1.PHILIPPINE STOCK EXCHANGE, INC
The
vs.
THE HONORABLE COURT OF APPEALS, SECURITIES AND
EXCHANGE COMMISSION and PUERTO AZUL LAND, INC.,  Complex, thereby implying that they are also asserting legal and
The Puerto Azul Land, Inc. (PALI), a domestic real estate
corporation, had sought to offer its shares to the public in order to
raise funds allegedly to develop its properties and pay its loans
with several banking institutions. In January, 1995, PALI was
issued a Permit to Sell its shares to the public by the Securities
and Exchange Commission (SEC). To facilitate the trading of its
shares among investors, PALI sought to course the trading of its
shares through the Philippine Stock Exchange, Inc. (PSE), for
which purpose it filed with the said stock exchange an application
to list its shares, with supporting documents attached.
On February 8, 1996, the Listing Committee of the PSE, upon a
perusal of PALI's application, recommended to the PSE's Board
of Governors the approval of PALI's listing application.
On February 14, 1996, before it could act upon PALI's
application, the Board of Governors of the PSE received a letter
from the heirs of Ferdinand E. Marcos, claiming that the late
President Marcos was the legal and beneficial owner of certain
properties forming part of the Puerto Azul Beach Hotel and
Resort Complex which PALI claims to be among its assets and
that the Ternate Development Corporation, which is among the
stockholders of PALI, likewise appears to have been held and
continue to be held in trust by one Rebecco Panlilio for then
President Marcos and now, effectively for his estate, and
requested PALI's application to be deferred. PALI was requested
to comment upon the said letter.
PALI's answer stated that the properties forming part of the
Puerto Azul Beach Hotel and Resort Complex were not claimed
by PALI as its assets. On the contrary, the resort is actually
owned by Fantasia Filipina Resort, Inc. and the Puerto Azul
Country Club, entities distinct from PALI. Furthermore, the
1
Ternate Development Corporation owns only 1.20% of PALI.
Marcoses responded that their claim is not confined to the
facilities forming part of the Puerto Azul Hotel and Resort
beneficial ownership of other properties titled under the name of
PALI.
On February 20, 1996, the PSE wrote Chairman Magtanggol
Gunigundo of the Presidential Commission on Good Government
(PCGG) requesting for comments on the letters of the PALI and
the Marcoses. On March 4, 1996, the PSE was informed that the
Marcoses received a Temporary Restraining Order on the same
date, enjoining the Marcoses from, among others, "further
impeding, obstructing, delaying or interfering in any manner by or
any means with the consideration, processing and approval by
the PSE of the initial public offering of PALI." The TRO was
issued by Judge Martin S. Villarama, Executive Judge of the RTC
of Pasig City in Civil Case No. 65561, pending in Branch 69
thereof.
In its regular meeting held on March 27, 1996, the Board of
Governors of the PSE reached its decision to reject PALI's
application, citing the existence of serious claims, issues and
circumstances surrounding PALI's ownership over its assets that
adversely affect the suitability of listing PALI's shares in the stock
exchange.
On April 11, 1996, PALI wrote a letter to the SEC addressed to
the then Acting Chairman, Perfecto R. Yasay, Jr., bringing to the
SEC's attention the action taken by the PSE in the application of
PALI for the listing of its shares with the PSE, and requesting that
the SEC, in the exercise of its supervisory and regulatory powers
over stock exchanges under Section 6(j) of P.D. No. 902-A,
review the PSE's action on PALI's listing application and institute
such measures as are just and proper under the circumstances.
On the same date, or on April 11, 1996, the SEC wrote to the
PSE, attaching thereto the letter of PALI and directing the PSE to
file its comments thereto within five days from its receipt and for facts and information to protect the investing
its authorized representative to appear for an "inquiry" on the public. In this regard, PALI is hereby ordered to
matter. On April 22, 1996, the PSE submitted a letter to the SEC amend its registration statements filed with the
containing its comments to the April 11, 1996 letter of PALI. Commission to incorporate the full disclosure of
these material facts and information.
On April 24, 1996, the SEC rendered its Order, reversing the
PSE's decision. The dispositive portion of the said order reads: Dissatisfied with this ruling, the PSE filed with the Court of
Appeals on May 17, 1996 a Petition for Review (with Application
WHEREFORE, premises considered, and for Writ of Preliminary Injunction and Temporary Restraining
invoking the Commissioner's authority and Order), assailing the above mentioned orders of the SEC,
jurisdiction under Section 3 of the Revised submitting the following as errors of the SEC:
Securities Act, in conjunction with Section 3, 6(j)
and 6(m) of Presidential Decree No. 902-A, the I. SEC COMMITTED SERIOUS
decision of the Board of Governors of the ERROR AND GRAVE ABUSE OF
Philippine Stock Exchange denying the listing of DISCRETION IN ISSUING THE
shares of Puerto Azul Land, Inc., is hereby set ASSAILED ORDERS WITHOUT
aside, and the PSE is hereby ordered to POWER, JURISDICTION, OR
immediately cause the listing of the PALI shares AUTHORITY; SEC HAS NO
in the Exchange, without prejudice to its authority POWER TO ORDER THE
to require PALI to disclose such other material LISTING AND SALE OF SHARES
information it deems necessary for the protection OF PALI WHOSE ASSETS ARE
of the investigating public. SEQUESTERED AND TO
REVIEW AND SUBSTITUTE
This Order shall take effect immediately. DECISIONS OF PSE ON LISTING
APPLICATIONS;
SO ORDERED.
II. SEC COMMITTED SERIOUS
PSE filed a motion for reconsideration of the said order on April ERROR AND GRAVE ABUSE OF
29, 1996, which was, however denied by the Commission in its DISCRETION IN FINDING THAT
May 9, 1996 Order which states: PSE ACTED IN AN ARBITRARY
AND ABUSIVE MANNER IN
DISAPPROVING PALI'S LISTING
WHEREFORE, premises considered, the
APPLICATION;
Commission finds no compelling reason to
reconsider its order dated April 24, 1996, and in
the light of recent developments on the adverse III. THE ASSAILED ORDERS OF
claim against the PALI properties, PSE should SEC ARE ILLEGAL AND VOID
require PALI to submit full disclosure of material FOR ALLOWING FURTHER
DISPOSITION OF PROPERTIES

2
 IN CUSTODIA LEGIS AND
WHICH FORM PART OF
NAVAL/MILITARY
RESERVATION; AND
IV. THE FULL DISCLOSURE OF
THE SEC WAS NOT PROPERLY
PROMULGATED AND ITS
IMPLEMENTATION AND
APPLICATION IN THIS CASE
VIOLATES THE DUE PROCESS
CLAUSE OF THE
CONSTITUTION.
On June 4, 1996, PALI filed its Comment to the Petition for
Review and subsequently, a Comment and Motion to Dismiss. On
June 10, 1996, PSE fled its Reply to Comment and Opposition to
Motion to Dismiss.
On June 27, 1996, the Court of Appeals promulgated its
Resolution dismissing the PSE's Petition for Review. Hence, this
Petition by the PSE.
The appellate court had ruled that the SEC had both jurisdiction
and authority to look into the decision of the petitioner PSE,
pursuant to Section 3   of the Revised Securities Act in relation to
3
Section 6(j) and 6(m)   of P.D. No. 902-A, and Section 38(b)  of
4 5
the Revised Securities Act, and for the purpose of ensuring fair
administration of the exchange. Both as a corporation and as a
stock exchange, the petitioner is subject to public respondent's
jurisdiction, regulation and control. Accepting the argument that
the public respondent has the authority merely to supervise or
regulate, would amount to serious consequences, considering
that the petitioner is a stock exchange whose business is
impressed with public interest. Abuse is not remote if the public
respondent is left without any system of control. If the securities
act vested the public respondent with jurisdiction and control over
all corporations; the power to authorize the establishment of stock
3
exchanges; the right to supervise and regulate the same; and the
power to alter and supplement rules of the exchange in the listing
or delisting of securities, then the law certainly granted to the
public respondent the plenary authority over the petitioner; and
the power of review necessarily comes within its authority.
All in all, the court held that PALI complied with all the
requirements for public listing, affirming the SEC's ruling to the
effect that:
. . . the Philippine Stock Exchange has acted in an
arbitrary and abusive manner in disapproving the
application of PALI for listing of its shares in the
face of the following considerations:
1. PALI has clearly and admittedly complied with
the Listing Rules and full disclosure requirements
of the Exchange;
2. In applying its clear and reasonable standards
on the suitability for listing of shares, PSE has
failed to justify why it acted differently on the
application of PALI, as compared to the IPOs of
other companies similarly situated that were
allowed listing in the Exchange;
3. It appears that the claims and issues on the title
to PALI's properties were even less serious than
the claims against the assets of the other
companies in that, the assertions of the Marcoses
that they are owners of the disputed properties
were not substantiated enough to overcome the
strength of a title to properties issued under the
Torrens System as evidence of ownership thereof;
4. No action has been filed in any court of
competent jurisdiction seeking to nullify PALI's
 ownership over the disputed properties, neither
has the government instituted recovery
proceedings against these properties. Yet the
import of PSE's decision in denying PALI's
application is that it would be PALI, not the
Marcoses, that must go to court to prove the
legality of its ownership on these properties before
its shares can be listed.
In addition, the argument that the PALI properties belong to the
Military/Naval Reservation does not inspire belief. The point is,
the PALI properties are now titled. A property losses its public
character the moment it is covered by a title. As a matter of fact,
the titles have long been settled by a final judgment; and the final
decree having been registered, they can no longer be re-opened
considering that the one year period has already passed. Lastly,
the determination of what standard to apply in allowing PALI's
application for listing, whether the discretion method or the
system of public disclosure adhered to by the SEC, should be
addressed to the Securities Commission, it being the government
agency that exercises both supervisory and regulatory authority
over all corporations.
On August 15, 19961 the PSE, after it was granted an extension,
filed the instant Petition for Review on Certiorari, taking exception
to the rulings of the SEC and the Court of Appeals. Respondent
PALI filed its Comment to the petition on October 17, 1996. On
the same date, the PCGG filed a Motion for Leave to file a
Petition for Intervention. This was followed up by the PCGG's
Petition for Intervention on October 21, 1996. A supplemental
Comment was filed by PALI on October 25, 1997. The Office of
the Solicitor General, representing the SEC and the Court of
Appeals, likewise filed its Comment on December 26, 1996. In
answer to the PCGG's motion for leave to file petition for
intervention, PALI filed its Comment thereto on January 17, 1997,
whereas the PSE filed its own Comment on January 20, 1997.
4
On February 25, 1996, the PSE filed its Consolidated Reply to the
comments of respondent PALI (October 17, 1996) and the
Solicitor General (December 26, 1996). On May 16, 1997, PALI
filed its Rejoinder to the said consolidated reply of PSE.
PSE submits that the Court of Appeals erred in ruling that the
SEC had authority to order the PSE to list the shares of PALI in
the stock exchange. Under presidential decree No. 902-A, the
powers of the SEC over stock exchanges are more limited as
compared to its authority over ordinary corporations. In
connection with this, the powers of the SEC over stock
exchanges under the Revised Securities Act are specifically
enumerated, and these do not include the power to reverse the
decisions of the stock exchange. Authorities are in abundance
even in the United States, from which the country's security
policies are patterned, to the effect of giving the Securities
Commission less control over stock exchanges, which in turn are
given more lee-way in making the decision whether or not to
allow corporations to offer their stock to the public through the
stock exchange. This is in accord with the "business judgment
rule" whereby the SEC and the courts are barred from intruding
into business judgments of corporations, when the same are
made in good faith. the said rule precludes the reversal of the
decision of the PSE to deny PALI's listing application, absent a
showing of bad faith on the part of the PSE. Under the listing
rules of the PSE, to which PALI had previously agreed to comply,
the PSE retains the discretion to accept or reject applications for
listing. Thus, even if an issuer has complied with the PSE listing
rules and requirements, PSE retains the discretion to accept or
reject the issuer's listing application if the PSE determines that
the listing shall not serve the interests of the investing public.
Moreover, PSE argues that the SEC has no jurisdiction over
sequestered corporations, nor with corporations whose properties
are under sequestration. A reading of Republic of the Philippines
vs. Sadiganbayan, G.R. No. 105205, 240 SCRA 376, would
reveal that the properties of PALI, which were derived from the
Ternate Development Corporation (TDC) and the Monte del Sol
Development Corporation (MSDC). are under sequestration by
the PCGG, and subject of forfeiture proceedings in the
Sandiganbayan. This ruling of the Court is the "law of the case"
between the Republic and TDC and MSDC. It categorically
declares that the assets of these corporations were sequestered
by the PCGG on March 10, 1986 and April 4, 1988.
It is, likewise, intimated that the Court of Appeals' sanction that
PALI's ownership over its properties can no longer be questioned,
since certificates of title have been issued to PALI and more than
one year has since lapsed, is erroneous and ignores well settled
jurisprudence on land titles. That a certificate of title issued under
the Torrens System is a conclusive evidence of ownership is not
an absolute rule and admits certain exceptions. It is fundamental
that forest lands or military reservations are non-alienable. Thus,
when a title covers a forest reserve or a government reservation,
such title is void.
PSE, likewise, assails the SEC's and the Court of Appeals
reliance on the alleged policy of "full disclosure" to uphold the
listing of PALI's shares with the PSE, in the absence of a clear
mandate for the effectivity of such policy. As it is, the case
records reveal the truth that PALI did not comply with the listing
rules and disclosure requirements. In fact, PALI's documents
supporting its application contained misrepresentations and
misleading statements, and concealed material information. The
matter of sequestration of PALI's properties and the fact that the
same form part of military/naval/forest reservations were not
reflected in PALI's application.
It is undeniable that the petitioner PSE is not an ordinary
corporation, in that although it is clothed with the markings of a
corporate entity, it functions as the primary channel through which
the vessels of capital trade ply. The PSE's relevance to the
continued operation and filtration of the securities transactions in
the country gives it a distinct color of importance such that
government intervention in its affairs becomes justified, if not
necessarily. Indeed, as the only operational stock exchange in
5
the country today, the PSE enjoys a monopoly of securities
transactions, and as such, it yields an immense influence upon
the country's economy.
Due to this special nature of stock exchanges, the country's
lawmakers has seen it wise to give special treatment to the
administration and regulation of stock exchanges.  6
These provisions, read together with the general grant of
jurisdiction, and right of supervision and control over all
corporations under Sec. 3 of P.D. 902-A, give the SEC the
special mandate to be vigilant in the supervision of the affairs of
stock exchanges so that the interests of the investing public may
be fully safeguard.
Section 3 of Presidential Decree 902-A, standing alone, is
enough authority to uphold the SEC's challenged control authority
over the petitioner PSE even as it provides that "the Commission
shall have absolute jurisdiction, supervision, and control over all
corporations, partnerships or associations, who are the grantees
of primary franchises and/or a license or permit issued by the
government to operate in the Philippines. . ." The SEC's
regulatory authority over private corporations encompasses a
wide margin of areas, touching nearly all of a corporation's
concerns. This authority springs from the fact that a corporation
owes its existence to the concession of its corporate franchise
from the state.
The SEC's power to look into the subject ruling of the PSE,
therefore, may be implied from or be considered as necessary or
incidental to the carrying out of the SEC's express power to
insure fair dealing in securities traded upon a stock exchange or
to ensure the fair administration of such exchange.   It is, likewise,
7
observed that the principal function of the SEC is the supervision
and control over corporations, partnerships and associations with
the end in view that investment in these entities may be
encouraged and protected, and their activities for the promotion
of economic development.  8
Thus, it was in the alleged exercise of this authority that the SEC
reversed the decision of the PSE to deny the application for listing
in the stock exchange of the private respondent PALI. The SEC's
action was affirmed by the Court of Appeals.
We affirm that the SEC is the entity with the primary say as to
whether or not securities, including shares of stock of a
corporation, may be traded or not in the stock exchange. This is
in line with the SEC's mission to ensure proper compliance with
the laws, such as the Revised Securities Act and to regulate the
sale and disposition of securities in the country.   As the appellate
9
court explains:
Paramount policy also supports the authority of
the public respondent to review petitioner's denial
of the listing. Being a stock exchange, the
petitioner performs a function that is vital to the
national economy, as the business is affected with
public interest. As a matter of fact, it has often
been said that the economy moves on the basis of
the rise and fall of stocks being traded. By its
economic power, the petitioner certainly can
dictate which and how many users are allowed to
sell securities thru the facilities of a stock
exchange, if allowed to interpret its own rules
liberally as it may please. Petitioner can either
allow or deny the entry to the market of securities.
To repeat, the monopoly, unless accompanied by
control, becomes subject to abuse; hence,
considering public interest, then it should be
subject to government regulation.
The role of the SEC in our national economy cannot be
minimized. The legislature, through the Revised Securities Act,
Presidential Decree No. 902-A, and other pertinent laws, has
entrusted to it the serious responsibility of enforcing all laws
affecting corporations and other forms of associations not
otherwise vested in some other government office.  10
6
This is not to say, however, that the PSE's management
prerogatives are under the absolute control of the SEC. The PSE
is, alter all, a corporation authorized by its corporate franchise to
engage in its proposed and duly approved business. One of the
PSE's main concerns, as such, is still the generation of profit for
its stockholders. Moreover, the PSE has all the rights pertaining
to corporations, including the right to sue and be sued, to hold
property in its own name, to enter (or not to enter) into contracts
with third persons, and to perform all other legal acts within its
allocated express or implied powers.
A corporation is but an association of individuals, allowed to
transact under an assumed corporate name, and with a distinct
legal personality. In organizing itself as a collective body, it
waives no constitutional immunities and perquisites appropriate to
such a body.   As to its corporate and management decisions,
11
therefore, the state will generally not interfere with the same.
Questions of policy and of management are left to the honest
decision of the officers and directors of a corporation, and the
courts are without authority to substitute their judgment for the
judgment of the board of directors. The board is the business
manager of the corporation, and so long as it acts in good faith,
its orders are not reviewable by the courts. 12
Thus, notwithstanding the regulatory power of the SEC over the
PSE, and the resultant authority to reverse the PSE's decision in
matters of application for listing in the market, the SEC may
exercise such power only if the PSE's judgment is attended by
bad faith. In Board of Liquidators vs. Kalaw,  it was held that bad
13
faith does not simply connote bad judgment or negligence. It
imports a dishonest purpose or some moral obliquity and
conscious doing of wrong. It means a breach of a known duty
through some motive or interest of ill will, partaking of the nature
of fraud.
In reaching its decision to deny the application for listing of PALI,
the PSE considered important facts, which, in the general
scheme, brings to serious question the qualification of PALI to sell
its shares to the public through the stock exchange. During the
time for receiving objections to the application, the PSE heard
from the representative of the late President Ferdinand E. Marcos
and his family who claim the properties of the private respondent
to be part of the Marcos estate. In time, the PCGG confirmed this
claim. In fact, an order of sequestration has been issued covering
the properties of PALI, and suit for reconveyance to the state has
been filed in the Sandiganbayan Court. How the properties were
effectively transferred, despite the sequestration order, from the
TDC and MSDC to Rebecco Panlilio, and to the private
respondent PALI, in only a short span of time, are not yet
explained to the Court, but it is clear that such circumstances give
rise to serious doubt as to the integrity of PALI as a stock issuer.
The petitioner was in the right when it refused application of PALI,
for a contrary ruling was not to the best interest of the general
public. The purpose of the Revised Securities Act, after all, is to
give adequate and effective protection to the investing public
against fraudulent representations, or false promises, and the
imposition of worthless ventures. 14
It is to be observed that the U.S. Securities Act emphasized its
avowed protection to acts detrimental to legitimate business,
thus:
The Securities Act, often referred to as the "truth
in securities" Act, was designed not only to
provide investors with adequate information upon
which to base their decisions to buy and sell
securities, but also to protect legitimate business
seeking to obtain capital through honest
presentation against competition from crooked
promoters and to prevent fraud in the sale of
securities. (Tenth Annual Report, U.S. Securities
& Exchange Commission, p. 14).
As has been pointed out, the effects of such an
act are chiefly (1) prevention of excesses and
fraudulent transactions, merely by requirement of
7
that their details be revealed; (2) placing the
market during the early stages of the offering of a
security a body of information, which operating
indirectly through investment services and expert
investors, will tend to produce a more accurate
appraisal of a security, . . . Thus, the Commission
may refuse to permit a registration statement to
become effective if it appears on its face to be
incomplete or inaccurate in any material respect,
and empower the Commission to issue a stop
order suspending the effectiveness of any
registration statement which is found to include
any untrue statement of a material fact or to omit
to state any material fact required to be stated
therein or necessary to make the statements
therein not misleading. (Idem).
Also, as the primary market for securities, the PSE has
established its name and goodwill, and it has the right to protect
such goodwill by maintaining a reasonable standard of propriety
in the entities who choose to transact through its facilities. It was
reasonable for the PSE, therefore, to exercise its judgment in the
manner it deems appropriate for its business identity, as long as
no rights are trampled upon, and public welfare is safeguarded.
In this connection, it is proper to observe that the concept of
government absolutism is a thing of the past, and should remain
so.
The observation that the title of PALI over its properties is
absolute and can no longer be assailed is of no moment. At this
juncture, there is the claim that the properties were owned by
TDC and MSDC and were transferred in violation of sequestration
orders, to Rebecco Panlilio and later on to PALI, besides the
claim of the Marcoses that such properties belong to the Marcos
estate, and were held only in trust by Rebecco Panlilio. It is also
alleged by the petitioner that these properties belong to naval and
forest reserves, and therefore beyond private dominion. If any of
these claims is established to be true, the certificates of title over
the subject properties now held by PALI map be disregarded, as
it is an established rule that a registration of a certificate of title
does not confer ownership over the properties described therein
to the person named as owner. The inscription in the registry, to
be effective, must be made in good faith. The defense of
indefeasibility of a Torrens Title does not extend to a transferee
who takes the certificate of title with notice of a flaw.
In any case, for the purpose of determining whether PSE acted
correctly in refusing the application of PALI, the true ownership of
the properties of PALI need not be determined as an absolute
fact. What is material is that the uncertainty of the properties'
ownership and alienability exists, and this puts to question the
qualification of PALI's public offering. In sum, the Court finds that
the SEC had acted arbitrarily in arrogating unto itself the
discretion of approving the application for listing in the PSE of the
private respondent PALI, since this is a matter addressed to the
sound discretion of the PSE, a corporation entity, whose business
judgments are respected in the absence of bad faith.
The question as to what policy is, or should be relied upon in
approving the registration and sale of securities in the SEC is not
for the Court to determine, but is left to the sound discretion of the
Securities and Exchange Commission. In mandating the SEC to
administer the Revised Securities Act, and in performing its other
functions under pertinent laws, the Revised Securities Act, under
Section 3 thereof, gives the SEC the power to promulgate such
rules and regulations as it may consider appropriate in the public
interest for the enforcement of the said laws. The second
paragraph of Section 4 of the said law, on the other hand,
provides that no security, unless exempt by law, shall be issued,
endorsed, sold, transferred or in any other manner conveyed to
the public, unless registered in accordance with the rules and
regulations that shall be promulgated in the public interest and for
the protection of investors by the Commission. Presidential
Decree No. 902-A, on the other hand, provides that the SEC, as
regulatory agency, has supervision and control over all
8
corporations and over the securities market as a whole, and as
such, is given ample authority in determining appropriate policies.
Pursuant to this regulatory authority, the SEC has manifested that
it has adopted the policy of "full material disclosure" where all
companies, listed or applying for listing, are required to divulge
truthfully and accurately, all material information about
themselves and the securities they sell, for the protection of the
investing public, and under pain of administrative, criminal and
civil sanctions. In connection with this, a fact is deemed material if
it tends to induce or otherwise effect the sale or purchase of its
securities.   While the employment of this policy is recognized
15
and sanctioned by the laws, nonetheless, the Revised Securities
Act sets substantial and procedural standards which a proposed
issuer of securities must satisfy.   Pertinently, Section 9 of the
16
Revised Securities Act sets forth the possible Grounds for the
Rejection of the registration of a security:
— The Commission may reject a registration
statement and refuse to issue a permit to sell the
securities included in such registration statement
if it finds that —
(1) The registration statement is on its face
incomplete or inaccurate in any material respect
or includes any untrue statement of a material fact
or omits to state a material fact required to be
stated therein or necessary to make the
statements therein not misleading; or 
(2) The issuer or registrant —
(i) is not solvent or not in sound
financial condition;
(ii) has violated or has not
complied with the provisions of this
Act, or the rules promulgated
 pursuant thereto, or any order of
the Commission;
(iii) has failed to comply with any
of the applicable requirements and
conditions that the Commission
may, in the public interest and for
the protection of investors, impose
before the security can be
registered;
(iv) has been engaged or is
engaged or is about to engage in
fraudulent transaction;
(v) is in any way dishonest or is
not of good repute; or
(vi) does not conduct its business
in accordance with law or is
engaged in a business that is
illegal or contrary to government
rules and regulations.
(3) The enterprise or the business of the issuer is
not shown to be sound or to be based on sound
business principles;
(4) An officer, member of the board of directors, or
principal stockholder of the issuer is disqualified to
be such officer, director or principal stockholder;
or  ACCORDINGLY, in view of the foregoing considerations, the Court hereby
(5) The issuer or registrant has not shown to the
satisfaction of the Commission that the sale of its
security would not work to the prejudice of the
9
public interest or as a fraud upon the purchasers
or investors. (Emphasis Ours)
A reading of the foregoing grounds reveals the intention of the
lawmakers to make the registration and issuance of securities
dependent, to a certain extent, on the merits of the securities
themselves, and of the issuer, to be determined by the Securities
and Exchange Commission. This measure was meant to protect
the interests of the investing public against fraudulent and
worthless securities, and the SEC is mandated by law to
safeguard these interests, following the policies and rules
therefore provided. The absolute reliance on the full disclosure
method in the registration of securities is, therefore, untenable. As
it is, the Court finds that the private respondent PALI, on at least
two points (nos. 1 and 5) has failed to support the propriety of the
issue of its shares with unfailing clarity, thereby lending support to
the conclusion that the PSE acted correctly in refusing the listing
of PALI in its stock exchange. This does not discount the
effectivity of whatever method the SEC, in the exercise of its
vested authority, chooses in setting the standard for public
offerings of corporations wishing to do so. However, the SEC
must recognize and implement the mandate of the law,
particularly the Revised Securities Act, the provisions of which
cannot be amended or supplanted by mere administrative
issuance.
In resume, the Court finds that the PSE has acted with justified
circumspection, discounting, therefore, any imputation of arbitrariness and
whimsical animation on its part. Its action in refusing to allow the listing of
PALI in the stock exchange is justified by the law and by the circumstances
attendant to this case.
GRANTS the Petition for Review on Certiorari. The Decisions of the Court of
Appeals and the Securities and Exchange Commission REVERSED and
SET ASIDE, and a new Judgment is hereby ENTERED, affirming the
decision of the Philippine Stock Exchange to deny the application for listing
of the private respondent Puerto Azul Land, Inc.
2. G.R. No. 210612
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee  money, but their demands were unheeded. The private
vs.
ERVIN Y. MATEO, EVELYN E. MATEO, CARMELITA B.
GALVEZ, ROMEO L. ESTEBAN, GALILEO J. SAPORSANTOS
and NENITA S. SAPORSANTOS, Accused
ERVIN Y. MATEO, 
In March 2001, private complainant Herminia Alcid, Jr. (Herminia,
Jr.) met a certain Geraldine Alejandro (Geraldine)who introduced
herself as the head of the Business Center of MMG International
Holdings Co., Ltd. (MMG).Geraldine was then soliciting
investments and has shown a brochure showcasing the
investments and businesses of the said entity. Herminia, Jr. was
also shown Articles of Partnership to prove that MMG is
registered with the 'Securities and Exchange
Commission (SEC). The Articles of Partnership showed accused-
appellant as a general partner who has contributed
₱49,750,000.00 to MMG. The other accused were shown to be
limited partners who have contributed ₱50,000.00 each.
Convinced by the representations of Geraldine, Herminia, Jr.
invested ₱50,000.00 with MMG on April 20, 2002. Subsequently,
all the interests and principal were promptly paid, which induced
him to make a bigger investment. On May 2, 2002, Herminio, Jr.
and his father, Herminia, Sr., made a joint investment of
₱200,000.00. Later, Geraldine was also able to convince
Herminia, Jr.'s sister, .Melanie, who made an investment
of ₱50,000.00 with MMG. The private complainants' investments
were covered by a notarized Memorandum of
Agreement (MOA), signed by accused-appellant, which
stipulated, among others, that MMG was being represented by its
President, herein accused-appellant, and that the investors will be
earning 2.5o/o monthly interest income from the capital they have
invested. Subsequently, the complainants received several post-
dated checks covering their investments. However, when they
tried to deposit the checks, their banks informed them that these
were dishonored because MMG's accounts in the bank from
10
which the checks were drawn were already closed. The
complainants then demanded from the accused the return of their
complainants and other investors then went to the SEC to file a
complaint, where they discovered that MMG was not a registered
issuer of securities. The SEC forwarded their complaint to the
City Prosecutor of Makati.
Subsequently, on April 11, 2003, the Assistant City Prosecutor of
Makat1 City filed two separate Informations  with the RTC of
4
Makati City charging accused-appellant, together with Evelyn E.
Mateo, Carmelita B. Galvez, Romeo L. Esteban, Galileo J.
Saporsantos and Nenita S. Saporsantos with the crime of
syndicated estafa. The Informations were similarly worded,
except as to the dates of the commission of the crime, the names
of the complainants, and the amounts obtained from them, as
follows:
xxxx
That on or about the 2nd day of May (09th day of July) 2002 prior
or subsequent thereto, in Makati, Philippines, said accused, being
officers, employees and/or agents of Mateo Management Group
Holding Company, a corporation operating on funds solicited from
the public, conspiring, or confederating with, and mutually helping
one another, and operating as a syndicate, did then and there,
willfully, unlawfully and feloniously defraud complainants
HERMINIO ALCID, SR. and HERMINIO ALCID, JR. (MELANIE
ALCID) by means of false pretenses or fraudulent acts executed
prior to or simultaneously with the commission of the fraud to the
effect that they have the business, property and power to solicit
and accept investments and deposits from the general public and
the capacity to pay the complainants guaranteed monthly returns
(interest) on investment from two point five percent (2.5%) and
lucrative commissions, and by means of other deceits of similar
import, induced and succeeded in inducing complainants to
invest, deposit, give and deliver as in fact the latter gave and
delivered to said accused the total amount of ₱200,000.00
(₱50,000.00) as investment or deposit, accused knowing fully
well that said pretenses and representations are a fraudulent
scheme to enable them to obtain said amount, and thereafter,
having in their possession said amount, with intent to gain and to
defraud, misappropriated and converted the same to their own
personal use and benefit to the damage and prejudice of said
complainants in the said amount.
Contrary to law.
xxx 5 with MMG International Holdings Company, Ltd. to pay private
On motion of the prosecution, and without objection on the part of
the defense, the Informations were subsequently amended where
the third and fourth lines of the Informations, as quoted above,
were made to read as follows: " ... being partners, officers,
employees and/or agents of MMG; International Holdings
Company, Ltd." 6 Penal Code, in relation to Presidential Decree No. 1689 and
The above cases were docketed as Criminal Case Nos. 03-2936
and 03-2987.
Similar cases for estafa and syndicated estafa, totalling 209, were
also filed against the accused.
Among the accused, only accused-appellant was arrested and
when arraigned on February 19, 2004, he pleaded not guilty to all
the charges. 7
Pre-trial  was then conducted. Thereafter, Criminal Case Nos. 03-
8
2936 and 03-2987 were jointly tried.
After the prosecution rested its case, the defense, represented by
private counsel, failed to present its evidence despite several re-
settings made by the RTC.  Thus, upon motion of the prosecution,
9
the case was deemed submitted for resolution. 10
11
On October 22, 2008, the RTC rendered its Judgment finding
accused-appellant guilty as charged, the dispositive portion of
which reads as follows:
WHEREFORE, in Criminal Case No. 03-2936, the Court finds the
accused, Ervin Y. Mateo, GUILTYbeyond reasonable doubt of
the crime of Syndicated Estafa penalized under Article 315 of the
Revised Penal Code, in relation to Presidential Decree No. 1689
and hereby sentences him to suffer the penalty of life
imprisonment. Likewise, Ervin Y. Mateo is held solidarity liable
complainant[s] Herminio Alcid, Jr. and Herminio Alcid, Sr.
₱206,000.00 as actual damages.
In Criminal Case No. 03-2987, the Court finds the accused, Ervin
Y. Mateo, GUILTY beyond reasonable doubt of the crime of
Syndicated Estafa penalized under Article 315 of the Revised
hereby sentences him to suffer the penalty of life imprisonment.
Likewise, Ervin Y. Mateo is held solidarily liable with MMG
International Holdings Company, Ltd. to pay private
complainant Melanie Alcid ₱59,702.61 as actual damages.
SO ORDERED. 11
The RTC found that all the elements of the crime of syndicated
estafa are present, to wit: (1) MMG was formed by accused-
appellant, together with five (5) other persons; (2) accused-
appellant, together with his co-accused, committed fraud in
inducing private complainants to part with their money; and (3)
the fraud resulted in the misappropriation of the money
contributed by the private complainants.
Accused-appellant appealed the RTC Decision with the CA. 12
On July 16, 2012, the CA promulgated its assailed Decision
affirming the judgment of the RTC in toto.
The CA held, among others, that, contrary to accused-appellant's
position, PD 1689 contemplates estafa as defined and penalized
under Article 315, paragraph 2(a) of the RPC. The CA also held
that all the elements of syndicated estafa are present in the
instant case.
On August 8, 2013, accused-appellant, through counsel, filed a
Notice of Appeal  manifesting his intention to appeal the CA
13
Decision to this Court.
In its Resolution dated August 29, 2013, the CA gave due course
to accused-appellant's Notice of Appeal and ordered the elevation
of the records of the case to this Court.
14
Hence, this appeal was instituted.
In a Resolution  dated March 5, 2014, this Court, among others,
15
notified the parties that they may file their respective
supplemental briefs, if they so desire.
In its Manifestation (In Lieu of Supplemental Brief)  dated May 6,
16
2014, the Office of the Solicitor General (OSG)informed this Court
that it will no longer file a supplemental brief because it had
already exhaustively addressed in its brief filed before the CA all
the issues and arguments raised by accused-appellant in his
brief.
On the other hand, accused-appellant filed a Supplemental
Brief  on June 30, 2014, raising the following issues:
17
A. WHETHER OR NOT ACCUSED-APPELLANT MAY BE
CONVICTED WITH ESTAFA UNDER ARTICLE 315,
PARAGRAPH 2(A) IN RELATION TO P.D. 1689.
B. WHETHER OR NOT THE ELEMENT OF DEFRAUDATION
WAS PROVEN BEYOND REASONABLE DOUBT BY THE
PROSECUTION.
12
C. WHETHER OR NOT THERE IS SUFFICIENT QUANTUM OF
PROOF TO WARRANT THE CONVICTION OF APPELLANT
BEYOND REASONABLE DOUBT AS FOUND BY THE TRIAL
COURT IN THE CHALLENGED DECISION.
D. WHETHER OR NOT THE ACCUSED-[APPELLANT] MAY BE
CONVICTED IN THE ABOVEMENTIONED CASES DESPITE
THE STAY ORDER ISSUED BY THE COMMERCIAL COURT,
RTC, BRANCH 256, MUNTINLUPA CITY, FOR THE
CORPORATE REHABILITATION OF MMG GROUP INCLUDING
MMG HOLDINGS.
E. WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED SERIOUS AND REVERSIBLE ERRORS
IN DENYING THE MOTION FOR RECONSIDERATION AND
THE SUPPLEMENTAL MOTION FOR RECONSIDERATION. 18
The appeal lacks merit.
Anent the first issue raised, the Court does not agree with
accused-appellant's contention that he may not be found guilty of
violating PD 1689 in relation to estafa under Article 315 (2)(a)  of
19
the RPC on the ground that the only kind of estafa contemplated
under PD 1689 is that .defined under Article 315 (1)(b)  of the
20
RPC and not the kind of estafa falling under Article 315 (2)(a) of
the same Code.
Section 1 of PD 1689 provides as follows:
Section 1. Any person or persons who shall commit estafa or
other forms of swindling as defined in Article 315 and 316 of the
Revised Penal Code, as amended, shall be punished by life
imprisonment to death if the swindling (estafa) is committed by a
syndicate consisting of five or more persons formed with the
intention of carrying out the unlawful or illegal act, transaction,
enterprise or scheme, and the defraudation results in the
misappropriation of money contributed by stockholders, or
members of rural banks, cooperative, "samahang nayon(s)", or
farmers association, or of funds solicited by
corporations/associations from the general public.
When not committed by a syndicate as above defined, the
penalty imposable shall be reclusion temporal to reclusion
perpetua if the amount of the fraud exceeds 100,000 pesos.
Suffice it to say that it has been settled in a number of cases  that
21
estafa, as defined under Article 315 (2)(a) of the RPC, is one of
the kinds of swindling contemplated under PD 1689.
Under the second and third issues raised by accused-appellant,
he argues that, insofar as he is concerned, the element of
defraudation was not proven beyond reasonable doubt because
the prosecution failed to prove that he personally transacted or
dealt with the private complainants. The Court is not persuaded.
The elements of estafa by means of deceit under Article 315 (2 )
(a) of the RPC are the following: (a) that there must be a false
pretense or fraudulent representation as to his power, influence,
qualifications, property, credit, agency, business or imaginary
transactions; (b) that such false pretense or fraudulent
representation was made or executed prior to or simultaneously
with the commission of the fraud; (c) that the offended party relied
on the false pretense, fraudulent act, or fraudulent means and
was induced to part with his money or property; and (d) that, as a
result thereof, the offended party suffered damage. 22
In addition, fraud, in its general sense, is deemed to comprise
anything calculated to deceive, including all acts, omissions, and
concealment involving a breach of legal or equitable duty, trust, or
confidence justly reposed, resulting in damage to another, or by
which an undue and unconscientious advantage is taken of
another.  It is a generic term embracing all multifarious means
23
which human ingenuity can devise, and which are resorted to by
one individual to secure an advantage over another by false
13
suggestions or by suppression of truth and includes all surprise,
trick, cunning, dissembling and any unfair way by which another
is cheated.  On the other hand, deceit is the false representation
24
of a matter of fact, whether by words or conduct, by false or
misleading allegations, or by concealment of that which should
have been disclosed which deceives or is intended to deceive
another so that he shall act upon it to his legal injury.
25
In relation to the above, the elements of syndicated estafa as
defined under Section 1 of PD 1689 are: (a) estafa or other forms
of swindling as defined in Articles 315 and 316 of the Revised
Penal Code is committed; (b) the estafaor swindling is committed
by a syndicate of five or ·more persons; and (c) defraudation
results in the misappropriation of moneys contributed by
stockholders, or members of rural banks,
cooperatives, "samahang nayon(s)," or farmers' associations, or
of funds solicited by corporations/associations from the general
public.
26
With respect to the presence of the elements of fraud and deceit,
the Court agrees with the arguments and conclusions of the
OSG, to wit:
In pursuit of their fraudulent investment scheme, appellant and
his partners formed a partnership which, by its Amended Article
of Partnership, had the end in view "to acquire, manage, own,
hold, buy, sell, and/or encumber securities or equity participation
of other persons, partnership, corporation, or any other entities,
as permitted or may be authorized by law as well as to [purchase]
or otherwise acquire the whole or any [part] of the property,
assests, business and goodwill of any other persons, firm,
corporation or association and to conduct in any lawful measures
the business so acquired and to express all the powers
necessary or [convenient] in and about the conduct, management
and carrying on of such business. However, the [partnership]
shall not engage in stock brokerage or dealership of securities."
In violation thereof, the people behind the partnership were
effectively engaging in the sale of securites by enticing the public
to "invest" funds with MMG International Holdings Co., Ltd.
offering a promise of a two point five percent (2.5%) monthly
compensation out of the capital on their investment. These
investment activities were clearly ultra vires acts or acts beyond
the partnership's authority.
In fact, Atty. Justine Callangan, Director of the Corporate Finance
Division of the Securities and Exchange Commission, issued on
February 10, 2003 a Certification that based on the records of the
Commission, MMG International Holdings Co. Ltd. is not a
registered issuer of securities. She explained in her testimony
that the partnership has not been issued a permit or a secondary
license or franchise to go to the public and offer to sell any form
of securities which means that the partnership cannot offer or sell
shares of stocks or equity, securities, investment contracts, debt
instruments like short-term or long-term commercial papers to
more than nineteen (19) people without any prior licensing from
the Commission. In plain language, Atty. Callangan stated that
soliciting funds from the public is a form of issuing securities,
which MMG International Holdings Co. Ltd. was not authorized to
do so.
Apparently, registration with the Securities and Exchange
Commission was procured by MMG International Holdings Co.
Ltd. only for the purpose of giving a semblance of legitimacy to
the partnership; that the partnership's business was sanctioned
by the government and that it was allowed by law to accept
investments.
In carrying out the nefarious transactions, MMG International
Holdings Co. Ltd. even published its own brochure
entitled "Alliance" which was shown to potential investors
showcasing that it had the following businesses to finance the
promised earnings: a condotel (MMG Condotel), a realty
company (Mateo Realty and Development Corporation), schools
(MMG Academy, Mateo College and Technical Foundation, Inc.,
14
MMG Computer Learning Center, Mateo Institute of Computer
Studies), consumer products manufacturing businesses (M-
Power Enterprises, Inc.), an insurance firm (Mateo Pre-Need
Plans), retail establishments (MMG International Trading
Corporation), movie outfit (MMG Films International) and a
shipping line (Mateo Maritime Management), among others.  Be1âwphi1
that as it may, there was no evidence presented by the
partnership to bolster their representations of being engaged in
these so-called bustling business endeavors.
Evidently, the testimonial evidence presented by the prosecution
more than amply proved that appellant, together with his partners,
employed fraud and deceit upon trusting individuals in order to
convince them to invest in MMG International Holdings Co. Ltd. It
may even be observed that there was a uniform pattern employed
in selling their proposition as shown by how potential investors
are ensnared by appellant and his partners, through MMG
International Holdings Co. Ltd. Business Center Head Geralding
Alejandro. First, they would make a presentation of the "Alliance"
brochure featuring the businesses the company professes to own
and combine with the misrepresentation that they had the
technical know-how and false promise of two point five percent
(2.5%) monthly compensation out of the capital on their
investment.27
Thus, in the present case, it is clear that all the elements of
syndicated estafa, are present, considering that: (a) the
incorporators/directors of MMG comprising more than five (5)
people, including herein accused-appellant, made false.
pretenses and representations to the investing public - in this
case, the private complainants - regarding a supposed lucrative
investment opportunity with MMG in order to solicit money from
them; (b) the said false pretenses and representations were
made prior to or simultaneous with the commission of fraud; (c)
relying on the same, private complainants invested their hard-
earned money into MMG; and (d) the incorporators/directors of
MMG ended up running away with the private complainants'
investments, obviously to the latter's prejudice.
Accused-appellant insists that the prosecution failed· to prove the
element of defraudation because no sufficient evidence was
presented to prove that he "personally, physically and actually
performed any 'false pretenses' and/or 'fraudulent
representations' against the private complainants."  The Court
28
does not agree. Accused-appellant should be reminded that he is
being accused of syndicated estafa in conspiracy with the other
co-accused. In this regard, the Court finds no error in the finding
of the CA that herein appellant and his co-accused are guilty of
conspiracy, to wit:
xxxx
The evidence adduced by the prosecution established the
existence of conspiracy among the accused in committing the
crime charged. They started by forming the partnership. All of
them had access to MMG Holding's bank accounts. They
composed the Members of the Board of Directors that manage
and control the business transactions of MMG Holdings. Without
the participation of each of the accused, MMG Holdings could not
have solicited funds from the general public and succeeded to
perpetrate their fraudulent scheme. Hence, each of them is a co-
conspirator by virtue of indispensable cooperation in the
fraudulent acts of the partnership.
xxx 29
In the instant case, it was not necessary for the prosecution to still
prove .that accused-appellant himself "personally, physically and
actually performed any 'false pretenses' and/or 'fraudulent
representations' against the private complainants," given the
findings of both the RTC and the CA of the existence of
conspiracy among appellant and his co-accused. When there is
conspiracy, the act of one is the act of all.  It is not essential that
30
there be actual proof that all the conspirators took a direct part in
every act.  It is sufficient that they acted in concert pursuant to
31
the same objective.  In any case, appellant's direct participation
32
in the conspiracy is evidenced by the findings of the CA· that: (1)
15
the Articles of Partnership of MMG named appellant as the sole
general partner with a capital contribution of ₱49,750,000.00; (2)
his signatures appear in the MOA entered into by the
complainants and facilitated by his co-accused Geraldine
Alejandro; (3) his signatures also appear in the Secretary's
Certificate and Signature Cards which were submitted to Allied
Bank when the partnership opened an account; (4) the MOA are
notarized and it was only on appeal that he denied his signatures
appearing therein or questioned the authenticity and due
execution of the said documents. Indeed, it cannot be denied that
accused-appellant, together with the rest of his co-accused,
participated in a network of deception. The active involvement of
each in the scheme of soliciting investments was directed at one
single purpose - which is to divest complainants of their money on
the pretext of guaranteed high return of investment. Without a
doubt, the nature and extent of the actions of accused-appellant,
as well as with the other persons in MMG show unity of action
towards a common undertaking. Hence, conspiracy is evidently
present.
As to accused-appellant's contention that his signatures
appearing in the questioned documents are mere facsimile
signatures, this Court has held that a facsimile signature, which is
defined as a signature produced by mechanical means, is
recognized as valid in banking, financial, and business
transactions.  Besides, as earlier mentioned, the MOA where
33
accused-appellant's signature appears, was notarized and that it
was only on appeal that he denied authenticity of such signatures
and questioned the due execution of the concerned documents.
Also, the same facsimile signature, together with the other
facsimile and stamped signatures of appellant's co-accused, were
used in opening a bank account in the name of MMG where
accused-appellant was one of the authorized signatories. As
found by the CA, the bank used and recognized these facsimile
and stamped signatures in transacting with appellant and his co-
accused without any complaints from them. Thus, accused-
appellant cannot deny the binding effect of the subject signatures.
With respect to the fourth issue raised, the matter to be resolved
is whether the suspension of all claims as an incident to MMG
Group of Companies'. corporate rehabilitation also contemplate
the suspension of criminal charges filed against herein accused-
appellant as an officer of the distressed corporation.
This Court rules in the negative.
Citing the case of Rosario v. Co,   the ruling of this Court
34
in Panlilio, et al. v. RTC, Branch 51, City of Manila, et al.,  to wit:
35
xxxx
x x x There is no reason why criminal proceedings should be
suspended during corporate rehabilitation, more so, since the
prime purpose of the criminal action is .to punish the offender in
order to deter him and others from committing the same or similar
offense, to isolate him from society, reform and rehabilitate him
or, in general, to maintain social order. As correctly observed
in Rosario, it would be absurd for one who has engaged in
criminal conduct could escape punishment by the mere filing of a
petition for rehabilitation by the corporation of which he is an
officer.
The prosecution of the officers of the corporation has no bearing
on the pending rehabilitation of the corporation, especially since
they are charged in their individual capacities. Such being the
case, the purpose of the law for the issuance of the stay order is
not compromised, since the appointed rehabilitation receiver can
still fully discharge his functions as mandated by law. It bears to
stress that the rehabilitation receiver is not charged to defend the
officers of the corporation. If there is anything that the
rehabilitation receiver might be remotely interested in is whether
the court also rules that petitioners are civilly liable. Such a
scenario, however, is not a reason to suspend the criminal
proceedings, because as aptly discussed in Rosario, should the
court prosecuting the officers of the corporation find that an award
16
or indemnification is warranted, such award would fall under the
category of claims, the execution of which would be subject to the
stay order issued by the rehabilitation court. x x x
x x x. 36
As to the last issue raised, accused-appellant insists that his
acquittal of the same offense charged in several other cases only
proves that he never committed the said crime of syndicated
estafa. Accused-appellant's logic is skewed. The fact that he was
acquitted in several other cases for the same offense charged
does not necessarily follow that he should also be found innocent
in the present case. His acquittal in the cases he mentioned was
due to the prosecution's failure to present sufficient evidence to
convict him of the offense charged. These cases involved
different parties, factual millieu and sets of evidence. In the
present case, both the RTC and the CA found that the evidence
presented by the prosecution is enough to prove that accused-
appellant is guilty beyond reasonable doubt of the crimes of
syndicated estafa. After a review of the evidence presented, this
Court finds no cogent reason to depart from the findings of the
RTC and the CA.
Finally, the Court notes the recent passage into law of Republic
Act No. 10951 (RA 10951), otherwise known as "AN ACT
ADJUSTING THE AMOUNT OR THE VALUE OF PROPERTY
AND DAMAGE ON WHICH A PENALTY IS BASED, AND THE
FINES IMPOSED UNDER THE REVISED PENAL CODE,
AMENDING FOR THE PURPOSE ACT NO. 3815, OTHERWISE
KNOWN AS "THE REVISED PENAL CODE", AS AMENDED.
Consistent with the settled principle that an appeal in criminal
cases throws the whole case open for review, the Court finds it
proper to look into the applicability or non-applicability of the
amendatory provisions of RA 10951 to the present case.
The amendments under RA 10951 were passed with the primary
objective of adjusting the amounts or the values of the
property and damage on which a penalty is based for various
crimes committed under the RPC, including estafa. Section 85 of
RA 10951 makes mention of PD 1689 as one of the laws which
amends Article 315 of the RPC.
On the other hand, it should be considered that PD 1689 is a
special law which was enacted for the specific purpose of defining
syndicated estafa and imposing a specific penalty for the
commission of the said offense.  Thus, the law emphatically
1âwphi1
states its intent in its ''WHEREAS" clauses, to wit:
xxxx
WHEREAS, there is an upsurge in the commission of swindling
and other forms of frauds in rural banks,
cooperatives, "samahang nayon(s) ", and farmers' associations or
corporations/associations operating on funds solicited from the
general public;
WHEREAS, such defraudation or misappropriation of funds
contributed by stockholders or members of such rural banks,
cooperatives, "samahang nayon(s) ", or farmers' associations, or
of funds solicited by corporations/associations from the general
public, erodes the confidence of the public in the banking and
cooperative system, contravenes the public interest, and
constitutes economic sabotage that threatens the stability of the
nation;
WHEREAS, it is imperative that the resurgence of said crimes be
checked, or at least minimized, by imposing capital punishment
on certain forms of swindling and other frauds involving rural
banks, cooperatives, "samahang nayon(s)", farmers' associations
or corporations/associations operating on funds solicited from the
general public;
x x x."
17
Notably, the first paragraph of PD 1689 penalizes offenders with
life imprisonment to death regardless of the amount or value of
the property or damage involved, provided that a syndicate
committed the crime. 37
Moreover, from the provisions of RA 10951, there appears no
manifest intent to repeal or alter the penalty for syndicated estafa.
If there was such an intent, then the amending law should have
clearly so indicated because implied repeals are not
favored.  Thus, unlike the specific amendments introduced by RA
38
10951 to the penalties on estafa committed by means of
bouncing checks, as defined under Article 315 (2)(d) and
amended by Republic Act No. 4885  and Presidential Decree No.
39
818,  nowhere in RA 10951 was it clearly shown that the
40
legislature intended to repeal or amend the provisions of PD
1689. As much as possible, effect must be given to all
enactments of the legislature.  A special law cannot be repealed,
41
amended or altered by a subsequent general law by mere
implication.  Furthermore, for an implied repeal, a pre-condition
42
must be found, that is, a substantial conflict should exist between
the new and prior laws.  Absent an express repeal, a subsequent
43
law cannot be construed as repealing a prior one unless an
irreconcilable inconsistency or repugnancy exists in the terms of
the new and old laws.  The two laws, in brief, must be absolutely
44
incompatible.  In the instant case, the Court finds neither
45
inconsistency nor absolute incompatibility in the existing
provisions of PD 1689 and the amendatory provisions of RA
10951. As such, the amendatory provisions under RA 10951 are
not applicable to the present case.
WHEREFORE, the Court AFFIRMS the Decision dated July 16,
2012 and Resolution dated July 1, 2013 of the Court of Appeals
in CA-G.R. CR-H.C. No. 04001.
SO ORDERED.
3.SEC VS G COSMOS
4.G.R. No. 181381               July 20, 2015
SECURITIES and EXCHANGE COMMISSION, Petitioner,  has failed to submit the following reports in violation of SRC Rule
vs.
UNIVERSAL RIGHTFIELD PROPERTY HOLDINGS,
INC., Respondent.
Respondent Universal Rightfield Property Holdings, Inc. (URPHI)
is a corporation duly registered and existing under the Philippine
Laws, and is engaged in the business of providing residential and
leisure-related needs and wants of the middle and upper middle-
income market.
On May 29, 2003, petitioner Securities and Exchange
Commission (SEC), through its Corporate Finance Department,
issued an Order revoking URPHI's Registration of Securities and
Permit to Sell Securities to the Public for its failure to timely file its
Year 2001 Annual Report and Year 2002 1st, 2nd and 3rd
Quarterly Reports pursuant to Section 17  of the Securities
3
Regulation Code (SRC), Republic Act No. 8799.
On October 16, 2003, URPHI filed with the SEC a
Manifestation/Urgent Motion to Set Aside Revocation Order and
Reinstate Registration after complying with its reportorial
requirements.
On October 24, 2003, the SEC granted URPHI's motion to lift the
revocation order, considering the current economic situation,
URPHI's belated filing of the required annual and quarterly
reports, and its payment of the reduced fine of ₱82,000.00.
Thereafter, URPHI failed again to comply with the same
reportorial requirements.
18
In a Notice of Hearing dated June 25, 2004, the SEC directed
URPHI to show cause why its Registration of Securities and
Certificate of Permit to Sell Securities to the Public should not be
suspended for failure to submit the said requirements. Pertinent
portion of the notice reads: Records show that the corporation
17.1:
(1) 2003 Annual Report (SEC Form 17-A); and
(2) 2004 1st Quarter Report (SEC Form 17-Q)
The company has been allowed a non-extendible period until May
31, 2004 within which to file its 2003 Annual Report but to date
the said report has not been submitted.
In view of the foregoing and considering the inadequate
information available to the public, the corporation is hereby
directed to show cause why the Registration of its Securities and
Certificate of Permit to Sell Securities should not be suspended,
in a hearing scheduled before Atty. Francia A. Tiuseco-Manlapaz
on July 6, 2004, at the Securities Registration Division,
Corporation Finance Department of the Commission, 6th Floor,
SEC Building, EDA, Greenhills, Mandaluyong, Metro Manila at
10:00 o'clock in the morning. Failure of the company to appear,
through its representative, at the said hearing shall be deemed a
waiver on its part to be heard with regard to the suspension of its
Certificate of Permit to Sell Securities to the Public.
SO ORDERED. 4
During the scheduled hearing on July 6, 2004, URPHI, through its
Chief Accountant, Rhodora Lahaylahay, informed the SEC why it
failed to submit the reportorial requirements, viz.: (1) it was
constrained to reduce its accounting staff due to cost-cutting
measures; thus, some of the audit requirements were not
completed within the original timetable; and (2) its audited
financial statements for the period ending December 31, 2003
could not be finalized by reason of the delay in the completion of
some of its audit requirements.
In an Order dated July 27, 2004, the SEC suspended URPHI's
Registration of Securities and Permit to Sell Securities to the
Public for failure to submit its reportorial requirements despite the
lapse of the extension period, and due to lack of sufficient
justification for its inability to comply with the said requirements.
On August 23, 2004, the SEC, through its Corporation Finance
Department, informed URPHI that it failed to submit its 2004 2nd
Quarter Report (SEC Form 17-Q) in violation of the Amended
Implementing Rules and Regulations of the SRC Rule 17 .1(1)(A)
(ii).  It also directed URPHI to file the said report, and to show
5
cause why it should not be held liable for violation of the said rule.
In a letter dated September 28, 2004, URPHI requested for a final
extension, or until November 15, 2004, within which to submit its
reportorial requirements. Pertinent portions of the letter read:
We refer to your Order dated 27 July 2004, wherein the
Commission resolved to SUSPEND the Corporation's
Registration of Securities and Permit to Sell Securities to the
Public due to non-filing of the Corporation's reportorial
requirements under SRC Rule 17 effective for sixty (60) days or
until the reporting requirements are complied [with]; otherwise,
the Commission shall proceed with the revocation of the
Corporation's registration [of] securities. To date, the Corporation
has not filed with the Commission its 2003 Annual Report in SEC
Form 17-A and 2004 1st and 2°d Quarterly reports in SEC Form
17-Q. The non-submission of these reportorial requirements, as
we have already disclosed to you per our letter dated 13
September 2004, was due to the non-finalization of the
Corporation's audited financial statement for the fiscal year ended
December 31, 2003.
19
During our meeting with our external auditor, SGV & Co. last 8
September 2004, SGV agreed to facilitate the finalization of our
financial statements within two (2) weeks. Notwithstanding the
same, the Corporation foresees the impossibility of complying
with its submission until the end of the month, as the partners of
SGV are still reviewing the final draft of the financial statements.
The Corporation intends to comply with its reportorial
requirements. However, due to the foregoing circumstances, the
finalization of our financial statement has again been delayed. In
this regard, may we request for the last time until November 15,
2004 within which to submit said reportorial requirements. 6
On December 1, 2004, URPHI filed with the SEC its 2003 Annual
Report.
In an Order of Revocation  dated December 8, 2004, the SEC
7
revoked URPHI's Registration of Securities and Permit to Sell
Securities to the Public for its failure to submit its reportorial
requirements within the final extension period.
On December 9, 10, and 14, 2004, URPHI finally submitted to the
SEC its 1st Quarterly Report for 2004, 2nd Quarterly Report for
2004, and 3rd Quarterly Report for 2004, respectively. Meantime,
URPHI appealed the SEC Order of Revocation dated December
8, 2004 by filing a Notice of Appeal and a Memorandum both
dated January 3, 2005.
In a Resolution dated December 15, 2005, the SEC denied
URPHI's appeal, thus: WHEREFORE, premises considered, the
Memorandum dated 03 January 2005 of Universal Rightfield
Property Holdings, Inc. praying for the reversal of the Order of
Revocation dated 08 December 2004 is DENIED for lack of merit.
SO ORDERED. 8
Aggrieved, URPHI filed a petition for review with the CA.
In a Decision dated January 21, 2008, the CA granted the petition
and set aside the SEC Order of Revocation after finding that
URPHI was not afforded due process because no due notice was
given and no hearing was conducted before its registration of
securities and permit to sell them to the public was revoked. The
CA noted that the hearing conducted on July 6, 2004 was only for
the purpose of determining whether URPHI's registration and
permit to sell should be suspended and not whether said
registration should be revoked.
The CA ruled that based on how Sections 5.1 (m)  and 13.1  of
9 10
the SRC are worded, suspension and revocation of URPHI's
registration of securities each requires separate notices and
hearings. It also held that the Ruling  in Globe Telecom, Inc. v.
11
The National Telecommunications Commission  (Globe Telecom,
12
Inc.) applies squarely to this case since the Section 13.1 of the
SRC itself provides that due notice and hearing are required
before revocation may be ordered by the SEC. In view of such
specific mandate of the SRC in cases of revocation, the CA
rejected the SEC's argument that the hearing conducted for the
suspension of URPHI's registration can already be considered as
the hearing for revocation.
The CA also held that the SEC cannot brush aside the specific
mandate of Section 13 .1 of the SRC by merely invoking the
doctrine that administrative due process is satisfied when the
party is given the opportunity to explain one's side or the
opportunity to seek a reconsideration of the action or ruling taken.
Citing Globe Telecom, Inc.  the CA explained that while such
13
doctrine remains valid and has been applied in numerous
instances, it must give way in instances when the statute itself,
such as Section 13 .1, demands prior notice and hearing. It
added that the imperativeness for a hearing in cases of
revocation of registration of securities assumes greater
significance, considering that revocation is a measure punitive in
character undertaken by an administrative agency in the exercise
of its quasi-judicial functions. Dissatisfied with the CA Decision,
20
the SEC filed the instant petition for review on certiorari, raising
the sole issue that:
THE COURT OF APPEALS DECIDED A QUESTION OF
SUBSTANCE WHICH IS NOT IN ACCORD WITH THE LAW
AND PREVAILING JURISPRUDENCE. 14
On the one hand, the SEC contends that URPHI was accorded all
the opportunity to be heard and comply with all the reportorial
requirements before the Order of Revocation was issued.
Specifically, in the Order dated July 27, 2004 suspending
URPHI's registration of securities for 60 days, the SEC expressly
warned that such registration would be revoked should it
persistently fail to comply with the said requirements. Still, URPHI
continuously failed to submit the required reports. On August 23,
2004, the SEC directed again URPHI to submit the required
report and to show cause why it should not be held liable for
violation of the law. Instead of submitting the required reports,
URPHI requested for a final extension, or until November 15,
2004, within which to comply with its reportorial requirements. For
URPHI's failure to submit the said reports, the SEC issued the
Order of Revocation dated December 8, 2004. URPHI
immediately filed a motion for reconsideration thereof through a
Notice of Appeal and a Memorandum both dated January 3,
2005, which the SEC later denied in the Resolution dated
December 15, 2005. Hence, URPHI was amply accorded its
guaranteed right to due process.
The SEC also submits that the factual milieu of Globe Telecom,
Inc.  cited by the CA in its Decision is starkly different from this
15
case. Unlike in the former case where the Court ruled that the fine
imposed by the National Telecommunications Commission
without notice and hearing, was null and void due to the denial of
petitioner's right to due process, the SEC points out that URPHI
was duly notified of its violations and the corresponding penalty
that may be imposed should it fail to submit the required reports,
and was given more than enough time to comply before the Order
of Revocation was issued. The SEC adds that a hearing was
conducted on July 6, 2004 as to URPHI's repeated failure to
submit the reportorial requirements as mandated by the SRC and
its implementing rules and regulations, which was the basis in
issuing the said Order.
On the other hand, URPHI insists that the CA was correct in
ruling that the SRC requires separate notices and hearings for
revocation and suspension of registration of securities and permit
to sell them to the public. It then asserts that the warning
contained in the SEC's suspension Order dated July 27, 2004
does not meet the requirement of notice under the SRC. It
stresses that while the SEC issued a separate notice of hearing
for such suspension, no similar notice was issued as regards
such revocation. It also notes that the July 6, 2004 hearing was
with regard to the suspension of its registration of securities, and
that no hearing was ever conducted for purposes of revocation of
such registration.
On the SEC's claim that URPHI was afforded due process
because it was already given the opportunity to seek a
reconsideration of the Order of Revocation by filing its Notice of
Appeal and Memorandum, URPHI argues that the filing of such
appeal did not cure the violation of its right to due process. In
support of its argument, URPHI cites the Globe Telecom,
Inc.  ruling that notice and hearing are indispensable when an
16
administrative agency exercises quasi-judicial functions and that
such requirements become even more imperative if the statute
itself demands it.
URPHI further cites the ruling  in BLTB, Co. v. Cadiao, et al.,  to
17 18
support its view that a motion for reconsideration is curative of a
defect in procedural due process only if a party is given sufficient
opportunity to explain his side of the controversy. It claims that
the controversy referred to is the underlying substantive
controversy of which the procedural due process controversy is
but an offshoot. Noting that the only issue raised in its appeal was
procedural, i.e., whether it was denied prior notice and hearing
under the SRC, URPHI contends that it cannot be said that by
21
appealing to the SEC, it had the opportunity to explain its side on
substantive controversy which pertains to its alleged violation of
the SRC and failure to comply with the reportorial requirements
that prompted the SEC to issue the Order of Revocation. Hence,
such appeal cannot be considered curative of the defect in
procedural due process which attended the issuance of the said
Order.
URPHI further submits that the prior revocation of its registration
on May 29, 2003 did not cure the lack of due process which
attended the revocation of its registration on December 8, 2004.
Since the SEC deemed it proper to lift the prior revocation, such
can no longer be used to sustain another revocation order, much
less one issued without prior notice and hearing. Granted that it
was accorded due process, URPHI asserts that the revocation of
its registration of securities and permit to sell them to the public is
inequitable under the circumstances. It calls attention to the
severe and certain consequences of such revocation, i.e.,
termination of the public offering of its securities, return of
payments received from purchasers thereof, and its delisting from
the PSE, which will cause financial ruin and jeopardize its efforts
to recover from its current financial distress. Claiming that it
exerted best effort and exercised good faith in complying with the
reportorial requirements, URPHI avers that the interest of the
investing public will be better served if, instead of revoking its
registration of securities, the SEC will merely impose penalties
and allow it to continue as a going concern in the hope that it may
later return to profitability.
The petition is meritorious.
There is no dispute that violation of the reportorial requirements
under Section 17.1  of the Amended Implementing Rules and
19
Regulation  of the SRC is a ground for suspension or revocation
20
of registration of securities pursuant to Sections 13.1 and 54.1 of
the SRC. However, contrary to the CA ruling that separate
notices and hearings for suspension and revocation of
registration of securities and permit to sell them to the public are
required, Sections 13 .1 and 54.1 of the SRC expressly provide
that the SEC may suspend or revoke such registration only after
due notice and hearing, to wit:
13.1. The Commission may reject a registration statement and
refuse registration of the security thereunder, or revoke the
effectivity of a registration statement and the registration of the
security thereunder after due notice and hearing by issuing an
order to such effect, setting forth its findings in respect thereto, if
it finds that:
a) The issuer:
xxxx
(ii) Has violated any of the provisions of this Code, the rules
promulgated pursuant thereto, or any order of the Commission of
which the issuer has notice in connection with the offering for
which a registration statement has been filed; 21
xxxx
54.1. If, after due notice and hearing, the Commission finds that:
(a) There is a violation of this Code, its rules, or its orders; (b) Any
registered broker or dealer, associated person thereof has failed
reasonably to supervise, with a view to preventing violations,
another person subject to supervision who commits any such
violation; ( c) Any registrant or other person has, in a registration
statement or in other reports, applications, accounts, records or
documents required by law or rules to be filed with the
Commission, made any untrue statement of a material fact, or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; or, in
the case of an underwriter, has failed to conduct an inquiry with
reasonable diligence to insure that a registration statement is
accurate and complete in all material respects; or ( d) Any person
has refused to permit any lawful examinations into its affairs, it
22
shall, in its discretion, and subject only to the limitations
hereinafter prescribed, impose any or all of the following
sanctions as may be appropriate in light of the facts and
circumstances:
(i) Suspension, or revocation of any registration for the offering of
securities;22
The Court has consistently held that the essence of due process
is simply an opportunity to be heard, or as applied to
administrative proceedings, an opportunity to explain one's side
or an opportunity to seek a reconsideration of the action or ruling
complained of.  Any seeming defect in its observance is cured by
23
the filing of a motion for reconsideration, and denial of due
process cannot be successfully invoked by a party who has had
the opportunity to be heard on such motion.  What the law
24
prohibits is not the absence of previous notice, but the absolute
absence thereof and the lack of opportunity to be heard. 25
In the present case, due notice of revocation was given to URPHI
through the SEC Order dated July 27, 2004 which reads:
Considering that the company is under rehabilitation, the request
was granted and it was given a non-extendible period until May
31, 2004 within which to comply.
Despite the extension[,] however, it failed to submit said reports.
Hence, a hearing was held on July 6, 2004 wherein the
company's representative, its Chief Accountant and a Researcher
appeared. No sufficient reason or justification for the company's
inability to comply with its reporting obligation was presented.
In view thereof, the Commission[,] in its meeting held on July 22,
2004, resolved to SUSPEND the Registration of Securities and
Permit to Sell Securities to the Public issued to UNIVERSAL
RIGHTFIELD PROPERTY HOLDINGS, INC., in accordance with
Section 54 of the Securities Regulation Code.
This said Suspension shall be effective for sixty (60) days or until
the reporting requirements are complied [with,] otherwise the
Commission shall proceed with the revocation of the company's
registration of securities.
Let this Order be published in a newspaper of general circulation
in the Philippines or on the Commission's web page.
SO ORDERED. 26
Contrary to the view that a separate notice of hearing to revoke is
necessary to initiate the revocation proceeding, the Court holds
that such notice would be a superfluity since the Order dated July
27, 2004 already states that such proceeding shall ensue if
URPHI would still fail to submit the reportorial requirements after
the lapse of the 60-day suspension period. After all, "due notice"
simply means the information that must be given or made to a
particular person or to the public within a legally mandated period
of time so that its recipient will have the opportunity to respond to
a situation or to allegations that affect the individual's or public's
legal rights or duties.
27
Granted that no formal hearing was held before the issuance of
the Order of Revocation, the Court finds that there was
substantial compliance with the requirements of due process
when URPHI was given opportunity to be heard. Upon receipt of
the SEC Order dated July 27, 2004, URPHI filed the letters dated
September 13 and 28, 2004, seeking a final extension to submit
the reportorial requirements, and admitting that its failure to
submit its 2nd Quarterly Report for 2004 was due to the same
reasons that it was unable to submit its 2003 Annual Report and
1st Quarterly Report for 2004. Notably, in its Order of Revocation,
the SEC considered URPHI's letters and stated that it still failed to
submit the required reports, despite the lapse of the final
extension requested.
23
In A.Z. Arnaiz, Realty, Inc. v. Office of the President,  the Court
28
held that due process, as a constitutional precept, does not
always, and in all situations, require a trial-type proceeding.
Litigants may be heard through pleadings, written explanations,
position papers, memoranda or oral arguments. The standard of
due process that must be met in administrative tribunals allows a
certain degree of latitude as long as fairness is not ignored. It is,
therefore, not legally objectionable for being violative of due
process for an administrative agency to resolve a case based
solely on position papers, affidavits or documentary evidence
submitted by the parties. Guided by the foregoing principle, the
Court rules that URPHI was afforded opportunity to be heard
when the SEC took into account in its Order of Revocation
URPHI's September 13 and 28, 2004 letters, explaining its failure
to submit the reportorial requirements, as well as its request for
final extension within which to comply. Pertinent portions of the
said Order read:
The Commission in its meeting held on July 22, 2004 resolved to
suspend its Registration of Securities and Permit to Sell
Securities to the Public. The Order of Suspension stated that it
was to be effective for sixty (60) days or until the reporting
requirements were complied with by the company; otherwise, the
Commission shall proceed with the revocation of the company's
registration of securities.
The sixty (60)-day period had elapsed on September 25, 2004
but the Commission received a letter on September 29, 2004
from the President of the company, Mr. Jose L. Merin. In the said
letter, it was admitted that the corporation had failed to submit its
2003 Annual Report (SEC Form 17-A) and its 2004 1st and 2nd
Quarterly Reports (SEC Form 17-Q) but explained that the
reason for its inability to submit said reports was due to the non-
finalization of the company's audited financial statements for the
fiscal year ended December 31, 2003. It further stated that during
its meeting with its external auditor, SGV & Co., last September
8, 2004, SGV agreed to facilitate the finalization of its financial
statements within two (2) weeks. The corporation foresaw the
impossibility of complying with its submission until the end of the
month as the partners of SGV were still reviewing the final draft of
the financial statements, thus, the request for extension FOR
THE LAST TIME until November 15, 2004 within which to comply.
SEC Form 17-A (for 2003) was finally submitted on December 1,
2004.
IN VIEW THEREOF, the Commission, in its meeting held on
December 2, 2004, resolved to REVOKE the Registration of
Securities and Permit to Sell Securities to the Public issued to
UNIVERSAL RIGHTFIELD PROPERTY HOLDINGS, INC. 29
Aside from having been given the opportunity to be heard before
the SEC issued the Order of Revocation, URPHI was likewise
able to seek reconsideration of such action complained of. After
the issuance of the said Order, URPHI filed a Notice of Appeal
and a Memorandum, asserting that it was issued without due
notice and hearing, and that the revocation is inequitable under
the circumstances. In the Resolution dated December 15, 2004,
the SEC denied URPHI's appeal in this wise:
In the instant case, URPHI was accorded due process when its
Chief Financial Officer gave its side on the imputed violation and
informed the Commission that it will not be able to submit its
Annual Report (SEC Form 17-A) for the fiscal year ending on 31
December 2003 and requested for additional time to comply with
the said requirements. The Commission granted URPHI a non-
extendible period of forty-seven (47) calendar days or until 15
November 2004 within which to comply.
In spite of the extension of time given, URPHI still failed to submit
the said reports. During the 06 July 2004 hearing where the Chief
Accountant and researcher of URPHI were present, both failed to
present sufficient justifications for URPHI's inability to comply with
its reporting obligations.
24
It is also noteworthy to mention that URPHI's Registration of
Securities and Permit to Sell Securities to the Public had been
revoked on several occasions on account of the same deficiency.
URPHI is aware of the SRC Rules and must suffer the
consequences of its reported violations. 30
Verily, URPHI was given the opportunity to be heard before the
Order of Revocation was issued, as well as the opportunity to
seek the reconsideration of such order.
Meanwhile, the Court disagrees with URPHI's claim that the
Globe Telecom, Inc.  ruling - that notice and hearing are
31
indispensable when an administrative agency exercises quasi-
judicial functions and that such requirements become even more
imperative if the statute itself demands it -is applicable to the
present case.
In Gamboa v. Finance Secretary,  the Court has held that the
32
SEC has both regulatory and adjudicative functions, thus:
Under its regulatory responsibilities, the SEC may pass upon
applications for, or may suspend or revoke (after due notice and
hearing), certificates of registration of corporations, partnerships
and associations (excluding cooperatives, homeowners
associations, and labor unions); compel legal and regulatory
compliances; conduct inspections; and impose fines or other
penalties for violations of the Revised Securities Act, as well as
implementing rules and directives of the SEC, such as may be
warranted.
Relative to its adjudicative authority, the SEC has original and
exclusive jurisdiction to hear and decide controversies and cases
involving
–
 a. Intra-corporate and partnership relations between or sell them to the public cannot be considered a penalty but a
among the corporation, officers and stockholders and withdrawal of a privilege, which regulatory power the SEC validly
partners, including their elections or appointments; exercised after giving it due notice and opportunity to be heard.

b. State and corporate affairs in relation to the legal While URPHI correctly relied in BLTB Co., Inc. v. Cadiao  to
35

existence of corporations, partnerships and associations
or to their franchises; and
c. Investors and corporate affairs particularly in respect of
devices and schemes, such as fraudulent practices,
employed by directors, officers, business associates,
support its view that a motion for reconsideration is curative of a
defect in procedural due process only if a party is given sufficient
opportunity to explain his side of the controversy, the Court
rejects URPHI's claim that it did not have the opportunity to
explain the substantive controversy of its violation of the SRC
reportorial requirements.  Contrary to the claim that only the
36

and/or other stockholders, partners, or members of
registered firms; x x x
As can be gleaned from the aforequoted ruling, the revocation of
registration of securities and permit to sell them to the public is
issue of procedural due process was raised in its appeal with the
SEC, URPHI also raised in its Memorandum dated January 3,
2005 the reasons why it failed to comply with the said
requirements, and why revocation is inequitable under the
circumstances. 37

not an exercise of the SEC's quasi-judicial power, but of its

regulatory power. A "quasi-judicial function" is a term which For the late filing of annual report and quarterly report, SEC
applies to the action, discretion, etc., of public administrative Memorandum Circular No. 6, Series of 2005, the Consolidated
officers or bodies, who are required to investigate facts, or Scale of Fines in effect at the time the offenses were committed,
ascertain the existence of facts, hold hearings, and draw provides for the following administrative penalties:
conclusions from them, as a basis for their official action and to
exercise discretion of a judicial nature.  Although Section 13.1 of
33
Description First Offense Second Offense Third Offense
the SRC requires due notice and hearing before issuing an order
of revocation, the SEC does not perform such quasi-judicial
functions and exercise discretion of a judicial nature in the Late Filing of Reprimand/Warning ₱50,000.00 plus ₱60,000.00 plus
exercise of such regulatory power. It neither settles actual Quarterly Report ₱300.00 per day of ₱600.00 per day o
controversies involving rights which are legally demandable and (SEC Form 17-Q) delay  delay
enforceable, nor adjudicates private rights and obligations in
cases of adversarial nature. Rather, when the SEC exercises its Late Filing of Annual Reprimand/Warning ₱100,000.00 plus ₱200,000.00 plus
incidental power to conduct administrative hearings and make Report (SEC Form ₱500.00 per day of ₱1000.00 per day
decisions, it does so in the course of the performance of its 17-A) delay delay
regulatory and law enforcement function.
It bears emphasis that URPHI had committed several offenses for
Significantly, unlike in Globe Telecom, Inc.  where the Court ruled
34

failure to comply with the reportorial requirements for which it was

that the fine imposed by the NTC without notice and hearing, was
fined and its registration of securities revoked. On May 29, 2003,
null and void due to the denial of petitioner's right to due process,
the SEC issued an Order revoking URPHI's Registration of
the revocation of URPHI's registration of securities and permit to

25
Securities and Permit to Sell Securities to the Public for its failure 93337, is REVERSED and SET ASIDE. In lieu thereof, the
to timely file its Year 2001 Annual Report and Year 2002 1st, 2nd Resolution dated December 15, 2005 of the Securities and
and 3rd Quarterly Reports. Then, on October 24, 2003, the SEC Exchange Commission and its Order of Revocation dated
granted URPHI's petition to lift the revocation, considering the December 8, 2004 are REINSTATED.
current economic situation, its belated filing of the required annual
and quarterly reports, and its payment of the reduced fine of SO ORDERED.
₱82,000.00. Despite the foregoing, URPHI failed again to submit
its 2003 Annual Report, and Year 2004 1st, 2nd and 3rd
Quarterly Reports within the requested extension periods.

Therefore, notwithstanding the belated filing of the said reports,

as well as the claim that public interest would be better served if
the SEC will merely impose penalties and allow it to continue in
order to become profitable again, the SEC cannot be faulted for
revoking once again URPHI's registration of securities and permit
to sell them to the public due to its repeated failure to timely
submit such reports. Needless to state, such continuing
reportorial requirements are pursuant to the state policies
declared in Section 2  of the SRC of protecting investors and
38

ensuring full and fair disclosure of information about securities

and their issuer.

All told, the CA erred in ruling that the SEC revoked URPHI's
registration of securities and permit to sell them to the public
without due process of law.  Quite the contrary, the requirements
1âwphi1

of due notice and hearing under Sections 13 .1 and 54.1 of the

SRC were substantially complied with. Due notice was made
through the Order dated July 27, 2004 stating that revocation
proceeding shall ensue if URPHI would still fail to submit the
reportorial requirements after the lapse of the 60-day suspension
period. Though no formal hearing was held, URPHI was still given
an opportunity to be heard through the letters dated September
13 and 18, 2004 before the Order of Revocation was issued, as
well as through its Notice of Appeal and Memorandum when it
moved to reconsider the said order.

WHEREFORE, the petition is GRANTED and the Decision dated

January 21, 2008 of the Court of Appeals in CA-G.R. SP No.

26