Interport Resources Corporation vs. Hearing Panel, et al.

[SEC-EB NO. 431. April 17, 1995.] INTERPORT RESOURCES CORPORATION , petitioner , vs . HEARING PANEL and PABLO B. ROMAN, JR. , respondents . D E C I S I O N Petitioner, Interport Resources Corporation, submits this petition for review by certiorari to set aside the Order of the Hearing Panel in SEC Case No. 08-94-4853 , dated November 14, 1994, which denied petitioner's motion for reconsideration of the Order dated October 3, 1994, denying the motion to dismiss. Records will show that on August 15, 1994, private respondent filed a Petition for Mandamus regarding the propriety of the exercise by the private respondent of his right to subscribe to IRC's increase of capital stock for the same number of shares purchased from him together with the preemptive right accruing thereto. On September 5, 1994, petitioner filed a Motion to Dismiss predicated on the grounds that the Commission has no jurisdiction over the nature of the action and that the petition states no cause of action. In an Order dated October 3, 1994, public respondent denied the Motion to Dismiss. On October 18, 1994, petitioner filed a motion for reconsideration, which was denied in an Order dated November 14, 1994. Hence, this present recourse to the Commission en banc. Petitioner alleged that the public respondent committed grave abuse of discretion in holding that it had jurisdiction over the nature of the action, when it held in abeyance the resolution of the issue of lack of cause of action, and when it did not rule on the propriety of mandamus as the remedy in the case at bar. On the first ground, petitioner alleged that the Commission has no jurisdiction over the nature of the action in SEC Case No. 08-94-48-53 , as when the alleged dispute between the private respondent and petitioner arose in 1989, private respondent was no longer a stockholder of the corporation after he sold his 852,726,200 shares of Interport to petitioner. Records will show that various grounds have been invoke by petitioner in assailing the failure of public respondent to give due course to the motion to dismiss. It is, however, apparent that the principal ground relied upon by the parties centers on the jurisdiction of the Commission Both petitioner and private respondent relied on the same legal provisions in justifying their conflicting positions. Petitioner in arguing the jurisdiction of the Commission and private respondent in stating otherwise relied on paragraph (a) (b) of Section 5 of Presidential Decree No. 902-A, as amended. Thus, the resolution of the issue on whether or not the Commission has jurisdiction over the subject matter or nature of the complaint hinges on the proper interpretation of the provisions of P.D. No. 902-A, as amended. The pertinent allegations of the petition below are as follows: "7. When this Honorable Securities and Exchange Commission, in its Order dated February 1, 1989, declared that the aforequoted IRC Res. No. 87-2 violated the provisions of Sections 67 and 68 of the Corporation Code and directed herein respondent IRC to recognize the right of the subscribers to pay 75% unpaid portion of their subscription, there was an over subscription to the shares of IRC. 8. During the suspension of the trading of the shares of herein respondent IRC and before the lifting of such suspension, the SEC en banc recommended the increase of the capital stock of IRC to avoid the over-issue of shares. Due to the length of time that will elapse before the increase of capital stock can be accomplished which will unduly delay the lifting of trading of shares of IRC in the Exchanges, herein petitioner, as President, proposed to the SEC that he will sell his IRC shares to respondent at par value and these shares will then be delivered to the subscribers who will pay in turn for their subscription in full in order to avoid the over-issue of securities of IRC. 9. Before said proposal was filed with the SEC, the Board of Directors of IRC met on January 19, 1989, and unanimously passed a resolution accepting petitioner's offer to sell his shares at par value to IRC to be delivered to the subscribers who will in turn pay for their subscriptions in excess of the authorized capital stock of the corporation, on condition that herein petitioner will have the right to subscribe to the same number of shares purchased from him by the corporation together with preemptive right accruing thereto at par value, upon the increase of the authorized capital stock of the corporation. All the resolutions of the Board of Directors were approved, confirmed and ratified by the stockholders in its annual meeting held on April 18, 1989. 10. Subsequently, per records of IRC, the total actual number of shares availed of by IRC is 852,726,200 shares with a total amount of P8,527,262.00. 11. There was this proposed increase of authorized capital stock of IRC from P200,000,000.00 to P1,000,000,000.00 and stockholders are given the preemptive right to subscribe to one (1) for every share owned. And previously, petitioner conveyed to respondent IRC that he would like to exercise his right to subscribe to the increase of capital stock for the same number of shares purchased from him by IRC together with the pre-emptive right accruing thereto. Accordingly, IRC's Corporate Secretary wrote an official letter to the SEC (dated November 12, 1991), requesting for confirmation of the propriety of the exercise of petitioner's right; and to which the SEC replied on November 14, 1991, confirming the propriety of the exercise of his said right. On January 17, 1992, the Corporate Secretary of IRC informed IRC of the aforestated facts. On February 18, 1993, petitioner sent a letter reiterating his demand for the exercise of his said right, to which IRC sent a reply and gave him a run-around. Finally, on April 19, 1994, petitioner's counsel sent a letter to IRC again reiterating the aforementioned demand to exercise said right, and to which IRC sent a reply maintaining its position. Petitioner having failed to exercise his right and there is no other plan, speedy and adequate remedy in the ordinary course of law to enforce the same, is constrained to seek relief by way of Mandamus under Rule XXI of the Revised Rules of Procedure of this Honorable Commission." Thus, the petition below states the essence of the complaint necessitating a clear determination as to whether or not private respondent has a legal right to subscribe to the increase of capital stock for the 852,726,200 shares purchased from him by IRC at par value of P0.01 per share together with the pre-emptive rights accruing thereto. A perusal of private respondent's petition in SEC Case No. 08-94-4853 would show that the issues raised therein especially his right to subscribe to the increase of capital stock of Interport are inherently intra-corporate in nature and therefore falls within the jurisdiction of the Commission, as mandated by P.D. 902-A, as amended. As aptly held, the dispute at bar is properly an intra-corporate dispute that has arisen between and among stockholders where herein petitioner raised his right to subscribe to the increase of capital stock of the subject corporation. In other words, the present case involves an intra corporate dispute as to whether or not private respondent could remain and act as owner-stockholder of the corporation and has validly preserved his right to subscribe to the corporation's increase in capital stock even if he ceased to be a shareholder at the time the company increased its capital stock. The questioned Order of October 3, 1994, correctly pointed out the applicability of the case of the Securities and Exchange Commission v. Court of Appeals, G.R. Nos. 106425 & 106431-32, July 21, 1995. Thus: ". . . The existence of the intra-corporate relation at the time of the filing of the complaint does not determine the jurisdiction of the SEC. As established in the rulings of Abejo v. dela Cruz (G.R. No. L-63558, May 19, 1987), Saavedra v. SEC (G.R. No. L-80879, March 21, 1988), Boman Enterprises v. CA * , the fact that the status of the stockholder, viz-a-viz a corporation has apparently terminated, does not deprive the SEC of its original jurisdiction to hear and decide the controversy which arose from that relationship. Rather, the factor which decides whether the action is within the jurisdiction of the Commission is just what the law provides, i.e. the controversy arose out of intra-corporate relationship between and among the stockholders." Likewise, the Hearing Panel correctly ruled on the holding in abeyance the resolution on the issue of lack of cause of action in the questioned Order of October 3, 1994, until after the hearing of the case. Thus: "As aptly held in Republic Bank v. Cuaderno, et al., G.R. No. L-22399, March 30, 1967, the test of sufficiency of the facts alleged in the complaint is whether or not the court could render a valid judgment as prayed for, accepting as true the exclusive facts set forth in the complaint. If the Court should doubt the truths of the facts averred, it must not dismiss the complaint but require an answer and proceed to trial on the merits." (Piero v. Enriquez, G.R. No. L-833, October 20, 1949, 84, Phil. 774) Lastly, petitioner alleged impropriety of not ruling on the mandamus as the remedy in the case below. This contention has no merit. The main petition below further necessitated a clear determination as to whether or not private respondent has a clear legal right to subscribe to the increase of capital stock for the 852,726,200 shares purchased from him by Interport at par value of P0.01 per share together with the preemptive right accruing thereto. Until after consideration of the merit of the such principal action, we cannot rightfully pronounce that the Hearing Panel gravely abused its discretion in not ruling on the mandamus as the remedy in the case. In the light of all the foregoing, we find and so hold that the public respondents, in issuing the questioned Order, did not abuse their discretion amounting to lack of jurisdiction. WHEREFORE, the instant petition for review is hereby DENIED for lack of merit. Let further proceedings continue in SEC Case No. 08-94-4853 . SO ORDERED. (SGD.) ROSARIO N. LOPEZ Chairman (SGD.) RODOLFO L. SAMARISTA (SGD.) MERLE O. MANUEL Associate Commissioner Associate Commissioner (SGD.) FE ELOISA C. GLORIA (SGD.) PERFECTO R. YASAY, JR. Associate Commissioner Associate Commissioner * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .