Nestle v. CA The Court rejects the petition and upholds the interpretation of SEC.

G.R. No. 86738 It is a well-established rule that the construction of an administrative

FACTS: Nestle Philippines increased its authorized capital stocks from P300
million divided into 3 million shares to P600 million divided into 6 million shares.
The increased was authorized by the Securities and Exchange Commission (SEC).
Nestle has only two principal stockholders: San Miguel Corpo and Nestle
S.A, and the other are just individual stockholders who only owns one share each.
As the board of the corporation authorizes the issuacnce of 344,500
shares out of the previously authorized but unissued capital stock, Nestle filed a
letter with the SEC seeking exemption of its proposed issuance of additional
shares to its existing shareholders, from the registration requirement of the
Revised Securities Act and from the payment of fee.
The company express that the additional shares would be issued only to
San Miguel Corp. and Nestle S.A> and that no commission or other form of
remuneration had been given, directly or indirectly, in connection with the
issuance of such additional shares. They assert that SEC could not collect fees for
the “sae transaction” twice.
On its reply, SEC ruled that there is still a need to pay fee for the proposed
issuance of shares.
Thus, the present case.
ISSUE: WON Nestle’s petition should be accepted.
HELD: NO.
In examining the Sec. 6(A)(4) of the Revised Securities Act, it will be seen
that the statutory phrase “issuance of additional capital stock” is ambiguous. The
phrase may refer either:
 the issuance of capital stock as part of and in the course of increasing the
authorized capital stock of the corporation; or
 issuance of already authorized but still unissued capital stock.
In the same view, the phrase “increased capital stock” may refer either to:
 newly authorized capital stock issued in the course of increasing the
authorized capital stock of a corporation; or
 previously authorized but unissued capital stock.
agency charged to interpret and apply a certain statute is entitled to great respect
and should be accorded with great weight by the courts, unless there is a clear
conflict with its construction with statute or the Constitution.
This is based on the emergence of the multifarious needs of modern
society and the establishment of diverse administrative agencies are just
important. Also, it is related to the accumulation of experience and growth of
these agencies charged with the implementation of certain statute.
The reading by the SEC of the scope of application of the provision of the
Revised Securities Act permits greater opportunity for the SEC to implement the
statutory objective of protecting the investing public by requiring proposed
issuers of capital stock to inform such public of the true financial conditions and
prospects of the corporation. By limiting the class of exempt transaction, SEC is
enabled to examine issuances by corporation.
On the other hand, the interpretation of Nestle shows that only approval
of the Board of Directors is required in the issuance of previously authorized but
unissued capital stock by the corporation. This circumstance shows that SEC is
not required for approval. Accordingly, SEC will have no opportunity to inform
themselves about such issuance and about the condition of the corporation and
the potential value of the shares of stock being offered.
Thus, the Court rejects the interpretation of Nestle because it may
disable SEC from rendering protection to investors, in the public interest,
precisely when such protection may be needed the most.

Both SEC and CA resolved the ambiguity by construing that the provision
refers only to the issuance of shares of stick as part of and in the course of
increasing the authorized capital stock of Nestle. Since the 344, 500 shares 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 is not proposed to
be further increase, the Sec and CA rejected Nestle’s petition.