effect of entries in the books of the corporation which purport to be regular
records of the proceedings of its board of directors or stockholders can be destroyed by
testimony of a more conclusive character than mere suspicion that there was an
irregularity in the manner in which the books were kept.
ABELARDO JAVELLANA, TOMAS JONCO, et al., in their capacities as Councilors
of the Municipal Municipality of Buenavista, Province of Iloilo
vs.
SUSANO TAYO, as Mayor of the Municipal Municipality of Buenavista, Iloilo
G.R. No. L-18919 December 29, 1962

FACTS:

Petitioners were members of the municipal council. On several sessions, the

mayor, herein defendant, was absent prompting the council to decide emong themselves
as to who to appoint as presiding officers. The mayor refused to act on the resulting
minutes also refused to sign the payrolls of the council covering the per diems of the
petitioners, alleging that the proceedings were illegal due to his absence.
Despite the Provincial Fiscal and the Provincial Board upholding the controverted
sessions of the Municipal Council, the Mayor refused and still refuses to recognize the
validity of the acts of the Municipal Council and the legality of its regular session held
in his absence.
The trial court ruled that attendance of the Mayor is not essential to the validity
of the session as long as there is quorum constituted in accordance with law. To declare
that the proceedings of the petitioners were null and void, is to encourage recalcitrant
public officials who would frustrate valid sessions for political end or consideration.

ISSUE:

Were the sessions held by petitioners valid and legal, having constituted a
quorum, and despite the absence of the defendant?

RULING:

Yes. The term "quorum" has been defined as "that number of members of the
body which, when legally assembled in their proper places, will enable the body to
transact its proper business, or, in other words, that number that makes a lawful body
and gives it power to pass a law or ordinance or do any other valid corporate act.
The Revised Administrative Code states that for the majority of the members of
the council to constitute a quorum to do business, the council "shall be presided by the
Mayor and no one else.
The procedure, as provided in the Administrative Code, provides that in case of
temporary incapacity of the mayor, the council member having the highest number of
votes can sit as presiding officer. This rule on incapacity was declared as valid by the
court in the case. Thus, the quorum requirement was satisfied despite the continuous
absence of the mayor on those scheduled sessions.
Thus, the questioned sessions and the resulting resolutions were declared valid.
 NATIONAL EXCHANGE CO., INC., petitioner
vs.
I.B. DEXTER, respondent
G.R. No. L-27872 February 25, 1928

FACTS:

This action was instituted in the Court of First Instance of Manila by the National
Exchange Co., Inc., as assignee (through the Philippine National Bank) of C. S. Salmon
& Co., for the purpose of recovering from I. B. Dexter a balance of P15,000, the par value
of one hundred fifty shares of the capital stock of C. S. Salmon & co., with interest and
costs. Upon hearing the cause the trial judge gave judgment for the plaintiff to recover
the amount claimed, with lawful interest from January 1, 1920, and with costs. From
this judgment the defendant appealed.
It appears that on August 10, 1919, the defendant, I. B. Dexter, signed a written
subscription to the corporate stock of C. S. Salmon & Co. in the following form: I hereby
subscribe for three hundred (300) shares of the capital stock of C. S. Salmon and
Company, payable from the first dividends declared on any and all shares of said
company owned by me at the time dividends are declared, until the full amount of this
subscription has been paid.
Upon this subscription the sum of P15,000 was paid in January, 1920, from a
dividend declared at about that time by the company, supplemented by money supplied
personally by the subscriber. Beyond this nothing has been paid on the shares and no
further dividend has been declared by the corporation. There is therefore a balance of
P15,000 still paid upon the subscription.

ISSUE:

Was the stipulation contained in the subscription to the effect that the
subscription is payable from the first dividends declared on the shares has the effect of
relieving the subscriber from personal liability in an action to recover the value of the
shares?

RULING:

No. In discussing this problem we accept as sound law the proposition

propounded by the appellant's attorneys and taken from Fletcher's Cyclopedia as
follows: In the absence of restrictions in its character, a corporation, under its general
power to contract, has the power to accept subscriptions upon any special terms not
prohibited by positive law or contrary to public policy, provided they are not such as to
require the performance of acts which are beyond the powers conferred upon the
corporation by its character, and provided they do not constitute a fraud upon other
subscribers or stockholders, or upon persons who are or may become creditors of the
corporation.
Pursuant to such, we find that the Philippine Commission inserted in the
Corporation Law, enacted March 1, 1906, the following provision: "no corporation shall
issue stock or bonds except in exchange for actual cash paid to the corporation or for
property actually received by it at a fair valuation equal to the par value of the stock or
bonds so issued."
 The prohibition against the issuance of shares by corporations except for actual
cash to the par value of the stock to its full equivalent in property is thus enshrined in
both the organic and statutory law of the Philippine; Islands; and it would seem that
our lawmakers could scarely have chosen language more directly suited to secure
absolute equality stockholders with respect to their liability upon stock subscriptions.
Now, if it is unlawful to issue stock otherwise than as stated it is self-evident that a
stipulation such as that now under consideration, in a stock subcription, is illegal, for
this stipulation obligates the subcriber to pay nothing for the shares except as dividends
may accrue upon the stock. In the contingency that dividends are not paid, there is no
liability at all. This is discrimination in favor of the particular subcriber, and hence the
stipulation is unlawful.
 RURAL BANK OF SALINAS, INC., MANUEL SALUD, LUZVIMINDA TRIAS and
FRANCISCO TRIAS
vs.
COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION, MELANIA A.
GUERRERO, LUZ ANDICO, WILHEMINA G. ROSALES, FRANCISCO M. GUERRERO,
JR., and FRANCISCO GUERRERO , SR.
G.R. No. 96674, June 26, 1992

FACTS:

Clemente G. Guerrero, President of the Rural Bank of Salinas, Inc., executed

a Special Power of Attorney in favor of his wife, private respondent Melania Guerrero,
giving and granting the latter full power and authority to sell or otherwise dispose of
and/or mortgage 473 shares of stock of the Bank registered in his name (represented
by the Bank's stock certificates nos. 26, 49 and 65), to execute the proper documents
therefor, and to receive and sign receipts for the dispositions. On February 27, 1980,
and pursuant to said Special Power of Attorney, private respondent Melania Guerrero,
as Attorney-in-Fact, executed a Deed of Assignment for 472 shares out of the 473
shares, in favor of private respondents Luz Andico (457 shares), Wilhelmina Rosales (10
shares) and Francisco Guerrero, Jr. (5 shares).Almost four months later, or two (2) days
before the death of Clemente Guerrero on June 24, 1980, private respondent Melania
Guerrero, pursuant to the same Special Power of Attorney, executed a Deed of
Assignmentfor the remaining one (1) share of stock in favor of private respondent
Francisco Guerrero, Sr.
Subsequently, private respondent Melania Guerrero presented to petitioner Rural
Bank of Salinas the two (2) Deeds of Assignment for registration with a request for the
transfer in the Bank's stock and transfer book of the 473 shares of stock so assigned,
the cancellation of stock certificates in the name of Clemente G. Guerrero, and the
issuance of new stock certificates covering the transferred shares of stocks in the name
of the new owners thereof. However, petitioner Bank denied the request of respondent
Melania Guerrero.

ISSUE:

Will a Mandamus lie against the Rural Bank of Salinas to register in its stock and
transfer book the transfer of 473 shares of stock to private respondents?

RULING:

Yes. Section 5 (b) of P.D. No. 902-A grants to the SEC the original and exclusive
jurisdiction to hear and decide cases involving intracorporate controversies. An intra-
corporate controversy has been defined as one which arises between a stockholder and
the corporation. There is neither distinction, qualification, nor any exception
whatsoever. The case at bar involves shares of stock, their registration, cancellation and
issuances thereof by petitioner Rural Bank of Salinas. It is therefore within the power
of respondent SEC to adjudicate.
A corporation, either by its board, its by-laws, or the act of its officers, cannot
create restrictions in stock transfers, because: Restrictions in the traffic of stock must
have their source in legislative enactment, as the corporation itself cannot create such
impediment. By-laws are intended merely for the protection of the corporation, and
prescribe regulation, not restriction; they are always subject to the charter of the
corporation. The corporation, in the absence of such power, cannot ordinarily inquire
into or pass upon the legality of the transactions by which its stock passes from one
person to another, nor can it question the consideration upon which a sale is based.
Whenever a corporation refuses to transfer and register stock in cases like the
present, mandamus will lie to compel the officers of the corporation to transfer said
stock in the books of the corporation.
 ENRIQUE RAZON
vs.
INTERMEDIATE APPELLATE COURT and VICENTE B. CHUIDIAN, in his capacity
as Administrator of the Estate of the Deceased JUAN T. CHUIDIAN
G .R. No. 74306 March 16, 1992

FACTS:

In his complaint filed on June 29, 1971, and amended on November 16, 1971,
Vicente B. Chuidian prayed that defendants Enrique B. Razon, E. Razon, Inc., Geronimo
Velasco, Francisco de Borja, Jose Francisco, Alfredo B. de Leon, Jr., Gabriel Llamas and
Luis M. de Razon be ordered to deliver certificates of stocks representing the
shareholdings of the deceased Juan T. Chuidian in the E. Razon, Inc. with a prayer for
an order to restrain the defendants from disposing of the said shares of stock, for a writ
of preliminary attachment v. properties of defendants having possession of shares of
stock and for receivership of the properties of defendant corporation.
In their answer filed on June 18, 1973, defendants alleged that all the shares of
stock in the name of stockholders of record of the corporation were fully paid for by
defendant, Razon; that said shares are subject to the agreement between defendants
and incorporators; that the shares of stock were actually owned and remained in the
possession of Razon. Appellees also alleged . . . that neither the late Juan T. Chuidian
nor the appellant had paid any amount whatsoever for the 1,500 shares of stock in
question

ISSUE:

Does petitioner have right over the ownership of the 1,500 shares of stock in E.
Razon, Inc?

RULING:

No. In the instant case, there is no dispute that the questioned 1,500 shares of
stock of E. Razon, Inc. are in the name of the late Juan Chuidian in the books of the
corporation. Moreover, the records show that during his lifetime Chuidian was ellected
member of the Board of Directors of the corporation which clearly shows that he was a
stockholder of the corporation. From the point of view of the corporation, therefore,
Chuidian was the owner of the 1,500 shares of stock. In such a case, the petitioner who
claims ownership over the questioned shares of stock must show that the same were
transferred to him by proving that all the requirements for the effective transfer of shares
of stock in accordance with the corporation's by laws, if any, were followed or in
accordance with the provisions of law.
The petitioner failed in both instances. The petitioner did not present any by-laws
which could show that the 1,500 shares of stock were effectively transferred to him. In
the absence of the corporation's by-laws or rules governing effective transfer of shares
of stock, the provisions of the Corporation Law are made applicable to the instant case.
The law is clear that in order for a transfer of stock certificate to be effective, the
certificate must be properly indorsed and that title to such certificate of stock is vested
in the transferee by the delivery of the duly indorsed certificate of stock. Since the
certificate of stock covering the questioned 1,500 shares of stock registered in the name
of the late Juan Chuidian was never indorsed to the petitioner, the inevitable conclusion
is that the questioned shares of stock belong to Chuidian. The petitioner's asseveration
that he did not require an indorsement of the certificate of stock in view of his intimate
friendship with the late Juan Chuidian cannot overcome the failure to follow the
procedure required by law or the proper conduct of business even among friends. To
reiterate, indorsement of the certificate of stock is a mandatory.
 LUMANLAN, plaintiff
vs.
CURA, et al., defendants
G.R. No. L-39861 March 21, 1934

FACTS:

The appellant is a corporation duly organized under the laws of the Philippine
Islands with its central office in the City of Manila. The plaintiff-appellee Bonifacio
Lumanlan, on July 31, 1922, subscribed for 300 shares of stock of said corporation at
a par value of P50 or a total of P15,000. Julio Valenzuela, Pedro Santos and Francisco
Escoto, creditors of this corporation, filed suit against it in the Court of First Instance
of Manila, case No. 37007, praying that a receiver be appointed, as it appeared that the
corporation at that time had no assets except credits against those who had subscribed
for shares of stock. The court named Tayag as receiver for the purpose of collecting, said
subscriptions. As Bonifacio Lumanlan had only paid P1,500 of the P15,000, par value
of the stock for which he subscribed, the receiver on August 30, 1930, filed a suit against
him in the Court of First Instance of Manila, civil case No. 37492, for the collection of
P15,109, P13,500 of which was the amount he owed for unpaid stock and P1,609 for
loans and advances by the corporation to Lumanlan. In that case Lumanlan was
sentenced to pay the corporation the above-mentioned sum of P15,109 with legal
interest thereon from August 30, 1930, and costs. Lumanlan appealed from this
decision.

ISSUE:

Is Bonifacio Lumanlan entitled to a credit against the judgment in case No. 37492
for P11,840 and an additional sum of P2,000, which is 25 per cent on the principal debt,
as he had to file this suit to collect, or receive credit for the sum which he had paid
Valenzuela for and in place of the corporation, or a total of P13,840?

RULING:

Yes. It appears from the record that during the trial of the case now under
consideration, the Bank of the Philippine Islands appeared in this case as assignee in
the "Involuntary Insolvency of Dizon & Co., Inc. That bank was appointed assignee in
case No. 43065 of the Court of First Instance of the City of Manila on November 28,
1932. It is therefore evident that there are still other creditors of Dizon & Co., Inc. This
being the case that corporation has a right to collect all unpaid stock subscriptions and
any other amounts which may be due it.
It is established doctrine that subscriptions to the capital of a corporation
constitute a fund to which the creditors have a right to look for satisfaction of their
claims and that the assignee in insolvency can maintain an action upon any unpaid
stock subscription in order to realize assets for the payment of its debts. The
Corporation Law clearly recognizes that a stock subscription is a subsisting liability
from the time the subscription is made, since it requires the subscriber to pay interest
quarterly from that date unless he is relieved from such liability by the by-laws of the
corporation. The subscriber is as much bound to pay the amount of the share
subscribed by him as he would be to pay any other debt, and the right of the company
to demand payment is no less incontestable.
 ANTONIO PARDO
vs.
THE HERCULES LUMBER CO., INC., and IGNACIO FERRER
G.R. No. L-22442 August 1, 1924

FACTS:

The petitioner, Antonio Pardo, a stockholder in the Hercules Lumber Company,

Inc., one of the respondents herein, seeks by this original proceeding in the Supreme
Court to obtain a writ of mandamus to compel the respondents to permit the plaintiff
and his duly authorized agent and representative to examine the records and business
transactions of said company. To this petition the respondents interposed an answer,
in which, after admitting certain allegations of the petition, the respondents set forth
the facts upon which they mainly rely as a defense to the petition. To this answer the
petitioner in turn interposed a demurrer, and the cause is now before us for
determination of the issue thus presented.

ISSUE:

Does the respondent have the right to deny inspection request by petitioner?

RULING:

Yes. The general right given by the statute may not be lawfully abridged to the
extent attempted in this resolution. It may be admitted that the officials in charge of a
corporation may deny inspection when sought at unusual hours or under other
improper conditions; but neither the executive officers nor the board of directors have
the power to deprive a stockholder of the right altogether. A by-law unduly restricting
the right of inspection is undoubtedly invalid. Authorities to this effect are too numerous
and direct to require extended comment. Under a statute similar to our own it has been
held that the statutory right of inspection is not affected by the adoption by the board
of directors of a resolution providing for the closing of transfer books thirty days before
an election.
It will be noted that our statute declares that the right of inspection can be
exercised "at reasonable hours." This means at reasonable hours on business days
throughout the year, and not merely during some arbitrary period of a few days chosen
by the directors.
In addition to relying upon the by-law, to which reference is above made, the
answer of the respondents calls in question the motive which is supposed to prompt the
petitioner to make inspection; and in this connection it is alleged that the information
which the petitioner seeks is desired for ulterior purposes in connection with a
competitive firm with which the petitioner is alleged to be connected. It is also insisted
that one of the purposes of the petitioner is to obtain evidence preparatory to the
institution of an action which he means to bring against the corporation by reason of a
contract of employment which once existed between the corporation and himself. These
suggestions are entirely apart from the issue, as, generally speaking, the motive of the
shareholder exercising the right is immaterial.
 REPUBLIC OF THE PHILIPPINES
vs.
SECURITY CREDIT AND ACCEPTANCE CORPORATION, ROSENDO T. RESUELLO,
PABLO TANJUTCO, ARTURO SORIANO, RUBEN BELTRAN, BIENVENIDO V. ZAPA,
PILAR G. RESUELLO, RICARDO D. BALATBAT, JOSE SEBASTIAN and VITO
TANJUTCO JR.
G.R. No. L-20583. January 23, 1967

FACTS:

The Articles of Incorporation of defendant corporation were registered with the

Securities and Exchange Commission on March 27, 1961. Thereafter, the Board of
Directors of the corporation adopted a set of by-laws which were filed with said
Commission on April 5, 1961
On September 19, 1961, the Superintendent of Banks of the Central Bank of the
Philippines asked its legal counsel an opinion on whether or not said corporation is a
banking institution, within the purview of Republic Act No. 337; that, acting upon this
request, on October 11, 1961, said legal counsel rendered an opinion resolving the query
in the affirmative
On March 9, 1961, the corporation had applied with the Securities and Exchange
Commission for the registration and licensing of its securities under the Securities Act.
However, SCAC’s registration of its Articles of Incorporation was denied on the ground
that it has not complied with the requirements under the General Banking Act (RA No.
337). Later, a Search Warrant was issued against SCAC where documents and records
relative to its business operation were seized.
Even when SCAC was duly advised of the findings, SCAC and its BOD and
Officers still continued operations prompting the Solicitor General to file a quo warranto
proceedings for the dissolution of SCAC.

ISSUE:

Was SCAC illegally engaged in the business of banking?

RULING:

Yes. In dissolving SCAC, the Court held that the corporation was indeed engaged
in the business of banking without first securing the administrative authority required
by RA No. 337.
Although, admittedly, SCAC has not secured the requisite authority to engage in
banking, defendants deny that its transactions partake of the nature of banking
operations. Note however that, in consequence of their propaganda campaign, a total of
59,463 savings account deposits have been made by the public with SCAC and its 74
branches, with an aggregate deposit of P1,689,136.74, which has been lent out to such
persons as SCAC deemed suitable. It is clear that these transactions partake of the
nature of banking, as the term is used in Section 2 of RA No. 337. Indeed, a bank has
been defined as: A moneyed institute founded to facilitate the borrowing, lending, and
safe-keeping of money and to deal in notes, bills of exchange, and credits; an investment
company which loans out the money of its customers, collects the interests, and charges
a commission to both lender and borrower is a bank; any person engaged in the
business carried on by banks of deposit, of discount, or of circulation is doing a banking
business, although but one of these functions is exercised.
The illegal transactions thus undertaken by SCAC to warrant its dissolution is
apparent from the fact that the foregoing misuser of the corporate funds and franchise
affects the essence of its business, that it is willful and has been repeated 59,643 times,
and that its continuance inflicts injury upon the public, owing to the number of persons
affected thereby.
 MAMBULAO LUMBER COMPANY
vs.
PHILIPPINE NATIONAL BANK
GR No. L-22973 30 January 1968

FACTS:

The plaintiff applied for an industrial loan with interest with the PNB. To secure
the payment of the loan, the plaintiff mortgaged to defendant PNB a parcel of land,
together with the buildings and improvements existing thereon as well as various
sawmill equipment, rolling unit and other fixed assets of the plaintiff. However, the
plaintiff failed to pay the amortizations on the amounts released to and received by it.
Repeated demands were made upon the plaintiff to pay its obligation but it failed
or otherwise refused to do so. Upon inspection and verification made by employees of
the PNB, it was found that the plaintiff had already stopped operation about the end of
1957 or early part of 1958. Thus, PNB requested for the foreclosure of the real estate
mortgage as well as the chattel mortgage.

ISSUE:

Was petitioner’s foreclosure of the mortgage tenable?

RULING:

No. It is clear that there was no further necessity to foreclose the mortgage of
herein appellant's chattels since the obligation has already been paid for. On this ground
alone, it may be declared that the sale of appellant's chattels, illegal and void. The Court
took into consideration the fact that the PNB must have been led to believe that the
stipulated 10% of the unpaid loan for attorney's fees in the real estate mortgage was
legally maintainable, and in accordance with such belief, herein appellee bank insisted
that the proceeds of the sale of appellant's real property was deficient to liquidate the
latter's total indebtedness. Be that as it may, however, still the subsequent sale of herein
appellant's chattels illegal and objectionable on other grounds. The parties have agreed
that in case of foreclosure, the sale should be made elsewhere not necessarily where the
properties are located. This stipulation is allowed under the law which provides for the
general rule. However, the sale was made in the place where the properties are situated.
A clear violation of the agreement of the parties. Thus, the foreclosure is not tenable.
 THE ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR OF DAVAO, INC.
vs.
THE LAND REGISTRATION COMMISSION and THE REGISTER OF DEEDS OF
DAVAO CITY,
G.R. No. L-8451 December 20, 1957

FACTS:
On October 4, 1954, Mateo L. Rodis, a Filipino citizen and resident of the City of
Davao, executed a deed of sale of a parcel of land located in the same city covered by
Transfer Certificate No. 2263, in favor of the Roman Catholic Apostolic Administrator of
Davao Inc.,(RCADI) is corporation sole organized and existing in accordance with
Philippine Laws, with Msgr. Clovis Thibault, a Canadian citizen, as actual incumbent.
Registry of Deeds Davao (RD) required RCADI to submit affidavit declaring that 60% of
its members were Filipino Citizens. As the RD entertained some doubts as to the
registerability of the deed of sale, the matter was referred to the Land Registration
Commissioner (LRC) en consulta for resolution. LRC hold that pursuant to provisions of
sections 1 and 5 of Article XII of the Philippine Constitution, RCADI is not qualified to
acquire land in the Philippines in the absence of proof that at leat 60% of the capital,
properties or assets of the RCADI is actually owned or controlled by Filipino citizens.
LRC also denied the registration of the Deed of Sale in the absence of proof of compliance
with such requisite. RCADI’s Motion for Reconsideration was denied. Aggrieved, the
latter filed a petition for mandamus.

ISSUE:
Was the Universal Roman Catholic Apostolic Church in the Philippines qualified to
acquire private agricultural lands in the Philippines pursuant to the provisions of Article
XIII of the Constitution?

RULING:
Yes. RCADI is qualified. While it is true and We have to concede that in the
profession of their faith, the Roman Pontiff is the supreme head; that in the religious
matters, in the exercise of their belief, the Catholic congregation of the faithful
throughout the world seeks the guidance and direction of their Spiritual Father in the
Vatican, yet it cannot be said that there is a merger of personalities resultant therein.
Neither can it be said that the political and civil rights of the faithful, inherent or
acquired under the laws of their country, are affected by that relationship with the Pope.
The fact that the Roman Catholic Church in almost every country springs from that
society that saw its beginning in Europe and the fact that the clergy of this faith derive
their authorities and receive orders from the Holy See do not give or bestow the
citizenship of the Pope upon these branches. To allow theory that the Roman Catholic
Churches all over the world follow the citizenship of their Supreme Head, the Pontifical
Father, would lead to the absurdity of finding the citizens of a country who embrace the
Catholic faith and become members of that religious society, likewise citizens of the
Vatican or of Italy. And this is more so if We consider that the Pope himself may be an
Italian or national of any other country of the world. The same thing be said with regards
to the nationality or citizenship of the corporation sole created under the laws of the
Philippines, which is not altered by the change of citizenship of the incumbent bishops
or head of said corporation sole.
Although a branch of the Universal Roman Catholic Apostolic Church, every
Roman Catholic Church in different countries, if it exercises its mission and is lawfully
incorporated in accordance with the laws of the country where it is located, is considered
an entity or person with all the rights and privileges granted to such artificial being
under the laws of that country, separate and distinct from the personality of the Roman
Pontiff or the Holy See, without prejudice to its religious relations with the latter which
are governed by the Canon Law or their rules and regulations.
It has been shown before that: (1) the corporation sole, unlike the ordinary
corporations which are formed by no less than 5 incorporators, is composed of only one
persons, usually the head or bishop of the diocese, a unit which is not subject to
expansion for the purpose of determining any percentage whatsoever; (2) the corporation
sole is only the administrator and not the owner of the temporalities located in the
territory comprised by said corporation sole; (3) such temporalities are administered for
and on behalf of the faithful residing in the diocese or territory of the corporation sole;
and (4) the latter, as such, has no nationality and the citizenship of the incumbent
Ordinary has nothing to do with the operation, management or administration of the
corporation sole, nor effects the citizenship of the faithful connected with their respective
dioceses or corporation sole.
 SCHMID & OBERLY, INC.
vs.
RJL MARTINEZ FISHING CORPORATION
G.R. No. 75198 October 18, 1988

FACTS:

RJL MARTINEZ is engaged in the business of deep-sea fishing. The transaction,

which gave rise to the present controversy, involves twelve (12) "Nagata"-brand
generators. Schmid gave RJL its Quotation dated August 19, 1975 stipulating that
payment would be made by confirming an irrevocable letter of credit in favor of NAGATA
CO . Agreeing with the terms of the Quotation, RJL opened a letter of credit. SCHMID
transmitted to NAGATA CO. an order for the twelve (12) generators to be shipped directly
to RJL MARTINEZ. NAGATA CO. thereafter sent RJL MARTINEZ the bill of lading and
its own invoice and, in accordance with the order, shipped the generators directly to
RJL MARTINEZ.
All generators subject of the two transactions burned out after continuous use.
SCHMID, upon information from RJL, brought the matter to the attention of NAGATA
CO. In July 1976, NAGATA CO. sent two technical representatives who made an ocular
inspection and conducted tests on some of the burned out generators. The tests
revealed that the generators were overrated.
As indicated both in the quotation and in the invoice, the capacity of a generator
was supposed to be 5 KVA, however, it turned out that the actual capacity was only 4
KVA. The Japanese technicians advised RJL MARTINEZ to ship three (3) generators to
Japan, which the company did.

ISSUE:

Was the transaction between the parties an indent, not sale?

RULING:

Yes. There is no statutory definition of "indent" in this jurisdiction. However, the

Rules and Regulations to Implement Presidential Decree No. 1789 states that foreign
firm which does business through the middlemen acting in their own names, such as
indentors, commercial brokers or commission merchants, shall not be deemed doing
business in the Philippines. But such indentors, commercial brokers or commission
merchants shall be the ones deemed to be doing business in the Philippines.
Therefore, an indentor is a middleman in the same class as commercial brokers
and commission merchants. It would appear that there are three parties to an indent
transaction, namely, the buyer, the indentor, and the supplier who is usually a non-
resident manufacturer residing in the country where the goods are to be bought. An
indentor may therefore be best described as one who, for compensation, acts as a
middleman in bringing about a purchase and sale of goods between a foreign supplier
and a local purchaser.
In the case at bar, the admissions of the parties and the facts appearing on
record more than suffice to warrant the conclusion that SCHMID was not a vendor, but
was merely an indentor, in the questioned transaction. The afore-quoted penal provision
in the Corporation Law finds no application to SCHMID and its officers and employees
relative to the transactions in the instant case.
 An indentor, acting in his own name, is not, however, covered by the above-
quoted provision. In fact, the provision of the Rules and Regulations implementing the
Omnibus Investments Code quoted above, which was copied from the Rules
implementing Republic Act No. 5455, recognizes the distinct role of an indentor, such
that when a foreign corporation does business through such indentor, the foreign
corporation is not deemed doing business in the Philippines. Not being the vendor,
SCHMID cannot be held liable for the implied warranty for hidden defects under the
Civil Code.
 ERIKS PTE. LTD.
vs.
COURT OF APPEALS
G.R. No. 118843 February 6, 1997

FACTS:

Petitioner is a non-resident foreign corporation engaged in the manufacture and

sale of elements used in sealing pumps, valves and pipes for industrial purposes, valves
and control equipment used for industrial fluid control and PVC pipes and fittings for
industrial uses.
On various dates, private respondent Delfin Enriquez, Jr., doing business under
the name and style of Delrene EB Controls Center and/or EB Karmine Commercial,
ordered and received from petitioner various elements used in sealing pumps, valves,
pipes and control equipment, PVC pipes and fittings.
The transfers of goods were perfected in Singapore, for private respondent's
account, F.O.B. Singapore, with a 90-day credit term. Subsequently, demands were
made by petitioner upon private respondent to settle his account, but the latter
failed/refused to do so.

ISSUE:

May Petitioner Corporation maintain an action in Philippine courts considering

that it has no license to do business in the country?

RULING:

Yes. The resolution of this issue depends on whether petitioner's business with
private respondent may be treated as isolated transactions. Granting that there is no
distributorship agreement between herein parties, yet by the mere fact that plaintiff,
each time that the defendant posts an order delivers the items as evidenced by the
several invoices and receipts of various dates only indicates that plaintiff has the
intention and desire to repeat the said transaction in the future in pursuit of its ordinary
business. Furthermore, "and if the corporation is doing that for which it was created,
the amount or volume of the business done is immaterial and a single act of that
character may constitute doing business.
More than the sheer number of transactions entered into, a clear and
unmistakable intention on the part of petitioner to continue the body of its business in
the Philippines is more than apparent. As alleged in its complaint, it is engaged in the
manufacture and sale of elements used in sealing pumps, valves, and pipes for
industrial purposes, valves and control equipment used for industrial fluid control and
PVC pipes and fittings for industrial use. Thus, the sale by petitioner of the items
covered by the receipts, which are part and parcel of its main product line, was actually
carried out in the progressive prosecution of commercial gain and the pursuit of the
purpose and object of its business, pure and simple.
Further, its grant and extension of 90-day credit terms to private respondent for
every purchase made, unarguably shows an intention to continue transacting with
private respondent, since in the usual course of commercial transactions, credit is
extended only to customers in good standing or to those on whom there is an intention
to maintain long-term relationship.
 This being so, the existence of a distributorship agreement between the parties,
as alleged but not proven by private respondent, would, if duly established by competent
evidence, be merely corroborative, and failure to sufficiently prove said allegation will
not significantly affect the finding of the courts below.
Thus, the court holds that the series of transactions in question could not have
been isolated or casual transactions. What is determinative of "doing business" is not
really the number or the quantity of the transactions, but more importantly, the
intention of an entity to continue the body of its business in the country. The number
and quantity are merely evidence of such intention.
 PHILIPPINE COLUMBIA ENTERPRISES CO.
vs.
LANTIN
G.R. No.L-29072 June 7, 1971

FACTS:

Private respondent Katoh & Co.,Ltd, alleged in its civil complaint that it is a
corporation duly organized under the laws of Japan, with head office in Tokyo, Japan.
The complaint alleged ten (10) causes of action against the defendants Philippines
Columbia Enterprises Co., with principal place of business in Manila, and the general
partners, thereof, Rufino Dy Chin and Fermin Sy, who reside in Manila.
These ten(10) causes of action are for the collection of payment of ten(10) different
shipments of angle bars, mild steel bars, and cold rolled steel sheets allegedly ordered
in May, July, October and November, 1966 by the defendants from the plaintiff which
plaintiff had duly shipped and defendants duly received but which defendant refused to
pay.
The complaint does not allege that plaintiff has secured a license to transact
business in the Philippines but its alleges that it” has not been and is not engaged in
business in the Philippines and that the transactions averred in this complaint were
exports made and consummated in Tokyo, Japan in pursuance of international trade.”

ISSUE:

Were plaintiff’s allegations in its complaint constitute by themselves an

admission that it is transacting business in the Philippines?

RULING:

No. An examination of complaint will show that the same expressly avers that the
transactions upon which respondent plaintiff is suing were” consummated in Tokyo”
and hence, not in the Philippines. Petitioners- defendant’s assertion that the contracts
were made in the Philippines squarely contradicts the averments in the complaint. And
the basic and well-known rule is that whether a cause of action is pleaded or not must
be ascertained solely upon the face of the complaint.
Since the petitioner’s averment that the plaintiff’s transactions were made in the
Philippines, being contradictory of the complaint, can not be set up in motion to dismiss
for lack of cause of action, but must be pleaded in an answer, any reception of evidence
on the point would merely duplicate the trial on the merits, and should be deferred.
Therefore, the court below committed no abuse of discretion amounting to excess
of jurisdiction in resolving to defer action on motion to dismiss. The last objection of the
petitioners to the deferment order is that if they file a counterclaim in their answer
against respondent foreign corporation, they would be recognizing the legal capacity of
said corporation which they are precisely questioning. This fear is without legal basis,
for actions by foreign corporations are governed by rules different from those in actions
against them.
A counterclaim partakes of the nature of a complaint and/or cause of action
against the plaintiff, so that if the petitioner’s-defendants should file a counterclaim, the
private respondent-plaintiff Katoh & Co.,Ltd., would not be maintaining a suit and,
consequently, Section 69 of the Corporation Law would not apply.
 HERNANI N. FABIA
vs.
COURT OF APPEALS
G.R. No. 132684 20 August 2000

FACTS:

Fabia was the President of private respondent MTCP, a domestic corporation

engaged in providing maritime courses and seminars to prospective overseas contract
workers and seamen. He was likewise a Director and stockholder thereof. MTCP filed an
affidavit-complaint for estafa against Hernani N. Fabia alleging that on various
occasions Fabia drew cash advances from MTCP, covered by cash vouchers which he
failed to liquidate despite repeated demands. Fabia’s defense is that such were in the
nature of simple loans that had already been liquidated and paid. The Office of the City
Prosecutor of Manila dismissed the complaint for lack of jurisdiction for the reason that
the controversy pertained to the relationship between a corporation and a former officer
it was the Securities and Exchange Commission (SEC) which had original and exclusive
jurisdiction over the case.

ISSUE:

Does SEC have jurisdiction over the case?

RULING:

Yes. The jurisdiction of the SEC to "intra-corporate disputes" defined as any act
or omission of the Board of Directors/Trustees of corporations, or of partnerships, or of
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. Petitioner was the President
as well as a Director and stockholder in private respondent MTCP, who was charged
with the misappropriation or diversion of corporate funds after having failed to liquidate
the amount he had received as cash advances from the company. The charge against
petitioner is for estafa, an offense punishable under The Revised Penal Code (RPC), and
prosecution for the offense is presently before the regular courts. However, jurisdiction
is determined not from the law upon which the cause of action is based, nor the type of
proceedings initiated, but rather, it is gleaned from the allegations stated in the
complaint. It is evident from the complaint that the acts charged are 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. This sufficiently removes the action from the jurisdiction of the
regular courts, and transposes it into an intra-corporate controversy within the
jurisdiction of the SEC. The fact that a complaint for estafa, a felony punishable under
the RPC, has been filed against petitioner does not negate and nullify the intra-corporate
nature of the cause of action, nor does it transform the controversy from intra-corporate
to a criminal one. However, in conformity with RA 8799, The Securities Regulation
Code, amending PD 902-A, which has effectively transferred the jurisdiction of the
Securities and Exchange Commission over all cases enumerated under Sec. 5 of PD
902-A to the courts of general jurisdiction or the appropriate Regional Trial Courts.
 WESTERN INSTITUTE OF TECHNOLOGY, INC.
vs.
SALAS
G.R. No. 113032 August 21, 1997

FACTS:

Private respondents Ricardo T. Salas, Salvador T. Salas, Soledad Salas-Tubilleja,

Antonio S. Salas, and Richard S. Salas, belonging to the same family, are the majority
and controlling members of the Board of Trustees of Western Institute of Technology,
Inc., a stock corporation engaged in the operation, among others, of an educational
institution. According to petitioners, the minority stockholders of WIT, a Special Board
Meeting was held. In attendance were other members of the Board including one of the
petitioners Reginald Villasis. In said meeting, the Board of Trustees passed Resolution
No. 48, s. 1986, granting monthly compensation to the private respondents as corporate
officers retroactive June 1, 1985. A few years later, petitioners Homero Villasis, Prestod
Villasis, Reginald Villasis and Dimas Enriquez filed an affidavit-complaint against
private respondents before the Office of the City Prosecutor, as a result of which two (2)
separate criminal informations, one for falsification of a public document and the other
for estafa, were filed before the Regional Trial Court. The charge for falsification of public
document was anchored on the private respondents' submission of WIT's income
statement for the fiscal year 1985-1986 with the Securities and Exchange Commission
reflecting therein 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.
Thereafter, trial for the two criminal cases, was consolidated. After a full-blown hearing,
Judge Porfirio Parian handed down a verdict of acquittal on both counts without
imposing any civil liability against the accused therein. Petitioners filed a Motion for
Reconsideration of the civil aspect of the RTC Decision which was, however, denied in
an Order.

ISSUE:

Was the case for derivative suit correctly filed in the Regional Trial Court?

RULING:

No. Granting, for purposes of discussion, that this is a derivative suit as insisted
by petitioners, which it is not, the same is outrightly dismissible for having been
wrongfully filed in the regular court devoid of any jurisdiction to entertain the complaint.
The ease should have been filed with the Securities and Exchange Commission (SEC)
which exercises original and exclusive jurisdiction over derivative suits, they being intra-
corporate disputes, per Section 5 (b) of P.D. No. 902-A: “In addition to the regulatory
and adjudicative functions of the Securities and Exchange Commission over
corporations, partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving: Controversies arising out of intra-
corporate or partnership relations, between and among stockholders, members, or
associates; between any or all of them and the corporation, partnership or association
of which they are stockholders, members or 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.
 JOSE MARCEL PANLILIO, ERLINDA PANLILIO, NICOLE MORRIS and MARIO T.
CRISTOBAL
vs.
REGIONAL TRIAL COURT, BRANCH 51, CITY OF MANILA, represented by HON.
PRESIDING JUDGE ANTONIO M. ROSALES; PEOPLE OF THE PHILIPPINES; and
the SOCIAL SECURITY SYSTEM
G.R. No. 173846. February 2, 2011

FACTS:

On October 15, 2004, Jose Marcel Panlilio, Erlinda Panlilio, Nicole Morris and
Marlo Cristobal (petitioners), as corporate officers of Silahis International Hotel, Inc.
(SIHI), filed with the Regional Trial Court (RTC) of Manila, Branch 24, a petition for
Suspension of Payments and Rehabilitation4 in SEC Corp. Case No. 04-111180.
On October 18, 2004, the RTC of Manila, Branch 24, issued an Orderstaying all claims
against SIHI upon finding the petition sufficient in form and substance.
The Court shares the view of the private complainants and the SSS that the said
stay order does not include the prosecution of criminal offenses. Precisely, the law
"criminalizes" the non-remittance of SSS contributions by an employer to protect the
employees from unscrupulous employers. Clearly, in these cases, public interest
requires that the said criminal acts be immediately investigated and prosecuted for the
protection of society.

ISSUE:

Was the suspension of "all claims" as an incident to a corporate rehabilitation

also contemplate the suspension of criminal charges filed against the corporate officers
of the distressed corporation?

RULING:

No. The prosecution of the officers of the corporation has no bearing on the
pending rehabilitation of the corporation, especially since they are charged in their
individual capacities. 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. It bears to stress that the
rehabilitation receiver is not charged to defend the officers of the corporation. If there is
anything that the rehabilitation receiver might be remotely interested in is whether the
court also rules that petitioners are civilly liable. Such a scenario, however, is not a
reason to suspend the criminal proceedings, because as aptly discussed in Rosario,
should the court prosecuting the officers of the corporation find that an award or
indemnification is warranted, such award would fall under the category of claims, the
execution of which would be subject to the stay order issued by the rehabilitation court.
The penal sanctions as a consequence of violation of the SSS law, in relation to the
revised penal code can therefore be implemented if petitioners are found guilty after
trial.
However, any civil indemnity awarded as a result of their conviction would be
subject to the stay order issued by the rehabilitation court. Only to this extent can the
order of suspension be considered obligatory upon any court, tribunal, branch or body
where there are pending actions for claims against the distressed corporation.
 PEOPLE OF THE PHILIPPINES, vs. ELVIRA PETRALBA,
RAYMOND HOUSCHT, JEFF GONZALES, and RICHARD ALCANTARA
G.R. No. 137512 September 27, 2004

FACTS:
Appellant and her co-accused Raymond Houscht, Jeff Gonzales and Richard
Alcantara are charged in three separate Informations.
Elvira Petralba introduced herself as a representative of Lansdale Enterprises
Limited showing the doctor her brochures (Exhibit B) and told her the Lansdale has an
office in Hongkong with its principal office in Tokyo. Accused gave Dr. Bailey some
documents one of which is the customers agreement (Exhibit C). Dr. Bailey gave the
accused a check worth $6,000.00 as her starting capital for foreign exchange trading to
be handled by Mr. Richard Alcantara, the manager of Lansdale.
Further, it was the accused Petralba assured Bailey that the business was
protected by a foreign company in the amount of $4,000,000.00. Four (4) persons,
namely, Petralba, the manager, the assistant manager and another person were present.
Petralba signed a receipt (Exhibit A) wherein her confirmatory signature (Exhibit A-2)
appears.
Then Bailey demanded partial return of her investment from accused Petralba
but the latter failed to do so. Bailey contacted the office of Lansdale, its officers including
the manager and Petralba several times but these persons were always out. Finally,
Bailey went to the Securities and Exchange Commission (SEC), filed a complaint and
executed an affidavit (Exhibit D, D-1) before Atty. Cunanan (Exhibit D-2), the director,
the original copy of which is with the SEC. She likewise submitted the original copy of
the receipt with the SEC. In addition, Dr. Bailey and Elvira Petralba knew each other as
early as the first week of June 1991. Since accused wanted to see her about foreign
currency trading, Bailey invited her to her office in July 1991. Petralba told her that she
represents REATA, an investment company in foreign exchange.
Dr. Bailey was in this business before in the United States. The company also
assumed the responsibility in case of loss, hence the investment was protected. Bailey
gave the accused the check although the payee was Lansdale which traded her money
without her consent. Out of the amount in the check only $300 was returned to her by
the cashier of Lansdale.
During the first week of trading or on July 8, 1991, Bailey signed the instruction of
purchase because she was asked to sign it. Bailey also signed other instructions of
purchase but before she signed them she read all of them. She also signed a form letter
dated August 15, 1991 which she was asked to fill up as the company was changing its
name to Tokyo Commonwealth Limited.
Bailey read the contract and the trading rules of Lansdale before she signed it.
She understood all the stipulations contained therein. There is a provision in paragraph
ten (10) thereof stating the risk of loss in trading but accused assured her that the
company had a reserve fund in the amount of $14 million as investors protection fund.
When Bailey signed the check for investment, the persons present were Alcantara,
Petralba and two others. Alcantara introduced himself as the Assistant Vice-President
of Lansdale. The customers agreement was signed by Bailey marked as Exhibit A and
the receipt as Exhibit E.
It was Atty. Rosalinda San Fontanosas of SECs legal department who investigated
Lansdale Enterprises in connection with the complaint of Dr. Leoni Bailey after a certain
Felix Chan in their office resigned.
On July 2, 1991, all the accused were not yet licensed as traders when they presented
to Dr. Bailey the investment proposal except Mr. Alcantara who has a license for the
period from January 15, 1991 to December 31, 1991.
Lansdale Enterprises Ltd. has not been registered with the Securities and Exchange
Commission (SEC) per first indorsement dated July 25, 1994 (Exhibits F, F-1 and F-2)
and another indorsement dated July 20, 1994
During the date of the hearing, it was only the appellant who was arraigned where
she pleaded not guilty to the charges against her under the informations, and joint trial
ensued thereafter. However, all her co-accused remain at large.

ISSUE:
Was Elvira guilty of the crime charged?

RULING:

No. The transaction that transpired between complainant and her employer
Lansdale was a mere foreign exchange trading which is not covered by the term
securities of B.P. Blg. 178, the prevailing law at the time of the commission of the alleged
crimes.

The foreign exchange trading transaction that transpired between complainant

and Lansdale appears to be an investment contract or participation in a profit sharing
agreement that falls within the definition of the law. When the investor is relatively
uninformed and turns over his money to others, essentially depending upon their
representations and their honesty and skill in managing it, the transaction generally is
considered to be an investment contract. The touchtone is the presence of an investment
in a common venture premised on a reasonable expectation of profits to be derived from
the entrepreneurial or managerial efforts of others. Dr. Bailey testified on this matter
but no contract was submitted by the prosecution. The prosecution failed to prove by
sufficient evidence that indeed, the amount delivered by Dr. Bailey to Lansdale, through
appellant, is an investment contemplated by the Revised Securities Act and not a mere
act of buying and selling foreign exchange. The Customers Agreement, marked as
Exhibit C during the hearing of the case, was not offered in evidence by the prosecution.
The fundamental rule is that upon him who alleges rests the burden of proof.
No less than the Constitution mandates that an accused shall be presumed
innocent until the contrary is proved. Section 14 (2), Article III of the Constitution
provides that in criminal cases, the quantum of evidence required to overturn this
presumption is proof beyond reasonable doubt, which, under Section 2, Rule 133 of the
Revised Rules of Court, is that proof which produces moral certainty in an unprejudiced
mind.
Hence, the prosecution failed to prove the guilt of the accused.
 PHILIPPINE ASSOCIATION OF STOCK TRANSFER AND REGISTRY AGENCIES, INC.,
vs.
THE HONORABLE COURT OF APPEALS; THE HONORABLE SECURITIES AND EXCHANGE
COMMISSION; AND SEC CHAIRMAN PERFECTO R. YASAY, JR.
G.R. No. 137321 October 15, 2007

FACTS:
Petitioner Philippine Association of Stock Transfer and Registry Agencies,
Inc.(PASTRA) is an association of stock transfer agents principally engaged in the
registration of stock transfers in the stock-and-transfer book of corporations.
On May 10, 1996, petitioner’s Board of Directors unanimously approved a resolution
allowing its members to increase the transfer processing fee they charge their clients.
After a dialogue with petitioner, public respondent Securities and Exchange
Commission (SEC) allowed petitioner to impose the P75 per certificate transfer fee
and P20 per certificate cancellation fee effective July 1, 1996. But, approval of the
additional increase of the transfer fees to P100 per certificate effective October 1, 1996,
was withheld until after a public hearing. The SEC issued a letter-authorization to this
effect.
The Philippine Association of Securities Brokers and Dealers, Inc. registered its
objection to the measure advanced by petitioner and requested the SEC to defer its
implementation. On June 27, 1996, the SEC advised petitioner to hold in abeyance the
implementation of the increases until the matter was cleared with all the parties
concerned. Petitioner nonetheless proceeded with the implementation of the increased
fees. Petitioner’s Contention: that the SEC cannot restrict petitioner’s members from
increasing the transfer and processing fees they charge their clients because there is no
specific law, rule or regulation authorizing it. Section 40 of the then Revised Securities
Act, according to petitioner, only lays down the general powers of the SEC to regulate
and supervise the corporate activities of organizations related to or connected with the
securities market like petitioner. It could not be interpreted to justify the SEC’s
unjustified interference with petitioner’s decision to increase its transfer fees and impose
processing fees, especially since the decision involved a management prerogative and
was intended to protect the viability of petitioner’s members.
On July 8, 1996, the SEC issued Order No. 104, series of 1996, enjoining petitioner
from imposing the new fees (pursuant to Sec. 40 of the Revised Securities Act) and to
show a cause why no administrative sanctions should be imposed upon the board and
officers of PASTRA. Subsequently on July 11, 1996, after hearing SEC ordered petitioner
to pay a basic fine of P5,000 and a daily fine of P500 for continuing violations; it is
hereby ordered to immediately cease and desist from imposing the new rates for
issuance and cancellation of stock certificates, until further orders from this
Commission.
The Court of Appeals affirmed such decision. Hence this petition.

ISSUE:
Did the SEC acted with grave abuse of discretion or lack or excess of jurisdiction
in issuing the controverted Orders of July 8 and 11, 1996?

RULING:
No. The Court notes that before its repeal, Section 47 of The Revised Securities
Act clearly gave the SEC the power to enjoin the acts or practices of securities-related
organizations even without first conducting a hearing if, upon proper investigation or
verification, the SEC is of the opinion that there exists the possibility that the act or
practice may cause grave or irreparable injury to the investing public, if left
unrestrained. Section 47 clearly provided,
Hence, the section enforces the power of general supervision of the SEC under Section
40 of the then Revised Securities Act.
As a securities-related organization under the jurisdiction and supervision of the
SEC by virtue of Section 40 of The Revised Securities Act and Section 3 of Presidential
Decree No. 902-A,10 petitioner was under the obligation to comply with the July 8, 1996
Order. Defiance of the order was subject to administrative sanctions provided in Section
4611 of The Revised Securities Act.
Petitioner was fined for violating the SEC’s cease-and-desist order which the SEC
had issued to protect the interest of the investing public, and not simply for exercising
its judgment in the manner it deems appropriate for its business.
The regulatory and supervisory powers of the Commission under Section 40 of
the then Revised Securities Act, in our view, were broad enough to include the power to
regulate petitioner’s fees. Indeed, Section 47 gave the Commission the power to
enjoin motu proprio any act or practice of petitioner which could cause grave or
irreparable injury or prejudice to the investing public. The intentional omission in the
law of any qualification as to what acts or practices are subject to the control and
supervision of the SEC under Section 47 confirms the broad extent of the SEC’s
regulatory powers over the operations of securities-related organizations like petitioner.