Provident International Resources Corporation vs. Venus

The SEC has regulatory jurisdiction to recall and cancel a stock and transfer book it erroneously registered, as this is a lesser power included in its power to revoke a corporate franchise and is necessary to ensure that each corporation has only one STB.

PIRC is a corporation organized under Philippine law and registered with the SEC on September 20, 1979. The Marcelo group were its incorporators, original stockholders, and directors, while the Asistio group claimed that the Marcelo group acquired PIRC shares as mere trustees for the Asistio group. The SEC's regulatory authority over corporations is the statutory backdrop against which the parties' dispute over PIRC's stock and transfer book is resolved.

Provident International Resources Corporation (PIRC) was registered with the SEC on September 20, 1979, and its incorporators, original stockholders, and directors included Edward T. Marcelo, Constancio D. Francisco, Lydia J. Chuanico, Daniel T. Pascual, and Jose A. Lazaro, collectively known as the Marcelo group. The Asistio group, composed of Luis A. Asistio, Lazaro L. Madara, Alfredo D. Roa III, Joaquin T. Venus, and Jose Ma. Carlos L. Zumel, claimed that the Marcelo group acquired shares in PIRC as mere trustees for the Asistio group. According to the Asistio group, the Marcelo group executed a waiver of pre-emptive right, blank deeds of assignment, and blank deeds of transfer; endorsed in blank their respective stock certificates over all of the outstanding capital stock registered in their names; and completed the blank deeds in 2002 to effect transfers to the Asistio group.

On April 21, 1998, the Supervision and Monitoring Department of the SEC issued a show cause letter to PIRC for its supposed failure to register its STB. On August 6, 2002, the Company Registration and Monitoring Department (CRMD) of the SEC issued a certification stating that verification made on the available records of PIRC showed failure to register its STB. On August 7, 2002, the Asistio group registered PIRC's STB. Upon learning of this, PIRC's assistant corporate secretary, Celedonio Escaño, Jr., requested the SEC for a certification of the registration in 1979 of PIRC's STB. Escaño presented the 1979-registered STB bearing the SEC stamp and the signature of the officer in charge of book registration.

On October 17, 2002, the Asistio group filed in the RTC of Muntinlupa City a complaint docketed as Civil Case No. 02-238 against the Marcelo group. The Asistio group prayed that the Marcelo group be enjoined from acting as directors of PIRC, from physically holding office at PIRC's office, and from taking custody of PIRC's corporate records. On October 30, 2002, the CRMD of the SEC issued a letter recalling the certification it had issued on August 6, 2002 and canceling the 2002-registered STB. Kennedy B. Sarmiento requested the SEC not to cancel the 2002-registered STB. The SEC thus scheduled a conference to determine which of the two STBs is valid, and the parties were ordered to file their respective position papers. On February 12, 2003, the hearing officer ruled that the 1979 STB was authentic and duly executed, recalled the August 6, 2002 certification, canceled the 2002 STB, and held that the STB registered on September 25, 1979 remained valid. The hearing officer found that the 1979 STB was properly presented and stamped received by the then SEC employee in charge of registration; that the signature of Ms. Nelly C. Gabriel appeared genuine and validly executed on September 25, 1979 after comparison with her signature on available records; and that Ms. Angeli G. Villanueva, daughter of Ms. Gabriel, attested that the signature was unquestionably her mother's.

The Asistio group appealed to the SEC Board of Commissioners, claiming that the issue of which of the two STBs is valid is intra-corporate in nature and that the RTC, not the SEC, has jurisdiction. The SEC En Banc denied the appeal, ratiocinating that the determination of which of the two STBs is valid calls for regulatory, not judicial, power and is therefore within its exclusive jurisdiction. The Asistio group elevated the case to the CA, which ruled in their favor. The CA held that the issue of which of the two STBs is valid is intra-corporate and thus subject to the jurisdiction of the RTC, and reversed the SEC ruling. The motion for reconsideration was denied for lack of merit.

During the pendency of the instant petition, the RTC of Muntinlupa City, Branch 276, rendered a decision on April 23, 2005 dismissing the claim of the Asistio group and declaring the Marcelo group the duly constituted officers of PIRC, thus upholding the validity of the 1979-registered STB.

• SEC Regulatory Jurisdiction: Petitioners argued that the CA erred in ruling that the SEC has no jurisdiction over the case; they maintained that the issue is not an intra-corporate dispute but one that calls for the exercise of the SEC's regulatory power over corporations.
• Sub Judice Rule: Petitioners maintained that the recall and cancellation of the 2002-registered STB does not conflict with the proceedings in the civil case so as to violate the sub judice rule, and pointed out that a judgment had in fact been promulgated in the civil case.

• Intra-Corporate Dispute: Respondents countered that resolving which of the two STBs is valid requires first settling the issues of (1) falsification by corporate officers of corporate records and (2) the acquisition of shares by the Asistio group, making the real issue intra-corporate.
• Consequential Recall: Respondents claimed that whether the 2002-registered STB should be recalled is a mere consequence of the real controversies that should be heard by a regular court.

• SEC Jurisdiction over Stock and Transfer Book: Whether the SEC has jurisdiction to recall and cancel a stock and transfer book it issued in 2002 because of its mistaken assumption that no stock and transfer book had been previously issued in 1979.

• SEC Jurisdiction over Stock and Transfer Book: Yes. The SEC has regulatory jurisdiction to recall and cancel the 2002-registered STB; the determination of the 1979 STB's validity and the cancellation of the 2002 STB are within its regulatory power and can be resolved without intra-corporate controversies.

• SEC Jurisdiction over Stock and Transfer Book: Republic Act No. 8799, Sec. 5 grants the SEC broad regulatory powers over corporations, including jurisdiction and supervision over corporations, power to regulate, investigate or supervise activities, impose sanctions, and suspend or revoke certificates of registration after notice and hearing. The SEC's regulatory authority over private corporations is wide because a corporation owes its existence to the concession of its corporate franchise. Since the SEC has the regulatory power to revoke the corporate franchise, it must likewise have the lesser power to merely recall and cancel an STB that was erroneously registered. As the administrative agency responsible for registration and monitoring of STBs, the SEC has primary competence and the means to determine and verify whether the 1979 STB presented by the incumbent assistant corporate secretary was authentic and duly registered in 1979; it is cognizant of STB registration procedures and possesses the pertinent files, records, and specimen signatures of authorized officers. The evaluation of whether an STB was authorized by the SEC primarily requires examination of the STB itself and SEC files, a function that necessarily belongs to the SEC as part of its regulatory jurisdiction. The issues can be resolved without going into the intra-corporate controversies raised by respondents. As regulatory body, the SEC has the duty to ensure only one set of STB for each corporation, and the determination of whether the 1979 STB is valid and whether to cancel the August 6, 2002 certification and the 2002 STB because an existing STB already exists is impliedly and necessarily within its regulatory jurisdiction. The SEC hearing officer examined the 1979 STB and found it properly presented and stamped received by the SEC employee in charge of registration, with the signature of Ms. Nelly C. Gabriel appearing genuine after comparison with records and attested by Ms. Angeli G. Villanueva; the SC found this ruling proper and within SEC jurisdiction. The RTC decision of April 23, 2005 also dismissed the Asistio group's claim and upheld the validity of the 1979-registered STB.

• SEC Regulatory Jurisdiction over Stock and Transfer Books — The SEC's regulatory authority over corporations includes the power to determine the authenticity and validity of a stock and transfer book and to recall and cancel an STB it erroneously registered. The SC reasoned that because the SEC may revoke a corporate franchise after notice and hearing, it must also have the lesser power to recall and cancel an erroneously registered STB.
• Lesser Power Included in Greater Power — The power to recall and cancel an erroneously registered STB is a lesser power necessarily included in the SEC's power to revoke a corporate franchise.
• Primary Competence and Administrative Expertise — As the agency responsible for registration and monitoring of STBs, the SEC has primary competence to verify whether an STB was authentic and duly registered, because it knows STB registration procedures and possesses the pertinent files, records, and specimen signatures.
• Intra-Corporate Dispute Distinguished from Regulatory Power — A dispute over which of two STBs is valid is not necessarily intra-corporate; it can be resolved through the SEC's regulatory power without going into intra-corporate controversies such as falsification of corporate records or acquisition of shares.
• One STB per Corporation — The SEC as regulatory body has the duty to ensure that there is only one set of STB for each corporation, and determining which STB is valid and canceling the erroneous one is within its regulatory jurisdiction.

• "Considering that the SEC, after due notice and hearing, has the regulatory power to revoke the corporate franchise -- from which a corporation owes its legal existence -- the SEC must likewise have the lesser power of merely recalling and canceling a STB that was erroneously registered." — The SC derives the SEC's power to cancel an erroneously registered STB from its greater power to revoke a corporate franchise.
• "As the regulatory body, it is the SEC's duty to ensure that there is only one set of STB for each corporation." — The SC identifies the SEC's regulatory duty that supports its jurisdiction over the conflicting STBs.
• "The evaluation of whether a STB was authorized by the SEC primarily requires an examination of the STB itself and the SEC files. This function necessarily belongs to the SEC as part of its regulatory jurisdiction." — The SC explains why the SEC, not the RTC, has primary competence over the authenticity of the STB.
• "Contrary to the allegations of respondents, the issues involved in this case can be resolved without going into the intra-corporate controversies brought up by respondents." — The SC rejects the Asistio group's characterization of the dispute as necessarily intra-corporate.

• Philippine Stock Exchange, Inc. vs. The Honorable Court of Appeals, G.R. No. 125469, October 27, 1997, 281 SCRA 232, 246 — Cited for the proposition that the SEC's regulatory authority over private corporations is wide and that this authority springs from the corporation's concession of its corporate franchise from the state.
• Securities and Exchange Commission vs. Court of Appeals, G.R. Nos. 106425 & 106431-32, July 21, 1995, 246 SCRA 738, 740 — Cited for the SEC's regulatory responsibilities, including passing upon applications, suspending or revoking certificates of registration after due notice and hearing, compelling legal and regulatory compliance, conducting inspections, and imposing fines or penalties.

• Republic Act No. 8799, Sec. 5 — The SC cited the SEC's powers and functions, including jurisdiction and supervision over corporations, power to regulate, investigate or supervise activities, impose sanctions, suspend or revoke certificates of registration after notice and hearing, and exercise implied or necessary powers; these powers supported the SEC's authority to recall and cancel the erroneously registered 2002 STB.
• Republic Act No. 8799, Sec. 5(a) — The SEC has jurisdiction and supervision over all corporations; applied to support the SEC's regulatory authority over PIRC's STB.
• Republic Act No. 8799, Sec. 5(d) — The SEC may regulate, investigate or supervise the activities of persons to ensure compliance; applied to the SEC's supervision of STB registration.
• Republic Act No. 8799, Sec. 5(m) — The SEC may suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations; applied as the greater power from which the lesser power to recall and cancel an STB is derived.
• Republic Act No. 8799, Sec. 5(n) — The SEC may exercise such other powers as may be provided by law and those implied from or necessary or incidental to its express powers; applied to support the implied power to cancel an erroneously registered STB.