G.R. No. 179047, 11 March 2015
FACTS:
On April 25, 1996, SBGCCI and UIGDC entered into a Development Agreement. UIGDC agreed to “finance, construct and develop the [golf course], for and in consideration of the payment by [SBGCCI] of its 1,530 (SBGCCI) shares of stock.”
Upon SBGCCI’s application, the Securities and Exchange Commission issued an Order for the Registration of 3,000 no par value shares of SBGCCI on July 8, 1996. SBGCCI was issued a Certificate of Permit to Offer Securities for Sale to the Public of its 1,530 no par value proprietary shares on August 9, 1996. The shares were sold at P425,000.00 per share. SBGCCI would use the proceeds of the sale of securities to pay UIGDC for the development of the golf course.
Complainants Regina Filart (Filart) and Margarita Villareal (Villareal) informed the Securities and Exchange Commission that they had been asking UIGDC for the refund of their payment for their SBGCCI shares. UIGDC did not act on their requests. They alleged that they purchased the shares in 1996 based on the promise of SBGCCI and UIGDC to deliver what has been agreed upon by the parties.
Villareal and Filart also claimed that despite SBGCCI’s and UIGDC’s failure to deliver the promised amenities, they started to charge them monthly dues. They also never received any billing statement from them until they were sent a demand notice to pay the alleged back dues. They were threatened that their shares would be auctioned off if their alleged back dues would not be paid.1Villareal and Filart prayed for relief from the “terrible situation [they found themselves] in.” They also prayed that their letter be accepted “as a formal complaint against Universal International Group Development Corporation for breach of promise/contract with its investors who put in hard-earned money believing that they would deliver what their brochures promised to deliver.”
The Corporation Finance Department found that Filart and Villareal invested in the golf course because of SBGCCI and UIGDC’s representation that a 27-hole, world-class golf course would be developed. It also found that SBGCCI and UIGDC failed to comply with their commitments and representations as stated in their prospectus so the Corporation Finance Department ordered the return of the purchase price of shares.
SBGCCI and UIGDC filed a Petition for Review35 of the Corporation Finance Department’s Order before the Securities and Exchange Commission. SBGCCI and UIGDC assailed the Corporation Finance Department’s and the Securities and Exchange Commission’s authority to order a refund of investments. They also assailed its jurisdiction over the case, which according to SBGCCI and UIGDC involved an intra-corporate dispute.
ISSUE:
Who between the SEC and RTC has jurisdiction over the case.
RULING:
Section 5.2 of Republic Act No. 8799 provides:
The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial Court 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 pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until fully disposed.
Hence, actions pertaining to intra-corporate disputes should be filed directly before designated Regional Trial Courts. Intra-corporate disputes brought before other courts or tribunals are dismissible for lack of jurisdiction.
This case involves corporate rights and obligations. The nature of the action — whether it involves corporate rights and obligations — is determined by the allegations and reliefs in the complaint.
Villareal and Filart’s right to a refund of the value of their shares was based on SBGCCI and UIGDC’s alleged failure to abide by their representations in their prospectus. Specifically, Villareal and Filart alleged in their letter-complaint that the world-class golf course that was promised to them when they purchased shares did not materialize. This is an intra-corporate matter that is under the designated Regional Trial Court’s jurisdiction. It involves the determination of a shareholder’s rights under the Corporation Code or other intra-corporate rules when the corporation or association fails to fulfill its obligations.
However, even though the Complaint filed before the Securities and Exchange Commission contains allegations that are intra-corporate in nature, it does not necessarily oust the Securities and Exchange Commission of its regulatory and administrative jurisdiction to determine and act if there were administrative violations committed.
The Securities and Exchange Commission is organized in line with the policy of encouraging and protecting investments. It also administers the Securities Regulation Code,75 which was enacted to “promote the development of the capital market, protect investors, ensure full and fair disclosure about securities, [and] minimize if not totally eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market.” Pursuant to these policies, the Securities and Exchange Commission is given regulatory powers and “absolute jurisdiction, supervision and control over all corporations, partnerships’ or associations. . . .”
In relation to securities, the Securities and Exchange Commission’s regulatory power pertains to the approval and rejection, and suspension or revocation, of applications for registration of securities for, among others, violations of the law, fraud, and misrepresentations.
*Case Digest by Catherine C. Velasco, LLB-IV, Andres Bonifacio Law School, SY 2019-2020