PSE v.

Court of Appeals
G.R. No. 125469
281 SCRA 232
October 27, 1997
By: Karen P. Lustica
Facts: The Puerto Azul Land, Inc. (PALI) is a domestic real estate corporation. PALI 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 to the public by the Securities and Exchange
Commission (SEC). To facilitate the trading of its shares among investors, PALI sought to
course the trading of its shares through the Philippine Stock Exchange, Inc. (PSE), for which
purpose it filed with the said stock exchange an application to list its shares, with supporting
documents attached.
The Listing Committee of the PSE, upon a perusal of PALI's application, recommended to the
PSE's Board of Governors the approval of PALI's listing application.
Before it could act upon PALI's application, the Board of Governors of the PSE received a letter
from the heirs of Ferdinand E. Marcos, claiming that the late President Marcos was the legal
and beneficial owner of certain assets of PALI which likewise appears to have been held and
continue to be held in trust by one Rebecco Panlilio for then President Marcos.
PALI wrote a letter to the SEC addressed to the then Acting Chairman, Perfecto R. Yasay, Jr.,
bringing to the SEC's attention the action taken by the PSE. SEC rendered its Order, reversing
the PSE's decision. SEC ordered to immediately cause the listing of the PALI shares in the
Exchange.
The CA rendered the decision that SEC had both jurisdiction and authority to look into the
decision of the petitioner PSE, for the purpose of ensuring fair administration of the exchange.
Both as a corporation and as a stock exchange, the petitioner is subject to public respondent's
jurisdiction, regulation and control. PALI complied with all the requirements for public listing,
affirming the SEC's ruling.
Issue: WON SEC has the authority to order the PSE to list the shares of PALI in the stock
exchange.
Held: YES.
Ratio: A corporation is but an association of individuals, allowed to transact under an assumed
corporate name, and with a distinct legal personality. In organizing itself as a collective body, it
waives no constitutional immunities and perquisites appropriate to such a body.
Section 3 of Presidential Decree 902-A, standing alone, is enough authority to uphold the SECs
challenged control authority over the petitioner PSE even as it provides that the Commission
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 SECs power to look into the subject ruling of the PSE, therefore, may be implied from or be
considered as necessary or incidental to the carrying out of the SECs express power to insure
fair dealing in securities traded upon a stock exchange or to ensure the fair administration of
such exchange.
However, in the present case, 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 the private
respondent 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.
The Court also 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.
(1) The registration statement is on its face incomplete or inaccurate in any material respect
or includes any untrue statement of a material fact or omits to state a material facts
required to be stated therein or necessary to make the statements therein not
misleading;
(5) The issuer or registrant has not shown to the satisfaction of the Commission that the
sale of its security would not work to the prejudice to the public interest or as a fraud
upon the purchaser or investors.
Dispositive: The decisions of the Court of Appeals and the Securities and Exchage
Commission dated July 27, 1996 and April 24, 1996, respectively, are hereby REVERSED and
SET ASIDE, and a new Judgment is hereby ENTERED, affirming the decision of the Philippine
Stock Exchange to deny the application for listing of the private respondent Puerto Azul Land,
Inc.