CORPORATION

 LAW  CASE  DIGESTS  

3C  &  3S  –  ATTY.  CARLO  BUSMENTE  

SUMNDAD  vs.  HARRIGAN   Petitioner   raised   before   the   SC   a   petition   for   review   on   certiorari  
G.R.  No.  132358  –  April  12,  2002   insisting   that   it   is   the   SEC   that   has   jurisdiction   by   virtue   of   Presidential  
  Decree   No.   902-­‐A   (Reorganization   of   the   Securities   and   Exchange  
FACTS:   Commission   with   Additional   Powers)   because   the   complaint   alludes   to  
John   William   Harrigan   filed   a   complaint   for   collection   of   a   sum   of   fraud  committed  by  respondent  corporation,  and  the  complainant  is  a  
money  against  respondent  Boracay  Beach  Hotel,  Inc.  (BBCHI)  with  the   stockholder  of  the  respondent  corporation.    
RTC.     Harrigan   prayed   for   the   issuance   of   a   writ   of   preliminary    
attachment  pending  the  hearing  of  the  case,  which  was  granted  by  the   Private   respondent,   on   the   other   hand,   maintains   that   jurisdiction   is  
trial  court    after  he  posted  an  attachment  bond  of  P2M.   lodged  with  the  regular  courts,  it  being  a  simple  collection  case.  
   
Harrigan   then   filed   an   amended   complaint     impleading   the   ISSUE:  
management   committee   of   BBCHI   through   its   acting   chairman.     WON  the  SEC    has  jurisdiction  over  the  subject  matter  of  the  case?  
Harrigan   stated   in   the   amended   complaint   that   respondent    
corporation   disposed   of   and   continues   to   actually   dispose   of   corporate   HELD:  
properties  and  funds  "in  fraud  of  its  creditors."     The  jurisdiction  of  courts  are  conferred  by  law  and  determined  by  the  
  allegations   in   the   complaint;   that   the   allegation   in   the   complaint  
The   trial   court   admitted   the   amended   complaint   and   issued   an   seeking   the   collection   of   advances   or   loans   from   the   corporation   falls  
amended  order  for  the  issuance  of  writ  of  attachment.   within   the   jurisdiction   of   the   RTC;   that   intra-­‐corporate   disputes,   under  
  the   provision   of   RA   8799,   falls   within   the   jurisdiction   of   RTC   and   no  
Petitioner   Mila   Yap   Sumndad   Petitioner,   claiming   ownership   of   the   longer  the  SEC.  
property,   filed   an   urgent   motion   for   leave   to   intervene     either   as    
plaintiff  or  defendant.    Trial  court  granted.   The   law   on   jurisdiction   of   the   SEC,   Section   5   of   PD   902-­‐A,   states   that   in  
  addition   to   the   regulatory   and   adjudicative   functions   of   the   SEC   over  
Instead   of   filing   an   answer,   petitioner   moved   to   dismiss   the   amended   corporations,   partnerships   and   other   forms   of   associations   registered  
complaint   based   on:   (1)   forum   shopping;   (2)   lack   of   jurisdiction;   (3)   with   it   as   expressly   granted   under   the   existing   laws   and   decrees,   it  
failure   to   state   a   cause   of   action;   and   (4)   litis   pendentia.     This   was   shall  have  original  and  exclusive  jurisdiction  to  hear  and  decide  cases  
denied  by  the  RTC.  Thereafter,  Sumndad  filed  6  motions  for  additional   involving  devises  or  schemes  employed  by  or  any  acts  of  the  Board  of  
time   to   file   an   answer.1Upon   motion   of   Harrigan,   petitioner   was   Directors,   business   associates,   its   officers   and   partners,   amounting   to  
declared   in   default   for   failure   to   answer   within   the   reglementary   fraud  and  misrepresentation  which  may  be  detrimental  to  the  interest  
period  and  the  trial  court  proceeded  with  the  ex-­‐parte  presentation  of   of   the   public   and/or   to   the   stockholders,   partners,   members   of  
evidence.   associations  or  organizations  registered  with  the  Commission.  
   
Trial   court   ruled   in   favor   of   Harrigan   and   ordered   respondent   to   pay   It   should   be   noted   that   the   issue   has   become   moot   and   academic  
P8M  plus  costs.   because   with   RA   8799,   Securities   Regulation   Code,   it   is   now   the   RTC  
  and   no   longer   the   SEC   that   has   jurisdiction.   Under   Section   5.2   of   RA  
CA  dismissed  the  appeal.   8799,   original   and   exclusive   jurisdiction   to   hear   and   decide   cases  

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involving   intra-­‐corporate   controversies   have   been   transferred   to   a   Filipino;   its   buyer   financing   facility   with   Banco   Filipino   has   been  
court  of  general  jurisdiction  or  the  appropriate  RTC.   suspended  such  that  it  cannot  now  consummate  its  sales  transactions;  
  the  libelous  circulars  made  by  the  Central  Bank  to  banks  such  that  the  
The  mere  use  of  the  phrase  "in  fraud  of  creditors"  does  not,  ipso  facto,   creditors   of   BF   Homes   have   begun   insisting   on   full   liquidation   under  
throw  the  case  within  SEC's  jurisdiction.  The  amended  complaint  filed   pain   of   foreclosure   of   their   notes.   Such   receiver,   according   to   BF  
by   Harrigan   does   not   sufficiently   allege   acts   amounting   to   fraud   and   Homes,  was  imperative  to  oversee  the  management  so  that  its  business  
misrepresentation  committed  by  respondent  corporation.   may   not   be   paralyzed   and   the   interest   of   the   creditors   may   not   be  
  prejudiced.   It   further   argued   that   rehabilitation   was   feasible;  
Fraud   is   defined   as   a   generic   term   embracing   all   multifarious   means   otherwise,   in   view   of   the   extent   of   its   involvement   in   the   shelter  
which   human   ingenuity   can   devise,   and   which   are   resorted   to   by   one   program   of   the   government   and   in   the   nation's   home   mortgage  
individual  to  secure  an  advantage  over  another  by  false  suggestions  or   insurance  system,  which  has  a  secured  coverage  for  at  least  P900  M  of  
by   suppression   of   truth   and   includes   all   surprise,   trick,   cunning,   [BF   Homes']   P1.5   B   liabilities,   not   only   [the]   creditors,   [buyers,   and  
dissembling  and  any  unfair  way  by  which  another  is  cheated.   stockholders]  of  the  petitioner  corporation  may  suffer  but  the  public  as  
  well."      
The   phrase   "in   fraud   of   creditors",   found   in   the   complaint,   can   only    
mean,   "to   the   prejudice   of   creditors"   and   not   to   the   use   of   devises   or   SEC  subsequently  issued  its  Order  which  created  the  B.F.  Homes,  Inc.,  a  
schemes  tantamount  to  fraud  and  misrepresentation  employed  by  the   Management  Committee;  Atty.  Orendain  as  Chairman.    
Board   of   Directors,   business   associates   or   its   officers   and   partners   to    
divert  corporate  funds  and  assets  for  personal  use,  as  contemplated  in   Thereafter,   SEC   ordered   the   appointment   of   a   rehabilitation   receiver,  
Section  5  of  PD  902-­‐A.   FBO   Management   Networks,   Inc.,   with   petitioner   Orendain   as  
  Chairman  to  prevent  paralyzation  of  BF  Homes'  business  operations.      
OREDAIN  vs.  BF  HOMES   In   1993,   a   Deed   of   Absolute   Sale  was   executed   by   and   between   BF  
G.R.  No.    146313  –  October  31,  2006   Homes   —   represented   by   Orendain   —   as   absolute   and   registered  
  owner,   and   the   Local   Superior   of   the   Franciscan   Sisters   of   the  
FACTS:   Immaculate   Phils.,   Inc.   (LSFSIPI)   over   a   parcel   of   land   situated   at  
BF   Homes,   Inc.,   domestic   corporation   and   organized   primarily   for   Barangay  Pasong  Papaya,  BF  International,  for  PhP  19,500,000.    
realty  business,  avail  itself  of  financial  assistance  from  various  sources    
to   enable   it   to   buy   properties   and   convert   them   into   residential   Meanwhile,   SEC   hearing   panel   released   an   Omnibus   Order  which  
subdivisions.  This  resulted  in  its  incurring  liabilities  amounting  to  PhP   confirmed   the   Closing   Report   submitted   by   Orendain.   Consequently,  
1,542,805,068.23.  On  the  other  hand,  it  was  able  to  acquire  properties   receiver  Orendain  was  relieved  of  his  duties  and  responsibilities.    
and   assets   worth   PhP   2,482,843,358.81,   which,   if   liquidated,   were    
more  than  enough  to  pay  all  its  creditors.       SEC   denied   BF   Homes'   and   the   intervenor-­‐derivative   Rodriguez's  
motions  for  reconsideration.  
 
Despite  its  solvent  status,  BF  Homes  filed  a  Petition  for  Rehabilitation  
and  for  Declaration  in  a  State  of  Suspension  of  Payments  under  PD  No.   Hence,   BF   Homes   filed   a   Complaint   before   the   Las   Piñas   RTC   against  
1758   before   SEC   because   Central   Bank   tried   to   take   over   Banco   LSFSIPI  and  Orendain  for  reconveyance  of  the  property  —  alleging  that  

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the   LSFSIPI   transacted   with   Orendain   in   his   individual   capacity   and   corporation,   partnership,   or   association   of  
therefore,  neither  FBO  Management,  Inc.  nor  Orendain  had  title  to  the   which   they   are   stockholders,   members   or  
property   transferred.   Moreover,   BF   Homes   averred   that   the   selling   associates,   respectively;   and   between   such  
price   was   grossly   inadequate   or   insufficient   amounting   to   fraud   and   corporation,   partnership   or   association   and  
conspiracy  with  the  LSFSIPI.     the   state   insofar   as   it   concerns   their  
  individual  franchise  or  right  to  exist  as  such  
LSFSIPI  filed  its  Answer  claiming  that  complaint  was  barred  by  a  prior   entity.  
judgment  of  a  tribunal  with  sufficient  jurisdiction  over  the  matter,  and    
BF   Homes   was   liable   for   forum   shopping,   and   BF   Homes   could   not   However,  Section  5  of  PD  No.  902-­‐A  does  not  apply  in  the  instant  case.  
question   its   own   acts   by   way   of   estoppel.   Orendain   filed   a   Motion   to   The   LSFSIPI   is   neither   an   officer   nor   a   stockholder   of   BF   Homes,   and  
Dismiss  stating  that  RTC  had  no  jurisdiction.   this   case   does   not   involve   intra-­‐corporate   proceedings.   In   addition,   the  
  seller,   Orendain,   is   being   sued   in   his   individual   capacity   for   the  
RTC  Las  Piñas  denied  the  motion  to  dismiss  for  lack  of  merit.   unauthorized   sale   of   the   property   in   controversy.   Hence,   no   cogent  
  reason   to   sustain   petitioner's   manifestation   that   the   resolution   of   the  
However,   SEC   rendered   its   Order   affirming   the   hearing   panel’s   instant  controversy  depends  on  the  ratification  by  the  SEC  of  the  acts  
decision.   of   its   agent   or   the   receiver   because   the   act   of   Orendain   was   allegedly  
  not  within  the  scope  of  his  authority  as  receiver.    
CA  held  that  the  action  for  reconveyance  filed  by  BF  Homes  was  within    
the   exclusive   jurisdiction   of   the   RTC.   LSFSIPI   was   not   a   party   to   the   In   addition,   jurisdiction   over   the   case   for   reconveyance   is   clearly  
said   case   and   did   not   have   any   intra-­‐corporate   relation   with   petitioner   vested   in   the   RTC   as   provided   in   paragraph   (2),   Section   19,   B.P.   Blg.  
at  the  time  of  the  sale.  The  SEC  could  not  acquire  jurisdiction  over  the   129.  
Franciscan   Sisters;   while   petitioner   Orendain   was   sued   in   his   Moreover,   the   instant   petition   has   been   rendered   moot   and   academic  
individual  capacity  and  not  in  his  official  capacity  as  receiver.   by   the   passage   of   RA   8799   or  The   Securities   Regulation   Code  which  
  took  effect  on  August  8,  2000.      
ISSUE:    
WON   action   for   reconveyance   involve   intra   corporate   dispute   and   thus   Section   5.2   of   RA   8799   transferred   exclusive   and   original   jurisdiction  
within  the  SEC’s  jurisdiction.   of   the   SEC   over   actions   involving   intra-­‐corporate   controversies   to   the  
  courts  of  general  jurisdiction  or  the  appropriate  RTC.  In  the  transition,  
HELD:   all   intra-­‐corporate   cases   pending   in   the   SEC,   which   were   not   ripe   for  
No.  In  1996,  Section  5  of  PD  No.  902-­‐A,  which  was  approved  on  March   adjudication  as  of  August  8,  2000,  were  turned  over  to  the  RTC.  Cases  
11,  1976,  was  still  the  law  in  force  —  whereby  the  SEC  still  had  original   under   Section   5,   PD   902-­‐A,   which   now   fall   within   the   RTC's  
and  exclusive  jurisdiction  to  hear  and  decide  cases  involving:   jurisdiction,  as  follows:  
b)controversies   arising   out   of   intra-­‐corporate   or   (a)Devices   or   schemes   employed   by   or   any   acts   of  
partnership   relations,   between   and   among   the   board   of   directors,   business   associates,  
stockholders,   members,   or   associates;   its  officers  or  partners,  amounting  to  fraud  
between   any   and/or   all   of   them   and   the   and   misrepresentation   which   may   be  

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detrimental   to   the   interest   of   the   public   upon   the   disclosed   facts   (emphasis   supplied   and   citation   omitted)."   It  
and/or  stockholders,  partners,  members  of   is   apparent   that   the   SEC   order   in   question   merely   acknowledged   the  
associations   registered   with   the   Closing   Report   for   inclusion   in   the   records   of   the   case.   It   did   not,  
Commission;   however,  pass  upon  the  merits  and  veracity  of  the  report's  contents.  As  
 (b)Controversies   arising   out   of   intra-­‐corporate   or   such,   it   cannot,   in   any   wise,   be   considered   as   an   adjudication   of   the  
partnership   relations,   between   and   among   rights   and   obligations   of   the   parties   relating   to   the   subject   matter   of  
stockholders,   members,   or   associates;   the   action.  Likewise,   it   appears   that   between   the   first   and   second  
between   any   or   all   of   them   and   the   actions,  there  was  no  identity  of  parties,  of  subject  matter,  and  of  cause  
corporation,   partnership   or   association   and   of  action.  Hence,  res  judicata  does  not  apply  in  the  instant  case.  
the   State   insofar   as   it   concerns   their  
individual  franchise  or  right  as  such  entity;   VELARDE  vs.  LOPEZ  
(c)Controversies   in   the   election   or   appointment   of   G.R.  No.  153886  –  January  14,  2004  
directors,   trustees,   officers   or   managers   of    
such   corporations,   partnerships,   or   FACTS:  
associations;   On   January   6,   1997,   Eugenio   Lopez   Jr.,   then   President   of   respondent  
(d)Petitioners   of   corporations,   partnerships   or   Lopez,   Inc.,   as   LENDER,   and   petitioner   Mel   Velarde,   then   General  
associations   to   be   declared   in   the   state   of   Manager   of   Sky   Vision   Corporation   (Sky   Vision),   a   subsidiary   of  
suspension   of   payment   in   cases   where   the   respondent,  as  BORROWER,  forged  a  notarized  loan  agreement  overing  
corporation,   partnership   or   association   the   amount   of   ten   million   (P10,000,000.00)   pesos.   The   agreement  
possesses  sufficient  property  to  cover  all  its   expressly   provided   for,   among   other   things,   the   manner   of   payment  
debts   but   foresees   the   impossibility   of   and   the   circumstances   constituting   default   which   would   give   the  
meeting   them   when   they   fall   due   or   in   lender   the   right   to   declare   the   loan   together   with   accrued   interest  
cases   where   the   corporation,   partnership   immediately  due  and  payable.    
or   association   has   no   sufficient   assets   to    
cover   its   liabilities   but   is   under   the   As   petitioner   failed   to   pay   the   installments   as   they   became   due,  
management  of  a  rehabilitation  receiver  or   respondent,   apparently   in   answer   to   a   proposal   of   petitioner  
management   committee   created   pursuant   respecting   the   settlement   of   the   loan,   advised   him   by   letter   in   Sky  
to  this  Decree.   Vision   in   partial   settlement   of   his   loan   after   he   settles   his  
  accountabilities   to   the   latter   and   gives   his   written   instructions   to   it.  
On  Res  Judicata  (Petitioner  claimed  the  action  be  dismissed  based   Petitioner   protested   the   computation   he   asserting   that   the   imputed  
on  res  judicata):   unliquidated   advances   from   Sky   Vision   had   already   been   properly  
  liquidated.  
While   the   said   SEC   order   denied   the   motion   for   intervention   filed   by    
Rodriguez,  it  did  not,  however,  resolve  the  issues  raised  in  the  motion   Respondent   filed   a   complaint   for   collection   of   sum   of   money   with  
on  the  merits.  A  judgment  is  "on  the  merits  when  it  amounts  to  a  legal   damages   at   the   Regional   Trial   Court   (RTC)   of   Pasig   City   against  
declaration   of   the   respective   rights   and   duties   of   the   parties   based   petitioner,  alleging  that  petitioner  violated  the  above-­‐quoted  Section  6  

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of   the   loan   agreement   as   he   failed   to   put   up   the   needed   collateral   for   ISSUE:    
the   loan   and   pay   the   installments   as   they   became   due,   and   that   despite   Whether   or   not   the   defendant   in   a   complaint   for   collection   of   sum   of  
his   receipt   of   letters   of   demand   dated   December   1,   1997,   he   refused   to   money   can   raise   a   counterclaim   for   retirement   benefits,   unpaid  
pay.     salaries   and   incentives,   and   other   benefits  arising   from   services  
  rendered  by  him  in  a  subsidiary  of  the  plaintiff  corporation.    
In  his  answer,  petitioner  alleged  that  the  loan  agreement  did  not  reflect    
his   true   agreement   with   respondent,   it   being   merely   a   “cover   HELD:    
document”   to   evidence   the   reward   to   him   of   ten   million   pesos   for   his   At   the   heart   of   petitioner’s   counterclaim   is   his   alleged   forced  
loyalty  and  excellent  performance  as    as  General  Manager  of  Sky  Vision   retirement  which  is  also  the  basis  of  his  claim  for,  among  other  things,  
and   that   the   payment,   if   any   was   expected,   was   in   the   form   of   unpaid   salaries,   unpaid   incentives,   reasonable   return   on   the   stock  
continued   service;   and   that   it   was   when   he   was   compelled   by   ownership   plan,   and   other   benefits   from   a   subsidiary   company   of   the  
respondent   to   retire   that   the   form   of   payment   agreed   upon   was   respondent.    
rendered   impossible,   prompting   the   late   Eugenio   Lopez,   Jr.   to   agree    
that  his  retirement  benefits  from  Sky  Vision  would  instead  be  applied   Section   5(c)   of   P.D.   902-­‐A   (as   amended   by   R.A.   8799,   the   Securities  
to  the  loan.     Regulation   Code)   applies   to   a   corporate   officer’s   dismissal.   For   a  
  corporate  officer’s  dismissal  is  always  a  corporate  act  and/or  an  intra-­‐
Respondent   filed   a   manifestation   and   a   motion   to   dismiss   the   corporate  controversy  and  that  its  nature  is  not  altered  by  the  reason  
counterclaim   for   want   of   jurisdiction   which   drew   petitioner   to   assert   or   wisdom   which   the   Board   of   Directors   may   have   in   taking   such  
in  his  comment  and  opposition  thereto  that  the  veil  of  corporate  fiction   action.    
must  be  pierced  to  hold  respondent  liable  for  his  counterclaims.      
  With   regard   to   petitioner’s   claim   for   unpaid   salaries,   unpaid   share   in  
By   Order   of   January   3,   2000,   Branch   155   of   the   RTC   of   Pasig   denied   net  income,  reasonable  return  on  the  stock  ownership  plan  and  other  
respondent’s   motion   to   dismiss   the   counterclaim   on   the   following   benefits   for   services   rendered   to   Sky   Vision,   jurisdiction   thereon  
premises:   A   counterclaim   being   essentially   a   complaint,   the   principle   pertains  to  the  Securities  Exchange  Commission  even  if  the  complaint  
that   a   motion   to   dismiss   hypothetically   admits   the   allegations   of   the   by   a   corporate   officer   includes   money   claims   since   such   claims   are  
complaint  is  applicable;  the  counterclaim  is  compulsory,  hence,  within   actually   part   of   the   prerequisite   of   his   position   and,   therefore,  
its   jurisdiction;   and   there   is   identity   of   interest   between   respondent   interlinked   with   his   relations   with   the   corporation.   e   question   of  
and  Sky  Vision  to  merit  the  piercing  of  the  veil  of  corporate  fiction.   remuneration   involving   a   person   who   is   not   a   mere   employee   but   a  
  stockholder   and   officer   of   the   corporation   is   not   a   simple   labor  
 Respondent   iled   a   Petition   for  Certiorari  at   the   Court   of   Appeals   which   problem   but   a   matter   that   comes   within   the   area   of   corporate   affairs  
held   that   respondent   is   not   the   real   party-­‐in-­‐interest   on   the   and   management,   and   is   in   fact   a   corporate   controversy   in  
counterclaim   and   that   there   was  failure   to   show   the   presence   of   any   of   contemplation  of  the  Corporation  Code.    
the  circumstances  to  justify  the  application  of  the  principle  of  “piercing    
the  veil  of  corporate  fiction.   It   cannot   be   gainsaid   that   a   subsidiary   has   an   independent   and  
  separate   juridical   personality,   distinct   from   that   of   its   parent   company,  
 

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hence,  any  claim  or  suit  against  the  latter  does  not  bind  the  former  and    
vice  versa.   As   for   the   trial   court’s   ruling   that   the   agreement   to   set-­‐off   is   an  
  amendment   of   the   loan   agreement   resulting   to   an   identity   of   interest  
Petitioner   argues   nevertheless   that   jurisdiction   over   the   subsidiary   is   between  respondent  and  Sky  Vision  and,  therefore,  sufficient  to  pierce  
justified   by   piercing   the   veil   of   corporate   fiction.   Piercing   the   veil   of   the  veil  of  corporate  fiction,  it  is  untenable.  The  abovequoted  letter  is  
corporate   fiction   is   warranted,   however,   only   in   cases   when   the   clear   that,   to   effect   a   set-­‐off,   it   is   a   condition  sine   qua   non  that   the  
separate   legal   entity   is   used   to   defeat   public   convenience,   justify   approval   thereof   by   “Sky/Central”   must   be   obtained,   and   that  
wrong,   protect   fraud,   or   defend   crime,   such   that   in   the   case   of   two   petitioner   liquidate   his   advances   from   Sky   Vision.   These   conditions  
corporations,  the  law  will  regard  the  corporations  as  merged  into  one.   hardly  manifest  that  respondent  possessed  that  degree  of  control  over  
The  rationale  behind  piercing  a  corporation’s  identity  is  to  remove  the   Sky   Vision   as   to   make   the   latter   its   mere   instrumentality,   agency   or  
barrier   between   the   corporation   from   the   persons   comprising   it   to   adjunct.  
thwart   the   fraudulent   and   illegal   schemes   of   those   who   use   the    
corporate   personality   as   a   shield   for   undertaking   certain   proscribed   TIMESHARE  REALTY  VS.  CA  
activities.     G.R.  No.  158941.  February  11,  2008  
   
In   applying   the   doctrine   of   piercing   the   veil   of   corporate   fiction,   the   FACTS:  
following   requisites   must   be   established:   (1)   control,   not   merely   On   October   6,   1996,   Timeshare   Realty   sold   to   Lao   and   Cortez,   one  
majority   or   complete   stock   control;   (2)   such   control   must   have   been   timeshare  (security)  of  Laguna  de  Boracay  for  US$7,500.00  payable  in  
used   by   the   defendant   to   commit   fraud   or   wrong,   to   perpetuate   the   eight  months  and  fully  paid  by  the  respondents.  
violation  of  a  statutory  or  other  positive  legal  duty,  or  dishonest  acts  in    
contravention   of   plaintiff’s   legal   rights;   and   (3)   the   aforesaid   control   However,  on  February  1998,    the  SEC  issued  a  resolution  declaring  that  
and   breach   of   duty   must   proximately   cause   the   injury   or   unjust   loss   Timeshare  has  no  authority  to  sell  securities,  like  timeshares,  prior  to  
complained  of.   February   11,   1998.   It   further   stated   in   the   resolution/order   that   the  
  Registration  Statement  of  petitioner  became  effective  only  on  February  
Nowhere,  however,  in  the  pleadings  and  other  records  of  the  case  can   11,   1998.   It   also   held   that   the   30   days   within   which   a   purchaser   may  
it   be   gathered   that   respondent   has   complete   control   over   Sky   Vision,   exercise   the   option   to   unilaterally   rescind   the   purchase   agreement   and  
not   only   of   finances   but   of   policy   and   business   practice   in   respect   to   receive   the   refund   of   money   paid   applies   to   all   purchase   agreements  
the   transaction   attacked,   so   that   Sky   Vision   had   at   the   time   of   the   entered   into   by   petitioner   prior   to   the   effectivity   of   the   Registration  
transaction   no   separate   mind,   will   or   existence   of   its   own.   The   Statement.  
existence  of  interlocking  directors,  corporate  officers  and  shareholders    
is  not  enough  justification  to  pierce  the  veil  of  corporate  fiction  in  the   On  March  30,  1998,  Lao  and  Cortez  wrote  petitioner  demanding  their  
absence   of   fraud   or   other   public   policy   considerations.   This   Court   is   right  and  option  to  cancel  their  Contract,  as  it  appears  that  Laguna  de  
thus   not   convinced   that   the   real   party-­‐in-­‐interest   with   regard   to   the   Boracay  is  selling  said  shares  without  license  or  authority  from  the  SEC  
counterclaim  for  damages  arising  from  the  alleged  tortuous  manner  by   but  Timeshare  Realty    failed  and  refused  to  refund  or  pay  respondents.  
which   petitioner   was   forced   to   retire   as   General   Manager   of   Sky   Vision    
is  respondent.    

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As   a   result,   Respondents   Lao   and   Cortez   directly   filed   with   SEC  En   Commission,   of   a   sworn   registration  
Banc  a   complaint  against   Timeshare   and   the   Members   of   its   Board   of   statement   with   respect   to   such   securities,  
Directors  for  violation  of  Section  4  of  B.P.  178  (The  Revised  Securities   containing   or   having   attached   thereto,   the  
Act).     following:  
   
SEC   en   Banc:   Rendered   a   decision   in   favor   of   Lao   and   Cortez.   MR   xxx  xxx  xxx  
denied.   (36)   Unless   previously   filed   and   registered  
  with  the  Commission  and  brought  up  to  date:  
CA:  Ruled   in   favor   of   Lao   and   Cortez   due   to   failure   of   Timeshare   to   file    
their  Petition  for  Review  under  the  15-­‐day  period  as  provided  by  Rule   (a)  A  copy  of  its  articles  of  incorporation  with  
43,  Section  4  of  the  1997  Revised  Rules  of  Civil  Procedure.  MR  denied.   all   amendments   thereof   and   its   existing   by-­‐
Timeshare’s  contention:     laws   or   instruments   corresponding   thereto,  
At   the   time   it   entered   into   a   timeshare   purchase   agreement   with   whatever   the   name,   if   the   issuer   be   a  
respondents   on   October   6,   1996,   it   already   possessed   the   requisite   corporation.  
license   and   marketing   agreement   to   engage   in   such   transactions,  as    
evidenced  by  its  registration  with  the  SEC  as  a  corporation.  Further,  it   Prior  to  fulfillment  of  all  the  other  requirements  of  Section  8,  
argues   that   when   it   was   registered   and   authorized   by   the   SEC   as   petitioner   is  absolutely  proscribed   under   Section   4   from  
broker   of   securities  —   such   as   the   Laguna   de   Boracay   timeshares   —   dealing  with  unregistered  timeshares,  thus:  
this  had  the  effect  of  ratifying  its  October  6,  1996  purchase  agreement    
with  respondents,  and  removing  any  cause  for  the  latter  to  rescind  it.   Section  4.  Requirement  of  registration  of  securities.  —  
  (a)   No   securities,   except   of   a   class   exempt   under   any  
ISSUE:     of  the  provisions  of  Section  five  hereof  or  unless  sold  
Whether   or   not   the   mere   registration   of   Timeshare   as   a   in  any  transaction  exempt  under  any  of  the  provisions  
corporation  already  authorizes  it  to  deal  with  unregistered  timeshares.   of   Section   six   hereof,   shall   be   sold   or   offered   for   sale  
  or   distribution   to   the   public   within   the  
RULING:     Philippines  unless   such   securities   shall   have   been  
NO.     registered   and   permitted   to   be   sold   as   hereinafter  
provided.  
(1) Under   BP   178,   Corporate   registration   is   just   one   of   several    
requirements  before  it  may  deal  with  timeshares:  
(2) Timeshare  did  not  resort  to  any  other  administrative  remedy  
Section   8.   Procedure   for   registration.   —   (a)   against  said  ruling  (the  SEC,  through  Director  Linda  A.  Daoang,  
All  securities  required  to  be  registered  under   already  rendered  a  ruling  on  the  effectivity  of  the  registration  
subsection  (a)  of  Section  four  of  this  Act  shall   statement   of   petitioner),   such   as   by   questioning   the   same  
be  registered  through  the  filing  by  the  issuer   before   the   SEC  En   Banc.   Having   failed   to   exhaust   the  
or  by  any  dealer  or  underwriter  interested  in  
the   sale   thereof,   in   the   office   of   the  

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administrative   remedies   available   to   it,   petitioner   is   already   Proxy/Information   Statement   in   connection   with   its   annual   meeting  
bound  by  said  ruling  and  can  no  longer  question  the  same.   held   on   May   23,   1997,   in   violation   of   respondent   Commission's   'Full  
Material  Disclosure  Rule.  
UNION  BANK  OF  THE  PHILIPPINES  VS.  SEC    
G.R.  No.  138949  -­‐  June  6,  2001.   Failing   to   respond   to   the   aforesaid   communication,   petitioner   was  
  given   a   '2nd   Show   Cause   with   Assessment'   by   respondent   Commission  
FACTS:   on  July  21,  1997.  Petitioner  was  then  assessed  a  fine  of  P50,000.00  plus  
Petitioner,   through   its   General   Counsel   and   Corporate   Secretary,   P500.00   for   every   day   that   the   report   [was]   not   filed,   or   a   total   of  
sought   the   opinion   of   Chairman   Perfecto   Yasay,   Jr.   of   respondent   P91,000.00   as   of   July   21,   1997.   Petitioner   was   likewise   advised   by  
Commission   as   to   the   applicability   and   coverage   of   the   Full   Material   respondent  Commission  to  submit  the  required  reports  and  settle  the  
Disclosure   Rule   on   banks,   contending   that   said   rules,   in   effect,   amend   assessment,  or  submit  the  case  to  a  formal  hearing.  
Section  5  (a)  (3)  of  the  Revised  Securities  Act  which  exempts  securities    
issued   or   guaranteed   by   banking   institutions   from   the   registration   Petitioner  then  elevated  its  case  to  the  Court  of  Appeals  which  affirmed  
requirement  provided  by  Section  4  of  the  same  Act.   the  questioned  Orders.  
   
In   reply   thereto,   Chairman   Yasay,   in   a   letter   dated   April   8,   1997,   ISSUE:    
informed  petitioner  that  while  the  requirements  of  registration  do  not   Whether   or   not   petitioner   is   required   to   comply   with   the   respondent  
apply  to  securities  of  banks  which  are  exempt  under  Section  5(a)  (3)  of   SEC's  full  disclosure  rules.  
the   Revised   Securities   Act,   however,   banks   with   a   class   of   securities    
listed   for   trading   on   the   Philippine   Stock   Exchange,   Inc.   are   covered   by   HELD:    
certain   Revised   Securities   Act   Rules   governing   the   filing   of   various   Yes.   Because   its   securities   are   exempt   from   the   registration  
reports   with   respondent   Commission,   i.e.,   (1)   Rule   11(a)-­‐1   requiring   requirements   under   Section   5(a)(3)   of   the   Revised   Securities   Act,  
the   filing   of   Annual,   Quarterly,   Current,   Predecessor   and   Successor   petitioner   argues   that   it   is   not   covered   by   RSA   Implementing   Rule  
Reports;   (2)   Rule   34-­‐(a)-­‐1   requiring   submission   of   Proxy   Statements;   11(a)-­‐1,   which   requires   the   filing   of   annual,   quarterly,   current  
and  (3)  Rule  34-­‐(c)-­‐1  requiring  submission  of  Information  Statements,   predecessor   and   successor   reports;   Rule   34(a)-­‐1   which   mandates   the  
among  others.   filing  of  proxy  statements  and  forms  of  proxy;  and  Rule  34(c)-­‐1,  which  
  obligates  the  submission  of  information  statements.  
Respondent   Commission,   through   its   Money   Market   Operations    
Department  Director,  wrote  petitioner,  reiterating  its  previous  position   We  do  not  agree.  Section  5(a)(3)  of  the  said  Act  reads:  
that   petitioner   is   not   exempt   from   the   filing   of   certain   reports.   The    
letter   further   stated   that   the   Revised   Securities   Act   Rule   11   (a)   "SECTION.   5.Exempt   Securities.   —   (a)   Except   as   expressly   provided,  
requires  the  submission  of  reports  necessary  for  full,  fair  and  accurate   the  requirement  of  registration  under  subsection  (a)  of  Section  four  of  
disclosure  to  the  investing  public,  and  not  the  registration  of  its  shares.   this  Act  shall  not  apply  to  any  of  the  following  classes  of  securities:  
   
Respondent  Commission  wrote  petitioner,  enjoining  the  latter  to  show   xxx  xxx  xxx  
cause   why   it   should   not   be   penalized   for   its   failure   to   submit   a    

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(3)Any   security   issued   or   guaranteed   by   any   banking   institution   requirements   embodied   in   the   assailed   Rules.   Petitioner,   as   a  
authorized   to   do   business   in   the   Philippines,   the   business   of   which   is   bank,   is   primarily   subject   to   the   control   of   the   BSP;   and   as   a  
substantially  confined  to  banking,  or  a  financial  institution  licensed  to   corporation  trading  its  securities  in  the  stock  market,  it  is  under  
engage  in  quasi-­‐banking,  and  is  supervised  by  the  Central  Bank."   the   supervision   of   the   SEC.   It   must   be   pointed   out   that   even   the  
  PSE  is  under  the  control  and  supervision  of  respondent.  14  There  
This   provision   exempts   from   registration   the   securities   issued   by   is   no   over-­‐supervision   here.   Each   regulating   authority   operates  
banking  or  financial  institutions  mentioned  in  the  law.  Nowhere  does  it   within  the  sphere  of  its  powers.  That  stringent  requirements  are  
state   or   even   imply   that   petitioner,   as   a   listed   corporation,   is   exempt   imposed   is   understandable,   considering   the   paramount  
from   complying   with   the   reports   required   by   the   assailed   RSA   importance  given  to  the  interests  of  the  investing  public.  
Implementing   Rules.   Worth   repeating   is   the   CA's   disquisition   on   the    
matter,  which  we  quote:   Otherwise   stated,   the   mere   fact   that   in   regard   to   its   banking  
  functions,   petitioner   is   already   subject   to   the   supervision   of   the  
"However,   the   exemption   from   the   registration   requirement   enjoyed   BSP   does   not   exempt   the   former   from   reasonable   disclosure  
by   petitioner   does   not   necessarily   connote   that   [it   is]   exempted   from   regulations   issued   by   the   SEC.   These   regulations   are   meant   to  
the   other   reportorial   requirements.   Having   confined   the   exemption   assure   full,   fair   and   accurate   disclosure   of   information   for   the  
enjoyed  by  petitioner  merely  to  the  initial  requirement  of  registration   protection   of   investors   in   the   stock   market.   Imposing   such  
of   securities   for   public   offering,   and   not   [to]   the   subsequent   filing   of   regulations   is   a   function   within   the   jurisdiction   of   the   SEC.   Since  
various   periodic   reports,   respondent   Commission,   as   the   regulatory   petitioner  opted  to  trade  its  shares  in  the  exchange,  then  it  must  
agency,   is   able   to   exercise   its   power   of   supervision   and   control   over   abide  by  the  reasonable  rules  imposed  by  the  SEC.  
corporations   and   over   the   securities   market   as   a   whole.   Otherwise,   the    
objectives   of   the   'Full   Material   Disclosure'   policy   would   be   defeated   xxx  
since   petitioner   corporation   and   its   dealings   would   be   totally   beyond    
the  reach  of  respondent  Commission  and  the  investing  public."   WHEREFORE,  the  Petition  is  hereby  DENIED,  and  the  assailed  Decision  
  of  the  Court  of  Appeals  AFFIRMED.  Costs  against  petitioner.  
It   must   be   emphasized   that   petitioner   is   a   commercial   banking    
corporation  listed  in  the  stock  exchange.  Thus,  it  must  adhere  not  only   SO  ORDERED.  
to   banking   and   other   allied   special   laws,   but   also   to   the   rules    
promulgated   by   Respondent   SEC,   the   government   entity   tasked   not   ONAPAL  vs.  CA  
only  with  the  enforcement  of  the  Revised  Securities  Act,  but  also  with   G.R.  No.  90707  –  February  1,  1993  
the  supervision  of  all  corporations,  partnerships  or  associations  which    
are  grantees  of  government-­‐issued  primary  franchises  and/or  licenses   FACTS:  
or  permits  to  operate  in  the  Philippines.   The   petitioner,   ONAPAL   Philippines   Commodities,   Inc.   is   a   duly  
  organized   and   existing   corporation,   licensed   as   commission  
That  petitioner  is  under  the  supervision  of  the  Bangko  Sentral  ng   merchant/broker  by  the  SEC,  to  engage  in  commodity  futures  trading  
Pilipinas  (BSP)  and  the  Philippine  Stock  Exchange  (PSE)  does  not   in   Cebu   City.   On   April   27,   1983,   petitioner   and   private   respondent,  
exempt   it   from   complying   with   the   continuing   disclosure   Susan   Chua   concluded  a  "Trading  Contract".  Like  all  customers  of  the  

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petitioner,   private   respondent   was   furnished   regularly   with   2.

On  June  2,  1983,  plaintiff  was  informed  by  Miss  Diaz  that  she  
"Commodities   Daily   Quotations"   showing   daily   movements   of   prices   of   had   to   deposit   an   additional   amount   of   P300,000.00   "to   pay  
commodity  futures  traded  and  of  market  reports  indicating  the  volume   the   difference"   in   prices,   otherwise   she   will   lose   her   original  
of   trade   in   different   future   exchanges   in   Hongkong,   Tokyo   and   other   deposit   of   P500,000.00;   Fearing   the   loss   of   her   original  
centers.   Every   time   a   customer   enters   into   a   trading   transaction   with   deposit,   plaintiff   was   constrained   to   deposit   an   additional  
petitioner  as  broker,  the  trading  order  is  communicated  by  telex  to  its   amount   of   P300,000.00.   Since   she   was   made   to   understand  
principal,   Frankwell   Enterprises   of   Hongkong.   If   the   transaction,   either   that  she  could  withdraw  her  deposit/investment  anytime,  she  
buying  or  selling  commodity  futures,  is  consummated  by  the  principal,   not   knowing   how   the   business   is   operated/managed   as   she  
the   petitioner   issues   a   document   known   as   "Confirmation   of   Contract   was  not  made  to  understand  what  the  business  was  all  about,  
and   Balance   Sheet"   to   the   customer.   An   order   of   a   customer   of   the   she   wanted   to   withdraw   her   investment;   but   Elizabeth   Diaz,  
petitioner   is   supposed   to   be   transmitted   from   Cebu   to   petitioner's   defendant's  Account  Executive,  told  her  she  could  not  get  out  
office   in   Manila.   From   Manila,   it   should   be   forwarded   to   Hongkong   and   because  there  are  some  accounts  hanging  on  the  transactions.  
from  there,  transmitted  to  the  Commodity  Futures  Exchange  in  Japan.    
  3. Plaintiff   further   testified   that   she   understood   the   transaction  
There   were   only   two   parties   involved   as   far   as   the   transactions   of   buying   and   selling   as   speculating   in   prices,   and   her   paying  
covered   by   the   Trading   Contract   are   concerned   —   the   petitioner   and   the   difference   between   gains   and   losses   without   actual  
the  private  respondents.   delivery   of   the   goods   to   be   gambling,   and   she   would   like   to  
withdraw  from  this  kind  of  business,  the  risk  of  which  she  was  
1. It   appears   from   plaintiff's   (Susan   Chua)   testimony   that   not  made  aware  of.  Plaintiff  further  testified  that  she  stopped  
sometime   in   April   of   1983,   she   was   invited   by   defendant's   trading   in   commodity   futures   in   September,   1983   when   she  
(Onapal)   Account   Executive   Elizabeth   Diaz   to   invest   in   the   realized  she  was  engaged  in  gambling.  She  was  able  to  get  only  
commodity   futures   trading   by   depositing   the   amount   of   P470,000.00  out  of  her  total  deposit  of  P800,000.00.  In  order  
P500,000.00.   She   was   further   told   that   the   business   is   to   recover   the   loss   of   P330,000.00,   she   filed   this   case   and  
"profitable"  and  that  she  could  withdraw  her  money  anytime;   engaged  the  services  of  counsel  for  P40,000.00  and  expects  to  
she   was   furthermore   instructed   to   go   to   the   Onapal   Office   incur  expenses  of  litigation  in  the  sum  of  P20,000.00."  
where   she   met   the   Manager,   Mr.   Ciam,   and   the   Account    
Executive   Elizabeth   Diaz   who   told   her   that   they   would   take   PETITIONER’s  CONTENTIONS:  
care   of   how   to   trade   business   and   her   account.   She   was   then    
made   to   sign   the   Trading   Contract   and   other   documents   1. Article  2018  of  the  New  Civil  Code  is  inapplicable  to  the  factual  
without  making  her  aware/understand  the  risks  involved;  that   milieu   of   the   instant   case   considering   that   in   a   commodity  
at   the   time   they   let   her   sign   "those   papers"   they   were   telling   futures  transaction  the  broker  is  not  the  direct  participant  and  
her  that  those  papers  were  for  "formality  sake";  that  when  she   cannot   be   considered   as   winner   or   loser   and   the   contract  
was   told   later   on   that   she   made   a   profit   of   P20,480.00   in   a   itself,  from  its  very  nature,  cannot  be  considered  as  gambling.  
span   of   three   days   in   the   first   transaction,   they   told   her   that   2. A   commodity   futures   contract,   being   a   specie   of   securities,   is  
the  business  is  "very  profitable".     valid   and   enforceable   as   its   terms   are   governed   by   special  
  laws,   notably   the   Revised   Securities   Act   and   the   Revised   Rules  

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and  Regulations  on  Commodity  Futures  Trading  issued  by  the   or  subject  is  placed  in  the  actual  or  constructive  possession  or  control  
Securities   and   Exchange   Commission   (SEC)   and   approved   by   of  another.  
the  Monetary  Board  of  the  Central  Bank;  hence,  the  Civil  Code    
is  not  the  controlling  piece  of  legislation.   The  facts  clearly  establish  that  the  petitioner   is   a   direct   participant  
  in   the   transaction,   acting   through   its   authorized   agents.  It  received  
ISSUE:   the  customer's  orders  and  private  respondent's  money.  As  per  terms  of  
Whether  or  not  the  commodity  futures  trading  is  a  legitimate  business?   the  trading  contract,  customer's  orders  shall  be  directly  transmitted  by  
(since   it   is   practiced   in   the   United   States,   recognized   by   the   SEC   and   the   petitioner   as   broker   to   its   principal,   Frankwell   Enterprises   Ltd.   of  
permitted  under  the  Civil  Code,  specifically  Article  1462)   Hongkong,  being  a  registered  member  of  the  International  Commodity  
    Clearing   House,   which   in   turn   must   place   the   customer's   orders   with  
HELD:   the  Tokyo  Exchange.  There  is  no  evidence  that  the  orders  and  money  
The   contract   between   the   parties   falls   under   the   kind   commonly   called   were   transmitted   to   its   principal   Frankwell   Enterprises   Ltd.   in  
"futures".  The  term  "futures"  has  grown  out  of  those  purely  speculative   Hongkong  nor  were  the  orders  forwarded  to  the  Tokyo  Exchange.  We  
transactions   in   which   there   are   nominal   contracts   to   sell   for   future   draw   the   conclusion   that   no   actual   delivery   of   goods   and  
delivery,   but   where   in   fact   no   delivery   is   intended   or   executed.   The   commodity   was   intended   and   ever   made   by   the   parties.   In   the  
nominal  seller  does  not  have  or  expect  to  have  a  stock  of  merchandise   realities   of   the   transaction,   the   parties   merely   speculated   on   the   rise  
he  purports  to  sell  nor  does  the  nominal  buyer  expect  to  receive  it  or  to   and   fall   in   the   price   of   the   goods/commodity   subject   matter   of   the  
pay   for   the   price.   Instead   of   that,   a   percentage   or   margin   is   paid,   which   transaction.   If   private   respondent's   speculation   was   correct,   she   would  
is   increased   or   diminished   as   the   market   rates   go   up   and   down,   and   be  the  winner  and  the  petitioner,  the  loser,  so  petitioner  would  have  to  
accounted   for   to   the   buyer.   This   is   simple   speculation,   gambling   or   pay   private   respondent   the   "margin".   But   if   private   respondent   was  
wagering   on   prices   within   a   given   time;   it   is   not   buying   and   selling   and   wrong  in  her  speculation  then  she  would  emerge  as  the  loser  and  the  
is  illegal  as  against  public  policy.     petitioner,   the   winner.   The   petitioner   would   keep   the   money   or   collect  
  the   difference   from   the   private   respondent.   This   is   clearly   a   form   of  
The   facts   as   disclosed   by   the   evidence   on   record   show   that   private   gambling   provided   for   with   unmistakeable   certainty   under   Article  
respondent   made   arrangements   with   Elizabeth   Diaz,   Account   2018  abovestated.  It   would   thus   be   governed   by   the   New   Civil   Code  
Executive   of   petitioner   for   her   to   see   Mr.   Albert   Chiam,   petitioner's   and   not   by   the   Revised   Securities   Act   nor   the   Rules   and  
Branch   Manager.   The   contract   signed   by   private   respondent   purports   Regulations  on  Commodity  Futures  Trading  laid  down  by  the  SEC.  
to   be   for   the   delivery   of   goods   with   the   intention   that   the   difference    
between   the   price   stipulated   and   the   exchange   or   market   price   at   the   Article   1462   of   the   New   Civil   Code   does   not   govern   this   case   because  
time  of  the  pretended  delivery  shall  be  paid  by  the  loser  to  the  winner   the   said   provision   contemplates   a   contract   of   sale   of   specific   goods  
  where   one   of   the   contracting   parties   binds   himself   to   transfer   the  
The   trading   contract   signed   by   private   respondent   and   Albert   Chiam,   ownership   of   and   deliver   a   determinate   thing   and   the   other   to   pay  
representing   petitioner,   is   a   contract   for   the   sale   of   products   for   future   therefore   a   price   certain   in   money   or   its   equivalent.   The   said   article  
delivery,  in  which  either  seller  or  buyer  may  elect  to  make  or  demand   requires   that   there   be   delivery   of   goods,   actual   or   constructive,   to   be  
delivery   of   goods   agreed   to   be   bought   and   sold,   but   where   no   such   applicable.  In  the  transaction  in  question,  there  was  no  such  delivery;  
delivery   is   actually   made.   By   delivery   is   meant   the   act   by   which   the   res   neither  was  there  any  intention  to  deliver  a  determinate  thing  

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  margin,  guarantee  or  secure  any  trade  or  contract  that  results  or  may  
After   considering   all   the   evidence   in   this   case,   it   appears   that   result  therefrom.  
petitioner   and   private   respondent   did   not   intend,   in   the   deals   of  
purchasing   and   selling   for   future   delivery,   the   actual   or  
CEMCO  HOLDINGS  VS.  NATIONAL  LIFE  INSURANCE  
constructive   delivery   of   the   goods/commodity,   despite   the  
G.R.  No.  171815.  August  7,  2007  
payment   of   the   full   price   therefor.  The  contract  between  them  falls  
 
under   the   definition   of   what   is   called   "futures".   The   payments   made  
FACTS:  
under   said   contract   were   payments   of   difference   in   prices   arising   out  
Union   Cement   Corporation   (UCC),   a   publicly-­‐listed   company,   has   two  
of   the   rise   or   fall   in   the   market   price   above   or   below   the   contract   price  
principal   stockholders   —   UCHC   (Union   Cement   Holdings   Corporation),  
thus  making  it  purely  gambling  and  declared  null  and  void  by  law.  
a   non-­‐listed   company,   with   shares   amounting   to   60.51%,   and  
 
petitioner  Cemco  with  17.03%.  Majority  of  UCHC's  stocks  were  owned  
Under   Article   2018,   the   private   respondent   is   entitled   to   refund   from  
by  BCI  (Bacnotan  Consolidated  Industries,  Inc.)    with  21.31%  and  ACC  
the   petitioner   what   she   paid.   There   is   no   evidence   that   the   orders   of  
(Atlas   Cement   Corporation   )   with   29.69%.   Cemco,   on   the   other   hand,  
private   respondent   were   actually   transmitted   to   the   petitioner's  
owned  9%  of  UCHC  stocks.    
principal   in   Hongkong   and   Tokyo.   There   was   no   arrangement   made   by  
In   a   disclosure   letter,   BCI   informed   the   Philippine   Stock   Exchange  
petitioner   with   the   Central   Bank   for   the   purpose   of   remitting   the  
(PSE)   that   it   and   its   subsidiary   ACC   had   passed   resolutions   to   sell   to  
money  of  its  customers  abroad.  The  money  which  was  supposed  to  be  
Cemco  BCI's  stocks  in  UCHC  equivalent  to  21.31%  and  ACC's  stocks  in  
remitted  to  Frankwell  Enterprises  of  Hongkong  was  kept  by  petitioner  
UCHC  equivalent  to  29.69%.    
in   a   separate   account   in   a   local   bank.   Having   received   the   money   and  
 
orders  of  private  respondent  under  the  trading  contract,  petitioner  has  
JULY,  2004  
the   burden   of   proving   that   said   orders   and   money   of   private  
In  the  PSE  Circular  for  Brokers  No.  3146-­‐2004,  it  was  stated  that  as  a  
respondent   had   been   transmitted.   But   petitioner   failed   to   prove   this  
result   of   petitioner   Cemco's   acquisition   of   BCI   and   ACC's   shares   in  
point.  
UCHC,  petitioner's  total  beneficial  ownership,  direct  and  indirect,  
 
in   UCC   has   increased   by   36%   and   amounted   to   at   least   53%   of   the  
ADDITIONAL  INFORMATION:  
shares  of  UCC.    
Commodity  Futures  Contract  -­‐  refer  to  an  agreement  to  buy  or  sell  a  
 
specified  quantity  and  grade  of  a  commodity  at  a  future  date  at  a  price  
As   a   consequence   of   this   disclosure,   the   PSE,   inquired   as   to   whether  
established  at  the  floor  of  the  exchange.  
the  Tender  Offer  Rule  under  Rule  19  of  the  Implementing  Rules  of  the  
 
Securities   Regulation   Code   is   not   applicable   to   the   purchase   by  
Futures   Commission   Merchant/Broker   -­‐   refer   to   a   corporation   or  
petitioner  of  the  majority  of  shares  of  UCC.  Director  Justina  Callangan  
partnership,   which   must   be   registered   and   licensed   as   a   Futures  
of  the  SEC's  Corporate  Finance  Department  responded  to  the  query  of  
Commission   Merchant/Broker   and   is   engaged   in   soliciting   or   in  
the  PSE  that  while  it  was  the  stance  of  the  department  that  the  tender  
accepting  orders  for  the  purchase  or  sale  of  any  commodity  for  future  
offer   rule   was   not   applicable,   the   matter   must   still   have   to   be  
delivery   on   or   subject   to   the   rules   of   the   contract   market   and   that,   in  
confirmed   by   the   SEC   en   banc.   Now,   SEC   en   banc   had   resolved   that   the  
connection  with  such  solicitation  or  acceptance  of  orders,  accepts  any  
Cemco  transaction  was  not  covered  by  the  tender  offer  rule.  
money,   securities   or   property   (or   extends   credit   in   lieu   thereof)   to  
 

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Feeling   aggrieved   by   the   transaction,   respondent   National   Life   administrative   fines,   the   suspension   or   revocation   of  
Insurance   Company   of   the   Philippines,   Inc.,   a   minority   stockholder   of   registrations   with   the   SEC,   and   the   like   is   WITHOUT   MERIT.  
UCC,   sent   a   letter   to   Cemco   demanding   the   latter   to   comply   with   the   Petitioner   stresses   that   there   is   nothing   in   the   statute   which  
rule  on  mandatory  tender  offer.  Cemco,  however,  refused.     authorizes  the  SEC  to  issue  orders  granting  affirmative  reliefs.  
   
AUGUST  2004   SEC   was   acting   pursuant   to   Rule   19   (13)   of   the   Amended  
A  Share  Purchase  Agreement  was  executed  by  ACC  and  BCI,  as  sellers,   Implementing   Rules   and   Regulations   of   the   Securities  
and  Cemco,  as  buyer.  The  transaction  was  consummated  and  closed.     Regulation  Code,  to  wit:    
  13.Violation    
Respondent   National   Life   Insurance   Company   of   the   Philippines,   Inc.   If   there   shall   be   violation   of   this   Rule   by   pursuing   a  
filed   a   complaint   with   the   SEC   asking   it   to   reverse   its   July   2004   purchase   of   equity   shares   of   a   public   company   at  
Resolution  and  to  declare  the  purchase  agreement  of  Cemco  void  and   threshold  amounts  without  the  required  tender  offer,  
praying   that   the   mandatory   tender   offer   rule   be   applied   to   its   UCC   the  Commission,  upon  complaint,  may  nullify  the  said  
shares.   Impleaded   in   the   complaint   were   Cemco,   UCC,   UCHC,   BCI   and   acquisition   and   direct   the   holding   of   a   tender   offer.  
ACC,   which   were   then   required   by   the   SEC   to   file   their   respective   This   shall   be   without   prejudice   to   the   imposition   of  
comment   on   the   complaint.   In   their   comments,   they   were   uniform   in   other  sanctions  under  the  Code.    
arguing  that  the  tender  offer  rule  applied  only  to  a  direct  acquisition  of    
the   shares   of   the   listed   company   and   did   not   extend   to   an   indirect   The   foregoing   rule   emanates   from   the   SEC's   power   and  
acquisition   arising   from   the   purchase   of   the   shares   of   a   holding   authority   to   regulate,   investigate   or   supervise   the  
company  of  the  listed  firm.   activities   of   persons   to   ensure   compliance   with   the  
  Securities   Regulation   Code,   more   specifically   the  
CA:  Affirmed  ruling  of  the  SEC.  It  ruled  that  the  SEC  has  jurisdiction  to   provision   on   mandatory   tender   offer   under   Section   19  
render  the  questioned  decision  and,  in  any  event,  Cemco  was  barred  by   thereof.  
estoppel  from  questioning  the  SEC's  jurisdiction.  It,  likewise,  held  that    
the   tender   offer   requirement   under   the   Securities   Regulation   Code   and   Another   provision   of   the   statute,   which   provides   the   basis   of  
its  Implementing  Rules  applies  to  Cemco's  purchase  of  UCHC  stocks.   Rule   19   (13)   of   the   Amended   Implementing   Rules   and  
  Regulations   of   the   Securities   Regulation   Code,   is   Section   5.1  
ISSUE:   (n),  viz:    
1. WON  SEC  has  jurisdiction    
2. WON  tender  offer  rule  applies  to  CEMCO   [T]he   Commission   shall   have,   among   others,   the  
  following  powers  and  functions:    
HELD:   (n)Exercise  such  other  powers  as  may  be  provided  by  
  law   as   well   as   those   which   may   be   implied   from,   or  
1. YES.     which  are  necessary  or  incidental  to  the  carrying  out  
Contention   of   petitioner   that   the   SEC   can   only   impose   of,   the   express   powers   granted   the   Commission   to  
administrative   sanctions   such   as   the   imposition   of   achieve  the  objectives  and  purposes  of  these  laws.  

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  least   thirty   percent   (30%)   of   such   equity   over   a   period   of   twelve   (12)  
To   deprive   the   SEC   of   this   power   would   render   the   agency   months   shall   make   a   tender   offer   to   stockholders   by   filing   with   the  
inutile,   because   it   would   become   powerless   to   regulate   and   Commission   a   declaration   to   that   effect;   and   furnish   the   issuer,   a  
implement  the  law.   statement   containing   such   of   the   information   required   in   Section   17   of  
  this   Code   as   the   Commission   may   prescribe.   Such   person   or   group   of  
Additional   info:   petitioner   is   barred   from   questioning   the   jurisdiction   persons  shall  publish  all  requests  or  invitations  for  tender,  or  materials  
of  the  SEC.  It  must  be  pointed  out  that  petitioner  had  participated  in  all   making  a  tender  offer  or  requesting  or  inviting  letters  of  such  a  security.  
the  proceedings  before  the  SEC  and  had  prayed  for  affirmative  relief.   Copies   of   any   additional   material   soliciting   or   requesting   such   tender  
  offers  subsequent  to  the  initial  solicitation  or  request  shall  contain  such  
2. TENDER  OFFER  DEFINED:     information   as   the   Commission   may   prescribe,   and   shall   be   filed   with   the  
  Commission  and  sent  to  the  issuer  not  later  than  the  time  copies  of  such  
1. Tender   offer   is   a   publicly   announced   intention   by   a   materials  are  first  published  or  sent  or  given  to  security  holders.  
person   acting   alone   or   in   concert   with   other   persons   to    
acquire   equity   securities   of   a   public   company.   A   public   ***   Under   existing   SEC   Rules,   16   the   15%   and   30%   threshold  
company   is   defined   as   a   corporation   which   is   listed   on   an   acquisition   of   shares   under   the   foregoing   provision   was   increased   to  
exchange,   or   a   corporation   with   assets   exceeding   thirty-­‐five   percent   (35%).   It   is   further   provided   therein   that  
P50,000,000.00   and   with   200   or   more   stockholders,   at   least   mandatory  tender  offer  is  still  applicable  even  if  the  acquisition  is  less  
200  of  them  holding  not  less  than  100  shares  of  such  company.     than  35%  when  the  purchase  would  result  in  ownership  of  over  51%  
of  the  total  outstanding  equity  securities  of  the  public  company.    
2. A   tender   offer   is   an   offer   by   the   acquiring   person   to    
stockholders   of   a   public   company   for   them   to   tender   their  
QUESTION:   IS   PETITIONER   COVERED   BY   MANDATORY   TENDER  
shares   therein   on   the   terms   specified   in   the   offer.   Tender   offer  
OFFER  RULE?  
is   in   place   to   protect   minority   shareholders   against   any  
 
scheme   that   dilutes   the   share   value   of   their   investments.   It  
YES!  
gives   the   minority   shareholders   the   chance   to   exit   the  
 
company   under   reasonable   terms,   giving   them   the  
The  SEC  and  the  Court  of  Appeals  accurately  pointed  out  that  the  
opportunity   to   sell   their   shares   at   the   same   price   as   those   of  
coverage  of  the  mandatory  tender  offer  rule  covers  not  only  direct  
the  majority  shareholders.    
acquisition   but   also   indirect   acquisition   or   "any   type   of  
 
acquisition".  
BASIS:  Under  Section  19  of  Republic  Act  No.  8799,  it  is  stated:    
 
 
This   is   clear   from   the   discussions   of   the   Bicameral   Conference  
Tender  Offers.  19.1.  (a)  Any  person  or  group  of  persons  acting  in  concert  
Committee  on  the  Securities  Act  of  2000,  on  17  July  2000.    
who   intends   to   acquire   at   least   fifteen   percent   (15%)   of   any   class   of  
 
any   equity   security   of   a   listed   corporation   or   of   any   class   of   any   equity  
SEN.  S.  OSMEÑA.    
security   of   a   corporation   with   assets   of   at   least   Fifty   million   pesos  
Eto   ang   mangyayari   diyan,   eh.   Somebody   controls   67%   of   the  
(P50,000,000.00)   and   having   two   hundred   (200)   or   more   stockholders  
Company.  Of  course,  he  will  pay  a  premium  for  the  first  67%.  Control  
with  at  least  one  hundred  (100)  shares  each  or  who  intends  to  acquire  at  

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yan,  eh.  Eh,  kawawa  yung  mga  maiiwan,  ang  33%  because  the  value  of   bottomline  of  the  law  is  to  give  the  shareholder  of  the  listed  company  
the   stock   market   could   go   down,   could   go   down   after   that,   because   the   opportunity   to   decide   whether   or   not   to   sell   in   connection   with   a  
there   will   (p.   41)   be   no   more   market.   Wala   nang   gustong   bumenta.   transfer  of  control.  .  .  .  .  
Wala   nang   .   .   .   I   mean   maraming   gustong   bumenta,   walang   gustong    
bumili   kung   hindi   yung   majority   owner.   And   they   will   not   buy.   They   Add’l  info:  WON  the  ruling  on  mandatory  tender  offer  rule  should  not  
already   have   67%.   They   already   have   control.   And   this   protects   the   have  retroactive  effect.  The  rule  applies  retroactively  to  the  petitioner  
minority.  And  we  have  had  a  case  in  Cebu  wherein  Ayala  A  who  already   because   the   ruling   relied   by   the   petitioner   was   only   a   mere   advisory  
owned   40%   of   Ayala   B   made   an   offer   for   another   40%   of   Ayala   B   opinion.   Jurisprudence   has   it   that   an   advisory   opinion   of   an   agency  
without   offering   the   20%.   Kawawa   naman   yung   nakahawak   ngayon   ng   may   be   stricken   down   if   it   deviates   from   the   provision   of   the   statute.  
20%.   Ang   baba   ng   share   sa   market.   But   we   did   not   have   a   law   Since   the   letter   dated   27   July   2004   runs   counter   to   the   Securities  
protecting  them  at  that  time.  (mng:  That  if  a  certain  group  achieves  a   Regulation   Code,   the   same   may   be   disregarded   as   what   the   SEC   has  
certain  amount  of  ownership  in  a  corporation,  yeah,  he  is  obligated  to   done  in  its  decision  dated  14  February  2005.  
buy  anybody  who  wants  to  sell.)    
  ABACUS  SECURITIES  vs.  AMPIL  
**   naintindihan   niyo   ba?   From   my(TIN’s)   point   of   view,   sabi   pag   G.R.  No.    160016  –  February  27,  2006  
majority  owner  ka  na  let’s  say  51%,  siyempre  pag  ibebenta  ng  owners    
nung   remaining   49%   yung   share   nila,   e   wala   na   gusto   bumili   kasi   kahit   FACTS:  
bilhin  ng  iba  duhh  minority  parin  sila,  on  the  other  hand,  hindi  na  din   Herein  petitioner,  Abacus  Securities  Corp.  (ASC)  is  engaged  in  business  
bibilhin   nung   majority   stockholder   kasi   nga   may   control   na   siya   bat   pa   as   a   broker   and   dealer   of   securities   of   listed   companies   at   the  
niya  bibilhin,  ganyan.     Philippine   Stock   Exchange     (PSE)   Center.   Sometime   in   April   1997,  
  respondent  Ampil  opened  a  cash  or  regular  account  with  petitioner  for  
The   legislative   intent   of   Section   19   of   the   Code   is   to   regulate   the   purpose   of   buying   and   selling   securities   as   evidenced   by   the  
activities   relating   to   acquisition   of   control   of   the   listed   company   Account   Application   Form.   The   parties’   business   relationship   was  
and   for   the   purpose   of   protecting   the   minority   stockholders   of   a   governed  by  the  terms  and  conditions  therein.  
listed  corporation.  Whatever  may  be  the  method  by  which  control  
of   a   public   company   is   obtained,   either   through   the   direct   Since  April  10,  1997,  Ampil  actively  traded  his  account,  and  as  a  result  
purchase   of   its   stocks   or   through   an   indirect   means,   mandatory   of  such  trading  activities,  he  accumulated  an  outstanding  obligation  in  
tender  offer  applies.   favor  of  ASC  in  the  principal  sum  of  P6,617,036.22  as  of  April  30,  1997.  
  Despite  the  lapse  of  period  within  which  to  pay  his  account  as  well  as  
Ownership  acquisition  means  both  direct  and  indirect.  What  is  decisive   sufficient  time  given  by  ASC  to  settle  his  account,  respondent  failed  to  
is   the   determination   of   the   power   of   control.   The   legislative   intent   do   so.   ASC   then   sold   respondent’s   securities   to   set   off   against   his  
behind   the   tender   offer   rule   makes   clear   that   the   type   of   activity   unsettled  obligations.  
intended   to   be   regulated   is   the   acquisition   of   control   of   the   listed    
company   through   the   purchase   of   shares.   Control   may   [be]   effected   After  the  sale,  it  showed  that  respondent  still  has  remaining  unsettled  
through  a  direct  and  indirect  acquisition  of  stock,  and  when  this  takes   obligation  in  the  amount  of  P3,364,313.56.  A  letter  of  demand  was  sent  
place,   irrespective   of   the   means,   a   tender   offer   must   occur.   The   to  respondent  and  the  latter  acknowledged  the  letter  and  admitted  his  

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obligation  and  requested  for  60  days  to  raise  funds  to  settle  the  same.     According   to   the   RTC,   by   allowing   respondent   to   trade   his   account  
After   the   lapse   of   the   requested   extension,   respondent   failed   and   actively   without   cash,   petitioner   effectively   induced   him   to   purchase  
refused  to  pay  his  accountabilities.   securities  thereby  incurring  excessive  credits.  
   
For   his   defense,   respondent   claims   that   he   was   induced   to   trade   in   a   RTC   concluded   that   both   petitioner   and   respondent   were   in   pari  
stock   security   with   ASC   because   the   latter   allowed   offset   settlements   delicto  and  therefore  without  recourse  against  each  other.  
wherein  he  is  not  obliged  to  pay  the  purchase  price.  Rather,  it  waits  for    
the   customer   to   sell.   And   if   there   is   a   loss,   ASC   only   requires   the   On   appeal,   the   CA   upheld   RTC’s   finding   that   the   parties   were   in   pari  
payment   of   the   deficiency   (i.e.,   the   difference   between   the   higher   delicto.  It  likewise  debunked  petitioner’s  contention  that  the  trial  court  
buying  price  and  the  lower  selling  price).   lacked   jurisdiction   to   determine   violations   of   the   RSA.   Hence,   this  
  petitions.  
Respondent  further  claims  that  all  his  trades  with  ASC  were  not  paid  in    
full   in   cash   at   anytime   after   purchase   or   within   the   T+4   [4   days   ISSUES:  
subsequent   to   trading]   and   none   of   these   trades   was   cancelled   by   1. WON  the  pari  delicto  rule  is  applicable  in  the  present  case  
petitioner.  Neither  did  ASC  apply  with  either  the  PSE  or  the  SEC  for  an   2. WON  the  trial  court  had  jurisdiction  over  the  case  
extension  of  time  for  the  payment  of  his  cash  purchases.  This  was  not    
brought  to  his  attention  by  his  broker  and  so  with  the  requirement  of   HELD:  
collaterals   in   margin   account.   Thus,   his   trade   under   an   offset   The  petition  is  partly  meritorious.  
transaction  with  ASC  is  unlimited  subject  only  to  the  discretion  of  the    
broker.   (1)The   provisions   governing   the   above   transactions   are   Sections   23  
  and  25  of  the  RSA  and  Rule  25-­‐1  of  the  RSA  Rules.  
Also,   respondent   avers   that   had   petitioner   followed   the   provision    
under   par.   8   of   Exh.   ‘A-­‐1’   which   stipulated   the   liquidation   within   the   "The   main   purpose   is   to   give   a   government   credit   agency   an   effective  
T+3   [3   days   subsequent   to   trading],   his   net   deficit   would   only   be   method   of   reducing   the   aggregate   amount   of   the   nation’s   credit  
P1,601,369.59.     resources  which  can  be  directed  by  speculation  into  the  stock  market  
  and  out  of  other  more  desirable  uses  of  commerce  and  industry  x  x  x."  
The  RTC  of  Makati  City  ruled  that  ASC  violated  Secs.  23  and  25  of  the    
Revised   Securities   Act   (RSA)   and   Rule   2501   of   the  Rules   Implementing   Otherwise   stated,   the   margin   requirements   set   out   in   the   RSA   are  
the  Act  (RSA  Rules)  when  it  failed  to:  1)  require  the  respondent  to  pay   primarily  intended  to  achieve  a  macroeconomic  purpose  -­‐-­‐  the  protection  
for   his   stock   purchases   within   three   (T+3)   or   four   days   (T+4)   from   of   the   overall   economy   from   excessive   speculation   in   securities.   Their  
trading;   and   2)   request   from   the   appropriate   authority   an   extension   of   recognized  secondary  purpose  is  to  protect  small  investors.  
time   for   the   payment   of   respondent’s   cash   purchases.   The   trial   court      
noted   that   despite   respondent’s   non-­‐payment   within   the   required   The   law   places   the   burden   of   compliance   with   margin   requirements  
period,  petitioner  did  not  cancel  the  purchases  of  respondent.  Neither   primarily   upon   the   brokers   and   dealers.   Sections   23   and   25   and   Rule  
did  it  require  him  to  deposit  cash  payments  before  it  executed  the  buy   25-­‐1,  otherwise  known  as  the  "mandatory  close-­‐out  rule,"  clearly  vest  
and/or   sell   orders   subsequent   to   the   first   unsettled   transaction.   upon  petitioner  the  obligation,  not  just  the  right,  to  cancel  or  otherwise  

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liquidate   a   customer’s   order,   if   payment   is   not   received   within   three    

days  from  the  date  of  purchase.  The   word   "shall"   as   opposed   to   the   In  the  present  case,  petitioner  obviously  failed  to  enforce  the  terms  and  
word   "may,"   is   imperative   and   operates   to   impose   a   duty,   which   conditions  of  its  Agreement  with  respondent,  specifically  paragraph  8  
may   be   legally   enforced.   For   transactions   subsequent   to   an   unpaid   thereof,  purportedly  acting  on  the  plea  of  respondent  to  give  him  time  
order,   the   broker   should   require   its   customer   to   deposit   funds   into   the   to   raise   funds   therefor.   These   stipulations,   in   relation   to   paragraph   4,  
account   sufficient   to   cover   each   purchase   transaction   prior   to   its   constituted   faithful   compliance   with   the   RSA.   By   failing   to   ensure  
execution.   These   duties   are   imposed   upon   the   broker   to   ensure   respondent’s   payment   of   his   first   purchase   transaction   within   the  
faithful   compliance   with   the   margin   requirements   of   the   law,   period   prescribed   by   law,   thereby   allowing   him   to   make   subsequent  
which   forbids   a   broker   from   extending   undue   credit   to   a   purchases,   petitioner   effectively   converted   respondent’s   cash   account  
customer.   into  a  credit  account.  However,   extension   or   maintenance   of   credits  
  on   nonmargin   transactions,   are   specifically   prohibited   under  
Respondent  Liable  for  the  First,   Section   23(b).   Thus,   petitioner   was   remiss   in   its   duty   and   cannot   be  
But  Not  for  the  Subsequent  Trades   said  to  have  come  to  court  with  "clean  hands"  insofar  as  it  intended  to  
Since   a   brokerage   relationship   is   essentially   a   contract   for   the   collect  on  transactions  subsequent  to  the  initial  trades  of  April  10  and  
employment   of   an   agent,   principles   of   contract   law   also   govern   the   11,  1997.  
broker-­‐principal  relationship.    
  Respondent  Equally  Guilty  
The   right   to   collect   cannot   be   denied   to   petitioner   as   the   initial   for  Subsequent  Trades  
transactions  were  entered  pursuant  to  the  instructions  of  respondent.   On   the   other   hand,   we   find   respondent   equally   guilty   in   entering   into  
The  obligation  of  respondent  for  stock  transactions  made  and  entered   the   transactions   in   violation   of   the   RSA   and   RSA   Rules.   We   are   not  
into   on   April   10   and   11,   1997   remains   outstanding.   These   transactions   prepared   to   accept   his   self-­‐serving   assertions   of   being   an   "innocent  
were  valid  and  the  obligations  incurred  by  respondent  concerning  his   victim"   in   all   the   transactions.   Rather,   he   is   an   experienced   and  
stock  purchases  on  these   dates   subsist.   At   that   time,   there   was   no   knowledgeable  trader  who  is  well  versed  in  the  securities  market  and  
violation  of  the  RSA  yet.  Petitioner’s  fault  arose  only  when  it  failed   who   made   his   own   investment   decisions.   In   fact,   in   the   Account  
to:   1)   liquidate   the   transactions   on   the   fourth   day   following   the   Opening  Form  (AOF),  he  indicated  that  he  had  excellent  knowledge  of  
stock  purchases,  or  on  April  14  and  15,  1997;  and  2)  complete  its   stock   investments;   had   experience   in   stocks   trading,   considering   that  
liquidation   no   later   than   ten   days   thereafter,   applying   the   he   had   similar   accounts   with   other   firms.41   Obviously,   he   knowingly  
proceeds   thereof   as   payment   for   respondent’s   outstanding   speculated   on   the   market,   by   taking   advantage   of   the   "no-­‐cash-­‐out"  
obligation.33   arrangement  extended  to  him  by  petitioner.  
   
It   should   be   clear   that   Congress   imposed   the   margin   The   SC   noted   that   it   was   respondent   who   repeatedly   asked   for   some  
requirements   to   protect   the   general   economy,   not   to   give   the   time   to   pay   his   obligations   for   his   stock   transactions.   Petitioner  
customer  a  free  ride  at  the  expense  of  the  broker.38  Not  to  require   acceded   to   his   requests.   It   is   only   when   sued   upon   his   indebtedness  
respondent   to   pay   for   his   April   10   and   11   trades   would   put   a   that   respondent   raised   as   a   defense   the   invalidity   of   the   transactions  
premium  on  his  circumvention  of  the  laws  and  would  enable  him   due   to   alleged   violations   of   the   RSA.   It   was   respondent’s   privilege   to  
to  enrich  himself  unjustly  at  the  expense  of  petitioner.   gamble  or  speculate,  as  he  apparently  did  so  by  asking  for  extensions  

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of   time   and   refraining   from   giving   orders   to   his   broker   to   sell,   in   the   WHEREFORE,   the   assailed   Decision   and   Resolution   of   the   Court   of  
hope   that   the   prices   would   rise.   Sustaining   his   argument   now   would   Appeals   are   hereby   MODIFIED.   Respondent   is   ordered   to   pay  
amount   to   relieving   him   of   the   risk   and   consequences   of   his   own   petitioner   the   difference   between   the   former’s   outstanding   obligation  
speculation   and   saddling   them   on   the   petitioner   after   the   result   was   as   of   April   11,   1997   less   the   proceeds   from   the   mandatory   sell   out   of  
known  to  be  unfavorable.   shares   pursuant   to   the   RSA   Rules,   with   interest   thereon   at   the   legal  
  rate  until  fully  paid.  
In  the  final  analysis,  both  parties  acted  in  violation  of  the  law  and  did  
not   come   to   court   with   clean   hands   with   regard   to   transactions   PHIL.  VETERANS  BANK  VS.  CALLANGAN  
subsequent  to  the  initial  trades  made  on  April  10  and  11,  1997.  Thus,   G.R.  No.  191995  –  August  3,  2011  
the   peculiar   facts   of   the   present   case   bar   the   application   of   the   pari    
delicto   rule   -­‐-­‐   expressed   in   the   maxims   "Ex   dolo   malo   non   oritur   FACTS:  
action"   and   "In   pari   delicto   potior   est   conditio   defendentis"   -­‐-­‐   to   all   the   Respondent   Justina   F.   Callangan,   the   Director   of   the   Corporation  
transactions  entered  into  by  the  parties.  The  pari  delecto  rule  refuses   Finance   Department   of   the   Securities   and   Exchange   Commission   (SEC),  
legal   remedy   to   either   party   to   an   illegal   agreement   and   leaves   them   sent   the   Bank   a   letter,   informing   it   that   it   qualifies   as   a   "public  
where   they   were.43In   this   case,   the   pari   delicto   rule   applies   only   to   company"   under   Section   17.2   of   the   Securities   Regulation   Code   (SRC)  
transactions  entered  into  after  the  initial  trades  made  on  April  10  and   in   relation   with   Rule   3   (1)   (m)   of   the   Amended   Implementing   Rules  
11,  1997.   and  Regulations  of  the  SRC.  The  Bank  is  thus  required  to  comply  with  
  the   reportorial   requirements   set   forth   in   Section   17.1   of   the   SRC.   The  
(2)   The   instant   controversy   is   an   ordinary   civil   case   seeking   to   enforce   Bank   responded   by   explaining   that   it   should   not   be   considered   a  
rights   arising   from   the   Agreement   (AOF)   between   petitioner   and   "public   company"   because   it   is   a   private   company   whose   shares   of  
respondent.  It  relates  to  acts  committed  by  the  parties  in  the  course  of   stock   are   available   only   to   a   limited   class   or   sector,  i.e.,   to   World   War   II  
their   business   relationship.   The   purpose   of   the   suit   is   to   collect   veterans,  and  not  to  the  general  public.    In  a  letter  dated  April  20,  2004,  
respondent’s   alleged   outstanding   debt   to   petitioner   for   stock   Director   Callangan   rejected   the   Bank's   explanation   and   assessed   it   a  
purchases.   total  penalty  of  One  Million  Nine  Hundred  Thirty-­‐Seven  Thousand  Two  
  Hundred   Sixty-­‐Two   and   80/100   Pesos   (P1,937,262.80)   for   failing   to  
To   be   sure,   the   RSA   and   its   Rules   are   to   be   read   into   the   Agreement   comply   with   the   SRC   reportorial   requirements   from   2001   to   2003.   The  
entered  into  between  petitioner  and  respondent.  Compliance  with  the   Bank   moved   for   the   reconsideration   of   the   assessment,   but   Director  
terms  of  the  AOF  necessarily  means  compliance  with  the  laws.  Thus,  to   Callangan   denied   the   motion   in   SEC-­‐CFD   Order   No.   085,   Series   of   2005  
determine   whether   the   parties   fulfilled   their   obligations   in   the   AOF,   dated  July  26,  2005.  4  When  the  SEC  En  Banc  also  dismissed  the  Bank's  
this   Court   had   to   pass   upon   their   compliance   with   the   RSA   and   its   appeal  for  lack  of  merit  in  its  Order  dated  August  31,  2006,  prompting  
Rules.   This,   in   no   way,   deprived   the   Securities   and   Exchange   the   Bank   to   file   a   petition   for   review   with   the   Court   of   Appeals   (CA).  
Commission  (SEC)  of  its  authority  to  determine  willful  violations  of  the   The   CA   dismissed   the   petition   and   affirmed   the   assailed   SEC   ruling,  
RSA   and   impose   appropriate   sanctions   therefor,   as   provided   under   with   the   modification   that   the   assessment   of   the   penalty   be  
Sections  45  and  46  of  the  Act.   recomputed  from  May  31,  2004.  
   
 

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ISSUE:   hundred  (200)  or  more  holders  each  holding  at  

Whether  or  not  petitioner  is  a  public  company.   least   one   hundred   (100)   shares   of   a   class   of   its  
  equity   securities:   Provided,   however,   That   the  
HELD:   obligation   of   such   issuer   to   file   reports   shall   be  
terminated   ninety   (90)   days   after   notification   to   the  
  Yes.   Section   17.Periodic   and   Other   Reports   of   Commission   by   the   issuer   that   the   number   of   its  
Issuers.  —   holders  holding  at  least  one  hundred  (100)  shares  is  
  reduced  to  less  than  one  hundred  (100).  
17.1.Every   issuer   satisfying   the   requirements   in    
Subsection   17.2   hereof   shall   file   with   the   Rule   3   (1)   (m)   of   the   Amended   Implementing   Rules   and   Regulations   of  
Commission:   the   SRC   defines   a   "public   company"   as   "any   corporation   with   a   class   of  
  equity   securities   listed   on   an   Exchange   or   with   assets   in   excess   of  
a)Within   one   hundred   thirty-­‐five   (135)   days,   after   Fifty   Million   Pesos   (P50,000,000.00)   and   having   two   hundred  
the  end  of  the  issuer's  fiscal  year,  or  such  other  time   (200)   or   more   holders,   at   least   two   hundred   (200)   of   which   are  
as  the  Commission  may  prescribe,  an  annual  report   holding   at   least   one   hundred   (100)   shares   of   a   class   of   its   equity  
which  shall  include,  among  others,  a  balance  sheet,   securities."  
profit   and   loss   statement   and   statement   of   cash    
flows,   for   such   last   fiscal   year,   certified   by   an   From   these   provisions,   it   is   clear   that   a   "public   company,"   as  
independent   certified   public   accountant,   and   a   contemplated  by  the  SRC,  is  not  limited  to  a  company  whose  shares  of  
management   discussion   and   analysis   of   results   of   stock  are  publicly  listed;  even  companies  like  the  Bank,  whose  shares  
operations;  and   are  offered  only  to  a  specific  group   of  people,  are  considered  a  public  
  company,  provided  they  meet  the  requirements  enumerated  above.  
b)Such   other   periodical   reports   for   interim   fiscal    
periods   and   current   reports   on   significant   The  records  establish,  and  the  Bank  does  not  dispute,  that  the  Bank  has  
developments  of  the  issuer  as  the  Commission  may   assets   exceeding   P50,000,000.00   and   has   395,998   shareholders.   10   It  
prescribe  as  necessary  to  keep  current  information   is   thus   considered   a   public   company   that   must   comply   with   the  
on   the   operation   of   the   business   and   financial   reportorial  requirements  set  forth  in  Section  17.1  of  the  SRC.  
condition  of  the  issuer.    
  ADDITIONAL:  
17.2.The   reportorial   requirements   of   Subsection   Petitioner   argues   that   even   assuming   it   is   considered   a   "public  
17.1  shall  apply  to  the  following:   company"  pursuant  to  Section  17  of  the  SRC,  the  Court  should  interpret  
  the  pertinent  SRC  provisions  in  such  a  way  that  no  financial  prejudice  
xxx  xxx  xxx   is   done   to   the   thousands   of   veterans   who   are   stockholders   of   the   Bank.  
c)An   issuer   with   assets   of   at   least   Fifty   million   Given   that   the   legislature   intended   the   SRC   to   apply   only   to   publicly  
pesos   (P50,000,000.00)   or   such   other   amount   as   traded  companies,  the  Court  should  exempt  the  Bank  from  complying  
the   Commission   shall   prescribe,   and   having   two   with  the  reportorial  requirements.  ATI  CcS  

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On   this   point,   the   Bank   is   apparently   referring   to   the   obligation   set  

forth  in  Subsections  17.5  and  17.6  of  the  SRC,  which  provide:   SEC  vs.  INTERPORT  RESOURCES  ET  AL.  
  G.R.  No.135808  –  October  6,  2008  
Section   17.5.   Every   issuer   which   has   a   class   of    
equity  securities  satisfying  any  of  the  requirements   FACTS:  
in  Subsection  17.2  shall  furnish   to   each   holder   of   On   August   6,   1994,   the   Board   of   Directors   of   IRC   approved   a  
such   equity   security   an   annual   report   in   such   Memorandum   of   Agreement   with   Ganda   Holdings   Berhad   to   acquire  
form   and   containing   such   information   as   the   100%   of   the   capital   stock   of   Ganda   Energy   Holdings,   Inc.   for   the  
Commission  shall  prescribe.   operation   of   a   102   megawatt   gas   turbine   power   generating   barge.   As  
  agreed,   GEHI   would   also   assume   a   5-­‐year   power   contract   with   the  
Section   17.6.   Within   such   period   as   the   Commission   National  Power  Corporation.  In  exchange,  IRC  will  issue  to  GHB  55%  of  
may  prescribe  preceding  the  annual  meeting  of  the   the  expanded  capital  stock  of  IRC.  On  the  side,  IRC  would  acquire  67%  
holders   of   any   equity   security   of   a   class   entitled   to   of  the  entire  capital  stock  of  the  Philippine  Racing  Club  Inc.  that  owns  
vote   at   such   meeting,   the   issuer   shall   transmit   to   25.724  hectares  of  real  estate  in  Makati.  Under  the  Agreement,  GHB,  a  
such   holders   an   annual   report   in   conformity   with   member   of   the   Westmont   Group   of   Companies   in   Malaysia,   shall  
Subsection  17.5.     extend  or  arrange  a  loan  required  to  pay  for  the  proposed  acquisition  
  by   IRC   of   PRCI.   On   August   8,   IRC   alleged   that   a   press   release  
The   Bank   ignores   the   fact   that   the   first   and   fundamental   duty   of   the   announcing   the   approval   of   the   Agreement   was   sent   through   fax   to   the  
Court  is  to  apply  the  law.  11  Construction  and  interpretation  come  only   PSE   and   the   SEC,   but   that   the   fax   machine   of   SEC   cannot   receive   it.  
after   a   demonstration   that   the   application   of   the   law   is   impossible   or   Upon  advice  of  the  SEC,  IRC  sent  a  press  release  the  following  morning.  
inadequate  unless  interpretation  is  resorted  to.  12  In  this  case,  we  see   However,   SEC   averred   that   it   failed   to   make   timely   public   disclosures  
the  law  to  be  very  clear  and  free  from  any  doubt  or  ambiguity;  thus,  no   of   its   negotiations   with   GHB   and   that   some   of   its   directors   heavily  
room  exists  for  construction  or  interpretation.   traded  IRC  shares  utilizing  this  material  insider  information.  Later,  the  
  SEC   Chairman   required   it   to   submit   a   copy   of   the   MOA   and   directed   all  
Additionally,  and  contrary  to  the  Bank's  claim,  the  Bank's  obligation  to   of  IRC's  principal  officers  to  appear  before  a  hearing  conducted  by  its  
provide  its  stockholders  with  copies  of  its  annual  report  is  actually  for   Brokers   and   Exchange   Department   to   explain   such   failure.   IRC  
the  benefit  of  the  veterans-­‐stockholders,  as  it  gives  these  stockholders   complied.   The   Chairman   later   found   IRC   to   have   violated   the   Rules   of  
access   to   information   on   the   Bank's   financial   status   and   operations,   Disclosure   by   some   of   its   officers   and   directors   entering   into  
resulting   in   greater   transparency   on   the   part   of   the   Bank.   While   transactions  involving  IRC  shares  in  violation  of  the  Revised  Securities  
compliance   with   this   requirement   will   undoubtedly   cost   the   Bank   Act.   IRC   filed   an   Omnibus   Motion   (later   amended)   alleging   that   SEC  
money,  the  benefit  provided  to  the  shareholders  clearly  outweighs  the   had  no  authority  to  investigate  the  subject  matter  since  under  sec  8  of  
expense.   For   many   stockholders,   these   annual   reports   are   the   only   PD  902-­‐A,  as  amended  by  PD1758,  jurisdiction  was  conferred  upon  the  
means  of  keeping  in  touch  with  the  state  of  health  of  their  investments;   Prosecution   and   Enforcement   Department   of   the   SEC.   IRC   also   claimed  
to   them,   these   are   invaluable   and   continuing   links   with   the   Bank   that   that   SEC   had   violated   its   right   to   due   process   when   it   ordered   that  
immeasurably   contribute   to   the   transparency   in   public   companies   that   respondents  appear  before  SEC  to  show  cause  why  no  administrative,  
the  law  envisions.     civil,   or   criminal   sanctions   should   be   imposed   on   them   and   thus,  

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shifted  the  burden  of  proof  to  the  respondents.  They  filed  a  motion  for   insider.   Insiders   have   the   duty   to   disclose   material   facts   which   are  
continuance  of  proceedings.  The  SEC  issued  an  Omnibus  Ordcr  creating   known  to  them  by  virtue  of  their  position  but  which  are  not  known  to  
a  special  investigating  panel  to  hear  and  decide  the  case  in  accordance   persons  with  whom  they  deal  and  which,  if  known,  would  affect  their  
with   the   Rules   of   Practice   and   Procedure   before   the   PED,   SEC;   to   recall   investment   judgment.   In   some   cases,   however,   there   may   be   valid  
the  show  cause  orders;  nod  to  deny  the  motion  for  continuance  for  lack   corporate   reasons   for   the   nondisclosure   of   material   information.  
of   merit.   Respondents   filed   a   petition   before   the   CA   questioning   the   Where  such  reasons  exist,  an  issuer's  decision  not  to  make  any  public  
Omnibus  Orders  and  prayed  for  Supplemental  Motions  for  the  issuance   disclosures   is   not   ordinarily   considered   as   a   violation   of   insider  
of   a   writ   of   preliminary   injunction.   The   CA   granted   the   motion   and   trading.   At   the   same   time,   the   undisclosed   information   should   not   be  
enjoined   the   SEC   from   doing   such.   It   ruled   that   there   were   no   improperly   used   for   non-­‐corporate   purposes,   particularly   to  
impending  rules  and  regulations  regarding  disclosure,  insider  trading,   disadvantage  other  persons  with  whom  an  insider  might  transact,  and  
or  any  of  the  provisions  of  the  Revised  Securities  Act  that  respondent   therefore   the   insider   must   abstain   from   entering   into   transactions  
allegedly  violated  and  that  SEC  had  no  statutory  authority  to  initiate  or   involving  such  securities.  
file   any   suit   for   civil   liability   under   sec   8,   30,   an   36   of   the   Revised    
Securities  Act.  Hence,  petition  by  SEC.   2.)  Yes.  While  the  absolute  repeal  of  a  law  generally  deprives  a  court  of  
its   authority   to   penalize   the   person   charged   with   the   violation   of   the  
ISSUES:   old   law   prior   to   its   appeal,   an   exception   to   this   rule   comes   about   when  
1.  Whether  sections  8,  30,  and  36  of  the  RSA  require  the  enactment  of   the  repealing  law  punishes  the  act  previously  penalized  under  the  old  
Implementing  Rules  to  make  them  binding  and  effective.   law.    
2.   Whether   criminal   case   may   still   be   filed   against   respondents   despite    
the  repeal  of  said  sections.   (Section  8  of  the  Revised  Securities  Act,  which  previously  provided  for  the  
  registration  of  securities  and  the  information  that  needs  to  be  included  in  
  the   registration   statements,   was   expanded   under   Section   12,   in  
HELD:   connection   with   Section   8   of   the   Securities   Regulations   Code.     Further  
1.)  No.  Sections  8,  30,  and  36  of  the  RSA  do  not  require  the  enactment   details  of  the  information  required  to  be  disclosed  by  the  registrant  are  
of   implementing   rules   to   make   them   binding   and   effective.   The   mere   explained   in   the   Amended   Implementing   Rules   and   Regulations   of   the  
absence  of  implementing  rules  cannot  invalidate  effectively  provisions   Securities   Regulations   Code,   issued   on   30   December   2003,   particularly  
of  law,  where  a  reasonable  construction  that  will  support  the  law  may   Sections  8  and  12  thereof.    
be   given.   Absence   of   any   Constitutional   and   statutory   infirmity,   the      
provisions   are   perfectly   legal   and   binding.   The   intention   of   the   law   is   Section   30   of   the   Revised   Securities   Act   has   been   reenacted   as   Section   27  
the   protection   of   investors   against   fraud,   committed   when   an   insider,   of  the  Securities  Regulations  Code,  still  penalizing  an  insider’s  misuse  of  
using   secret   information,   takes   advantage   over   a   nun   uninformed   material  and  non-­‐public  information  about  the  issuer,  for  the  purpose  of  
investor.  The  term  "insiders”now  includes  persons  whose  relationship   protecting  public  investors.    Section  26  of  the  Securities  Regulations  Code  
or  former  relationship  to  the  issuer  gives  or  gave  them  access  to  a  fact   even   widens   the   coverage   of   punishable   acts,   which   intend   to   defraud  
of   special   significance   about   the   issuer   or   the   security   that   is   not   public  investors  through  various  devices,  misinformation  and  omissions.        
generally   available,   and   one   who   learns   such   a   fact   from   an   insider      
knowing   that   the   person   from   whom   he   learns   the   fact   is   such   an  

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Section  23  of  the  Securities  Regulations  Code  was  practically  lifted  from  
Section  36(a)  of  the  Revised  Securities  Act.    Both  provisions  impose   upon  
(1)  a  beneficial  owner  of  more  than  ten  percent  of  any  class  of  any  equity  
security  or  (2)  a  director  or  any  officer  of  the  issuer  of  such  security,  the  
obligation   to   submit   a   statement   indicating   his   or   her   ownership   of   the  
issuer’s  securities  and  such  changes  in  his  or  her  ownership  thereof.)    

 
 

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