San Miguel Corporation vs. Kahn

A bona fide stockholder owning shares in his own right has standing to bring a derivative suit regardless of the number of shares held, provided he was a stockholder at the time of the complained act, has exhausted intra-corporate remedies, and the cause of action devolves on the corporation; a director’s nomination by the PCGG does not by itself create a disqualifying conflict of interest, and a derivative suit challenging a board resolution as an intra-corporate dispute falls within SEC jurisdiction notwithstanding the involvement of sequestered SMC shares.

San Miguel Corporation is the corporation whose shares were placed under a Voting Trust Agreement and later sequestered by the Presidential Commission on Good Government. Eduardo de los Angeles was a director and owner of 20 shares, while Ernest Kahn and the other respondents were fellow directors. The dispute implicated Executive Orders Nos. 1 and 2, which prohibited the transfer, conveyance, encumbrance, concealment or liquidation of assets and properties acquired by former President Ferdinand Marcos and/or his wife, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, and business associates, and Section 5 of P.D. 902-A, which vested the SEC with jurisdiction over intra-corporate disputes. Prior litigation over the sequestered SMC shares and the PCGG’s voting power under Baseco vs. PCGG formed part of the regulatory and jurisprudential backdrop.

On December 15, 1983, 33,133,266 shares of the outstanding capital stock of San Miguel Corporation were acquired by fourteen corporations and placed under a Voting Trust Agreement in favor of the late Andres Soriano, Jr. After his death, Eduardo M. Cojuangco, Jr. was elected Substitute Trustee on April 9, 1984 with power to delegate the trusteeship in writing to Andres Soriano III. Shortly after the February 1986 Revolution, Cojuangco left the country amid persistent reports that huge and unusual cash disbursements from the funds of SMC had been irregularly made and the resources of the firm extensively used in support of the candidacy of Ferdinand Marcos during the February 1986 snap elections.

On March 26, 1986, an Agreement was executed between Andres Soriano III, as Buyer, and the 14 corporations, as Sellers, for the purchase by Soriano, for himself and as agent of several persons, of the 33,133,266 shares at P100.00 per share, or an aggregate sum of P3,313,326,600.00 payable in specified installments. The Agreement revoked the voting trust and expressed the sellers’ desire to sell the shares to pay certain outstanding and unpaid debts, and Soriano’s wish to purchase them to institutionalize and stabilize management in himself and the professional officer corps and to direct the company toward its principal products and extensive support to the government’s agriculture program. According to Soriano and the other private respondents, the buyer was Neptunia Corporation Limited, a Hongkong company wholly owned by San Miguel International, which was in turn wholly owned by SMC; Neptunia on or about April 1, 1986 made the down payment of P500,000,000.00 from the proceeds of certain loans.

At this point the 33,133,266 SMC shares were sequestered by the PCGG on the ground that the stock belonged to Eduardo Cojuangco, Jr., allegedly a close associate and dummy of former President Marcos, and that the sale contravened Executive Orders Nos. 1 and 2, which prohibited the transfer, conveyance, encumbrance, concealment or liquidation of assets and properties acquired by former President Ferdinand Marcos and/or his wife, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, and business associates. The sequestration was subsequently lifted and the sale allowed to proceed on representations by SMC that the shares were owned by 1.3 million coconut farmers, that the seller corporations were fully owned by said farmers, and that Cojuangco owned only 2 shares in one of the companies. The sequestration was soon re-imposed by PCGG Order dated May 19, 1986, which also forbade the SMC corporate secretary to register any transfer or encumbrance of any of the stock without the PCGG’s prior written authority. SMC promptly suspended payment of the other installments to the fourteen seller corporations, and the latter sued for rescission and damages.

On June 4, 1986, the PCGG directed SMC to issue qualifying shares to seven individuals, including Eduardo de los Angeles, from the sequestered shares registered as street certificates under the control of Anscor-Hagedorn Securities, Inc., to be held in trust by the seven persons for the benefit of Anscor-Hagedorn Securities, Inc. and/or whoever should finally be determined to be the owner of said shares. In December 1986, the SMC Board, by Resolution No. 86-122, decided to assume the loans incurred by Neptunia for the P500,000,000.00 down payment on the 33,133,266 shares. The Board opined that there was nothing illegal in the assumption because Neptunia was an indirectly wholly owned subsidiary of SMC, there was no additional expense or exposure for the SMC Group, and there were tax and other benefits for the SMC group of companies. At the SMC Board meeting on January 30, 1987, de los Angeles impugned Resolution No. 86-12-2, denying that it was ever adopted and stating that what was agreed at the December 4, 1986 meeting was merely a further study by Director Ramon del Rosario of a plan presented by him for the assumption of the loan. De los Angeles also pointed out certain deleterious effects, but he was overruled by the private respondents.

When his efforts to obtain relief within the corporation and later the PCGG proved futile, de los Angeles filed with the SEC in April 1987 a derivative suit in behalf of SMC against ten of the fifteen-member Board who had either voted to approve and/or refused to reconsider and revoke Board Resolution No. 86-12-2. His Amended Petition recited the antecedents and additional facts: on April 1, 1986 Soriano, Kahn and Roxas, as directors of Neptunia, met and passed a resolution authorizing the company to borrow up to US$26,500,000.00 from the Hongkong & Shanghai Banking Corporation, Hongkong “to enable the Soriano family to initiate steps and sign an agreement for the purchase of some 33,133,266 shares of San Miguel Corporation”; the loan was obtained on the same day, with the loan agreement signed for Neptunia by Ralph Kahn and Carl Ottiger, and at Ottiger’s request the proceeds were deposited in different banks for the account of Eduardo J. Soriano; three days later, on April 4, 1986, Soriano III sent identical letters to SMC stockholders soliciting proxies and announcing that the Soriano family, friends and affiliates had acquired a considerable block of SMC shares a few days earlier through the facilities of the Manila Stock Exchange, with 33,133,266 shares purchased for the aggregate price of P3,313,326,600.00, and that the purchase was an exercise of the Sorianos’ right to buy back the same number of shares purchased in 1983 by the fourteen seller corporations. The Amended Petition further alleged that in implementing the assumption of the Neptunia loan and the purchase agreement, which assumption constituted an improper use of corporate funds to pay personal obligations of Andres Soriano III and enabled him to purchase stock of the corporation using funds of the corporation itself, the respondents through various machinations and manipulations, for interior motives and in breach of fiduciary duty, compounded the damages caused SMC by (1) agreeing to pay a higher price for the shares than originally covenanted in order to prevent rescission by the sellers; (2) urging UCPB to accept SMC and Neptunia as buyers of the shares, thereby committing SMC to purchase its own shares for at least 25% higher than the price at which they were fairly traded in the stock exchanges and shifting to said corporations the personal obligations of Soriano III under the purchase agreement; and (3) causing to be applied to the part payment of P1,800,000.00 various assets and receivables of SMC. The complaint prayed for injunction against the execution or consummation of any agreement causing SMC to purchase the shares or entailing the use of its corporate funds or assets for said purchase, and against Andres Soriano III from further using or disposing of the funds or assets of the corporation for his obligations; for nullification of the SMC Board’s resolution of April 2, 1987 making SMC a party to the purchase agreement; and for damages.

The Court of Appeals found that de los Angeles held 20 shares out of 121,645,860, or 0.00001644%; that he was put by the PCGG to vote the majority stock; and that he had not voted in favor of the resolution authorizing the purchase. It also noted that de los Angeles owned the 20 shares in his own right since 1977.

• Procedural Propriety of Certiorari: Petitioner de los Angeles assigned as error the Court of Appeals’ grant of certiorari despite the fact that Kahn had not first resorted to the plain remedy available to him, namely, appeal to the SEC en banc, and despite the fact that no question of jurisdiction was involved.
• Disputed Facts Without Trial: Petitioner argued that the Court of Appeals ruled on Kahn’s petition merely on the basis of his factual allegations, although de los Angeles had disputed them and there had been no trial in the SEC.
• Capacity to File Derivative Suit: Petitioner maintained that the Court of Appeals erred in holding that he could not file a derivative suit as stockholder and/or director of San Miguel Corporation. He invoked the three requisites for a derivative suit: (a) the party bringing suit should be a shareholder as of the time of the act or transaction complained of; (b) he has exhausted intra-corporate remedies by demanding relief from the board of directors, which failed or refused to heed his plea; and (c) the cause of action devolves on the corporation because the wrongdoing or harm was caused to the corporation and not to the particular stockholder. He owned 20 shares in his own right since 1977, had sought board relief without success, and the wrong was against the corporation.
• Exhaustion and Rule 65: Petitioner argued that Kahn had not limited himself to questions of law and could not claim exclusion from the exhaustion doctrine; Rule 65 bars certiorari where a plain, speedy and adequate remedy was available, such as a motion for reconsideration before the SEC en banc.
• Jurisdiction and BASECO: Petitioner contended that respondents had not raised the issue of jurisdiction before the Court of Appeals; the derivative suit did not fall within the BASECO doctrine because it did not involve any question of ownership of the 33,133,266 sequestered SMC shares but rather the validity of the board resolution assuming Neptunia’s loan, an intra-corporate dispute within the SEC’s exclusive jurisdiction.

• SEC Jurisdiction and Sandiganbayan: Respondents asserted that the SEC has no jurisdiction over the dispute because it involves the ownership of the 33,133,266 shares of SMC stock, in light of the Supreme Court’s Resolution in G.R. Nos. 74910, 5075, 75094, 76397, 79459 and 79520, promulgated on August 10, 1988.
• Legal Capacity and PCGG Conflict: Respondents argued that de los Angeles was beholden to the controlling stockholder in the corporation, the PCGG, which had imposed him on the corporation; since the PCGG had a clear conflict of interest with the minority, de los Angeles, as director of the former, had no legal capacity to sue on behalf of the latter.
• Inadequate Representation: Respondents argued that even assuming absence of conflict of interest, de los Angeles did not fairly and adequately represent the interest of the minority stockholders.
• Propriety of Certiorari: Respondents maintained that they properly applied for certiorari with the Court of Appeals because that Court had, by law, exclusive appellate jurisdiction over officers and agencies exercising quasi-judicial functions and hence competence to issue the writ; the principle of exhaustion of administrative remedies did not apply since the issue involved was one of law; they had no plain, speedy and adequate remedy within the SEC; the SEC Investigating Officer’s order denying the motion to dismiss was issued without or in excess of jurisdiction; and de los Angeles had not raised the absence of a motion for reconsideration, which in any event was unnecessary.
• Motion to Dismiss Grounds: Kahn’s motion to dismiss asserted that de los Angeles had no legal capacity because he was merely imposed by the PCGG as a director on San Miguel, held only 20 shares, and had not come to court with clean hands; and that the SEC had no jurisdiction because the matters involved were exclusively within the business judgment of the Board of Directors.

• SEC Jurisdiction: Whether the SEC has jurisdiction over de los Angeles’ derivative suit challenging the SMC board’s assumption of Neptunia’s loans, or whether the matter falls within the Sandiganbayan’s exclusive jurisdiction over sequestered Marcos assets.
• Legal Capacity to Sue / Derivative Suit: Whether de los Angeles, owning only 20 shares and being a PCGG-nominated director, has legal capacity to bring a derivative suit on behalf of San Miguel Corporation.
• Conflict of Interest: Whether de los Angeles’ position as a PCGG nominee creates a disqualifying conflict of interest.
• PCGG Voting of Sequestered Shares: Whether the PCGG’s act of voting sequestered shares to elect de los Angeles as director was unauthorized under Baseco vs. PCGG, thereby disqualifying him from bringing the derivative suit.

• SEC Jurisdiction: Yes. The SEC has jurisdiction over de los Angeles’ derivative suit because it challenges the validity of the board’s assumption of Neptunia’s indebtedness, an intra-corporate dispute under Section 5, P.D. 902-A, and does not require determining ownership of the sequestered SMC shares.
• Legal Capacity to Sue / Derivative Suit: Yes. A stockholder’s bona fide ownership of stock in his own right suffices for standing; the number of shares is immaterial, provided the requisites of a derivative suit are met.
• Conflict of Interest: No. Being a PCGG-nominated director does not by itself disqualify de los Angeles or oblige him to vote as the PCGG wishes; a director must exercise independent judgment.
• PCGG Voting of Sequestered Shares: No. The PCGG’s act of voting sequestered shares to elect de los Angeles was not shown to be unauthorized; Baseco does not prohibit such voting under all circumstances, and official duty is presumed regular.

• SEC Jurisdiction: The Court held that de los Angeles did not oppose the PCGG’s position that the sequestered SMC shares belonged to Ferdinand Marcos and/or his dummies and/or cronies; his consent to sit on the board as PCGG nominee indicated his advocacy of that position. His complaint did not seek annulment of the purchase by SMC of the stock in question, or of the subsequent purchase of the same stock by others, nor did it impugn the right of the PCGG to vote the sequestered stock through its nominee directors. The subject matter of his complaint was the validity of the assumption by SMC of the indebtedness of Neptunia Co., Ltd., allegedly for the benefit of certain officers and stockholders. This issue was distinct from, and did not require inquiry into, whether the 33,133,266 SMC shares sequestered by the PCGG belonged to Marcos and his cronies or dummies. The August 10, 1988 Resolution in G.R. Nos. 74910, 75075, 75094, 76397, 79459 and 79520, citing PCGG vs. Pena, et al., lodged within the Sandiganbayan’s exclusive and original jurisdiction cases regarding the funds, moneys, assets, and properties illegally acquired or misappropriated by former President Marcos, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees, and all incidents arising from, incidental to, or related to such cases. De los Angeles’ complaint, however, did not involve any property illegally acquired or misappropriated by Marcos, et al., or any incidents arising from, incidental to, or related to any case involving such property, but assets indisputably belonging to San Miguel Corporation which were allegedly being illicitly committed by a majority of its board of directors to answer for loans assumed by Neptunia. The dispute concerned acts of the board of directors claimed to amount to fraud and misrepresentation which may be detrimental to the interest of the stockholders, or arose out of intra-corporate relations between and among stockholders, or between any or all of them and the corporation, under Section 5, P.D. 902-A. The contention that the SEC had no jurisdiction over the de los Angeles complaint was therefore rejected.
• Legal Capacity to Sue / Derivative Suit: The theory that de los Angeles had no personality to bring suit in behalf of the corporation because his stockholding was minuscule and there was a conflict of interest between him and the PCGG could not be sustained. The implicit argument that a stockholder, to be considered qualified to bring a derivative suit, must hold a substantial or significant block of stock found no support in the law. The requisites for a derivative suit are: (a) the party bringing suit should be a shareholder as of the time of the act or transaction complained of, the number of his shares not being material; (b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of directors for the appropriate relief but the latter has failed or refused to heed his plea; and (c) the cause of action actually devolves on the corporation, the wrongdoing or harm having been, or being caused to the corporation and not to the particular stockholder bringing the suit. The bona fide ownership by a stockholder of stock in his own right suffices to invest him with standing to bring a derivative action for the benefit of the corporation. The number of his shares is immaterial since he is not suing in his own behalf, or for the protection or vindication of his own particular right, or the redress of a wrong committed against him individually, but in behalf and for the benefit of the corporation. De los Angeles owned 20 shares in his own right since 1977, had sought without success to have the board of directors remedy the wrong, and the wrong was in truth a wrong against the stockholders of the corporation generally and not against him individually.
• Conflict of Interest: The conflict-of-interest theory could not be upheld. From the conceded premise that de los Angeles sat in the SMC Board of Directors by the grace of the PCGG, it did not follow that he was legally obliged to vote as the PCGG would have him do, that he could not legitimately take a position inconsistent with that of the PCGG, or that, not having been elected by the minority stockholders, his vote would necessarily never consider the latter’s interests. The proposition was not only logically indefensible, non sequitur, but also constituted an erroneous conception of a director’s role and function, it being plainly a director’s duty to vote according to his own independent judgment and his own conscience as to what is in the best interests of the company. Apart from the qualifying shares given to him by the PCGG, de los Angeles owned 20 shares in his own right, as regards which he could not from any aspect be deemed beholden to the PCGG, his ownership of these shares being precisely what he invoked as the source of his authority to bring the derivative suit.
• PCGG Voting of Sequestered Shares: The theory, based on the BASECO decision, that the PCGG had no power to vote sequestered shares of stock as an act of dominion but only in pursuance of its power of administration, and that the PCGG’s act of voting the stock to elect de los Angeles to the SMC Board was unauthorized and void, was strained and of no merit. It was not necessary for de los Angeles to be a director in order to bring a derivative action; all he had to be was a stockholder, and he owned in his own right 20 shares of stock, a fact not disputed by the respondents. Nothing in the Baseco decision could be interpreted as ruling that sequestered stock may not under any circumstances be voted by the PCGG to elect a director in the company in which such stock is held. On the contrary, that decision held such act permissible in the context of its reference to the Presidential Memorandum of June 26, 1986 authorizing the PCGG, pending the outcome of proceedings to determine the ownership of sequestered shares of stock, to vote such shares at all stockholders’ meetings called for the election of directors, the only caveat being that the stock is not to be voted simply because the power to do so exists, whether to oust and replace directors or to effect substantial changes in corporate policy, programs or practice, but only for demonstrably weighty and defensible grounds or when essential to prevent disappearance or wastage of corporate property. The issues raised did not peremptorily call for a determination of whether in voting de los Angeles to the San Miguel Board the PCGG kept within the parameters announced in Baseco; absent any showing to the contrary, consistently with the presumption that official duty is regularly performed, it had to be assumed that it did so.

• Derivative Suit — A derivative suit is one brought by a stockholder in behalf and for the benefit of the corporation. The requisites are: (a) the party bringing suit should be a shareholder as of the time of the act or transaction complained of, the number of his shares not being material; (b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of directors for the appropriate relief but the latter has failed or refused to heed his plea; and (c) the cause of action actually devolves on the corporation, the wrongdoing or harm having been, or being caused to the corporation and not to the particular stockholder bringing the suit. The Court applied these requisites and found that de los Angeles satisfied them.
• Standing of a Stockholder in a Derivative Suit — The bona fide ownership by a stockholder of stock in his own right suffices to invest him with standing to bring a derivative action for the benefit of the corporation. The number of his shares is immaterial since he is not suing in his own behalf, or for the protection or vindication of his own particular right, or the redress of a wrong committed against him individually, but in behalf and for the benefit of the corporation. The Court applied this doctrine to uphold de los Angeles’ standing despite his ownership of only 20 shares.
• Director’s Independent Judgment and Conflict of Interest — A director’s duty is to vote according to his own independent judgment and his own conscience as to what is in the best interests of the company. Being nominated by the PCGG does not legally oblige a director to vote as the PCGG would have him do, nor does it automatically create a disqualifying conflict of interest. The Court applied this doctrine to reject the conflict-of-interest theory against de los Angeles.
• SEC Jurisdiction over Intra-Corporate Disputes — Under Section 5, P.D. 902-A, the SEC has jurisdiction over disputes concerning acts of the board of directors claimed to amount to fraud and misrepresentation which may be detrimental to the interest of the stockholders, or arising out of intra-corporate relations between and among stockholders, or between any or all of them and the corporation. The Court applied this provision to hold that the derivative suit fell within SEC jurisdiction.
• Sandiganbayan Exclusive Jurisdiction over Marcos Ill-Gotten Wealth — Cases regarding the funds, moneys, assets, and properties illegally acquired or misappropriated by former President Ferdinand Marcos, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees, whether civil or criminal, are lodged within the exclusive and original jurisdiction of the Sandiganbayan, and all incidents arising from, incidental to, or related to such cases fall likewise under the Sandiganbayan’s exclusive and original jurisdiction, subject to review on certiorari exclusively by the Supreme Court. The Court distinguished this doctrine because de los Angeles’ complaint did not involve any property illegally acquired or misappropriated by Marcos, et al., or any incidents related to such property, but assets indisputably belonging to San Miguel Corporation.
• PCGG Voting of Sequestered Shares / Baseco Doctrine — The PCGG has no power to vote sequestered shares as an act of dominion but only in pursuance of its power of administration. However, Baseco does not rule that sequestered stock may not under any circumstances be voted by the PCGG to elect a director in the company in which such stock is held. The Presidential Memorandum of June 26, 1986 authorized the PCGG, pending the outcome of proceedings to determine ownership of sequestered shares, to vote such shares at all stockholders’ meetings called for the election of directors, subject to the caveat that the stock is not to be voted simply because the power exists, but only for demonstrably weighty and defensible grounds or when essential to prevent disappearance or wastage of corporate property. The Court applied this doctrine and found no showing that the PCGG exceeded the parameters.
• Presumption of Regular Performance of Official Duty — Absent any showing to the contrary, official duty is presumed to have been regularly performed. The Court applied this presumption to assume that the PCGG kept within the parameters announced in Baseco when it voted de los Angeles to the San Miguel Board.

• "The bona fide ownership by a stockholder of stock in his own right suffices to invest him with standing to bring a derivative action for the benefit of the corporation. The number of his shares is immaterial since he is not suing in his own behalf, or for the protection or vindication of his own particular right, or the redress of a wrong committed against him, individually, but in behalf and for the benefit of the corporation." — This passage states the ratio decidendi on the standing of a stockholder to bring a derivative suit and is the Court’s canonical formulation of why the number of shares is immaterial.
• "The proposition is not only logically indefensible, non sequitur, but also constitutes an erroneous conception of a director's role and function, it being plainly a director's duty to vote according to his own independent judgment and his own conscience as to what is in the best interests of the company." — This passage defines the director’s duty of independent judgment and rejects the conflict-of-interest theory against a PCGG-nominated director.
• "His complaint does not involve any property illegally acquired or misappropriated by Marcos, et al., or 'any incidents arising from, incidental to, or related to' any case involving such property, but assets indisputably belonging to San Miguel Corporation which were, in his (de los Angeles') view, being illicitly committed by a majority of its board of directors to answer for loans assumed by a sister corporation, Neptunia Co., Ltd." — This passage distinguishes the Sandiganbayan’s exclusive jurisdiction over Marcos ill-gotten wealth from the SEC’s jurisdiction over the intra-corporate dispute.
• "Nor is there anything in the Baseco decision which can be interpreted as ruling that sequestered stock may not under any circumstances be voted by the PCGG to elect a director in the company in which such stock is held." — This passage clarifies the scope of the Baseco doctrine on the PCGG’s voting of sequestered shares.

• Baseco vs. PCGG, 150 SCRA 181 (May 27, 1987) — Cited by the Court of Appeals and discussed by the Supreme Court; held that the PCGG cannot exercise acts of dominion over sequestered property and has only powers of administration, and that its voting of sequestered stock must be done only pursuant to its power of administration. The Supreme Court clarified that Baseco does not prohibit the PCGG from voting sequestered stock to elect a director under all circumstances.
• PCGG vs. Pena, et al., G.R. No. 77663, April 12, 1988 — Cited for the rule that cases regarding the funds, moneys, assets, and properties illegally acquired or misappropriated by former President Marcos, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees, whether civil or criminal, are lodged within the exclusive and original jurisdiction of the Sandiganbayan, and all incidents arising from, incidental to, or related to such cases fall likewise under the Sandiganbayan’s exclusive and original jurisdiction. The Court distinguished this precedent because de los Angeles’ complaint did not involve such property or incidents.
• Pascual vs. Orozco, 19 Phil. 82 — Cited for the derivative suit requisite that the party bringing suit should be a shareholder as of the time of the act or transaction complained of, the number of his shares not being material.
• Republic Bank vs. Cuaderno, 19 SCRA 671 — Cited for the same derivative suit requisite that the party bringing suit should be a shareholder as of the time of the act or transaction complained of, the number of his shares not being material.
• Everett vs. Asia Banking Corporation, 49 Phil. 512 — Cited for the derivative suit requisite that the stockholder must exhaust intra-corporate remedies by making a demand on the board of directors for the appropriate relief.
• Angeles vs. Santos, 64 Phil. 387 — Cited for the same derivative suit requisite on exhaustion of intra-corporate remedies.
• Evangelista vs. Santos, 86 Phil. 387 — Cited for the derivative suit requisite that the cause of action actually devolves on the corporation, the wrongdoing or harm having been caused to the corporation and not to the particular stockholder bringing the suit.

• Section 5, P.D. 902-A — Cited as the basis for SEC jurisdiction over intra-corporate disputes. The Court applied it to hold that the dispute concerning acts of the board of directors claimed to amount to fraud and misrepresentation which may be detrimental to the interest of the stockholders, or arising out of intra-corporate relations between and among stockholders, or between any or all of them and the corporation, fell within the SEC’s jurisdiction.
• Executive Orders Nos. 1 and 2 (February 28, 1986 and March 12, 1986) — Cited as the orders prohibiting the transfer, conveyance, encumbrance, concealment or liquidation of assets and properties acquired by former President Ferdinand Marcos and/or his wife, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, and business associates. These orders were the stated ground for the PCGG’s sequestration of the 33,133,266 SMC shares.
• Presidential Memorandum of June 26, 1986 — Cited in the context of the Baseco decision as authorizing the PCGG, pending the outcome of proceedings to determine the ownership of sequestered shares of stock, to vote such shares at all stockholders’ meetings called for the election of directors, subject to the caveat that the stock is not to be voted simply because the power to do so exists, but only for demonstrably weighty and defensible grounds or when essential to prevent disappearance or wastage of corporate property. The Court applied this provision to hold that the PCGG’s voting of sequestered shares to elect de los Angeles was not shown to be unauthorized.

Gancayco, J.; Griño-Aquino, J.; and Medialdea, J., concurred.