Alfredo C. Gray, Sr., et al. vs. Agustin Marking, et al.

[SEC-SICD * CASE NO. 2102. March 9, 1982.] ALFREDO C. GRAY, SR.,ET AL. , petitioner , vs .AGUSTIN MARKING, ET AL. , respondents . O R D E R Submitted for resolution are two (2) separate Motions To Dismiss filed by respondent Veterans Federation of The Philippines ("VFP" for short) and individual respondents Agustin Marking, Jaime S. Mejia, Felipe L. Cuison, Emmanuel V. de Ocampo, Luis Los Baos, Lorenzo G. Teves and Vicente Valley. Both Motions To Dismiss questioned the jurisdiction of this Commission over the person of respondents and over the controversy or dispute subject matter of the Petition. prLL Additionally, VFP asserts that the Petition, insofar as it seeks a declaration of nullity of Resolution No. 30-81, states no cause of action against it inasmuch as there is no showing in the Petition that petitioners are members of VFP nor that any intra-corporate dispute exists in VFP to warrant the filing of the Petition against it with this Commission. The question of jurisdiction over the person of respondents and over the subject matter of the petition was submitted to the Commission on the basis of the arguments and counter-arguments respectively propounded by the parties in their pleadings and memoranda. While the question of lack of cause of action necessitated a hearing considering that the same involved factual issues and the parties failed to stipulate on certain crucial facts to the determination of the validity or invalidity of the questioned Resolution No. 30-81. The Petition principally seeks the nullification of the annual meeting of stockholders and the election of the board of directors of the Philippine Veterans Bank ("PVB" for brevity) held on July 14, 1981; and the declaration of nullity of the VFP Resolution No. 30-81, authorizing the VFP President to nominate and vote the undelivered shares of stock held in trust by VFP. In this Petition, respondents, except Peregrino M. Andres who filed his answer praying for the dismissal of the petition, filed their Motions to Dismiss instantly under the consideration. I. On the question of jurisdiction . "The rule long in standing and frequently in application (is) that jurisdiction (of a court) over the subject matter (of a case) is conferred only by the Constitution or law" (De Jesus, et al. vs. Garcia, G.R. No. L-26816, February 28, 1967). Jurisdiction, therefore, cannot be presumed as the same "must appear clearly from statute or it will not be held to exist" (Africa vs. Gronke, G.R. No. 10649, March 1, 1916, 34 Phil. 50). Moreover, jurisdiction cannot be broadened upon "doubtful inference" from statutes and, absent a statutory grant, neither convenience nor assumed justice or propriety of the exercise thereof in a particular class of cases "can justify the assumption of jurisdiction by said courts" (Tuason vs. Crossfield, G.R. No. 9453, March 30, 1915, 30 Phil. 543). The rule with respect to administrative agencies such as this Commission is more stringent. "Being a creature of the legislature and not a court, (an administrative agency) can exercise only such jurisdiction and powers as are expressly or by necessary implication, conferred upon it by statute" (RCPI vs. Board of Communications, G.R. No. L-45378, November 23, 1977, Filipino Bus Co., vs. Phil. Railway Co., G.R. No. 37929, February 16, 1933, 57 Phil. 860). Applying the above well-settled rules, in relation to Presidential Decree No. 902-A, as amended, Section 3 thereof states: "The Commission shall have absolute jurisdiction, supervision, and control over all corporations, partnerships or associations, who are the grantees of primary franchise and/or a license or permit issued by the government to operate in the Philippines, and in the exercise of its authority, it shall have the power to enlist the aid and support of and to deputize any all enforcement agencies of the government, civil or military as well as any private institution, corporation, firm, association or person." LLpr The thrust of the question lies in the precise meaning of the phrases, "grantees of primary franchise and/or license or permit issued by the government to operate in the Philippines". In this jurisdiction, a "corporation is created (1) by law or (2) by operation of law. The right to be and act as a corporation is not a natural right or a civil right of any person. The right to be and act as a corporation, and to enjoy the immunities and privileges resulting from incorporation constitute a franchise given by the State. A corporation, therefore, cannot be created except by or under special authority from the State. Such authority is granted by the State through its legislative department by special law which directly created the corporation, or by a general law under which persons desiring to be and act as a corporation may incorporate." (Commercial Laws of the Philippines, Agbayani, Vol. 3 (1970 Ed.) p. 35, citing Fletcher and Ballantine). Accordingly, "the term corporate franchise ordinarily refers to the primary franchise of a corporation. Gulf Refining Co. vs. Cleveland Trust Co., Miss. 108 SO 158, citing Fletcher Cyc. Corps., 1st Ed. SS 1148, 1153". (Emphasis ours). On the other hand, the term "license or permit issued by the government to foreign corporations to operate in the Philippines refers to the license or permit issued by the government to foreign corporations to operate in the Philippines pursuant to the provisions of the Corporation Law, Act 1459 now under Title XV of the Corporation Code, or the secondary franchise or license issued to corporations to enable them to operate the business or industry from which they are organized after incorporation. The primary jurisdiction of the Commission of supervision and control over corporations emanates from its authority to implement and enforce the Corporation Law, Act 1459 pursuant to R.A. 287 * now the Corporation Code in accordance with Sec. 143 thereof, and such other laws which expressly vested the Commission the power to enforce and implement. The scope and limitation of the Commission's jurisdiction is clearly defined under Sec. 3 * of P.D. No. 902-A, as amended, which provides: In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: ....(Emphasis ours) Undeniably, the PVB is created by special law, R.A. No. 3518 and not by operation of general law. Its "statutory articles of incorporation" is R.A. No. 3518 itself and not the articles of incorporation contemplated and registered under the Corporation Law, Act 1459 or the Corporation Code. The mere filing and registration of the by-laws of PVB with the Commission does not necessarily confer jurisdiction over it as nowhere in its charter does it expressly place the Bank within the jurisdiction, supervision and control of the Commission. It is clear, therefore, that the Commission has no jurisdiction over PVB and the intra-corporate dispute involving the same subject of the petition. To hold otherwise would be arrogating unto the Commission the power and authority to interpret and implement laws outside its competence and jurisdiction. The proscription against "doubtful inferences" from the statutes creating administrative agencies is absolute and irrevocable on this point. In the same vein, neither can this Commission assume jurisdiction over the subject matter of the instant Petition, which involves the interpretation of the provisions of R.A. No. 2640, a special law. Indeed, the dispute or controversy centers around the interpretation of respondent VFP's act of passing a resolution authorizing respondent Espino to represent and vote as he did the undelivered shares of stock in PVB during the Stockholders' Meeting of the PVB. Considering that the basic justification invoked by respondents VFP and Espino in passing the questioned Resolution No. 30-81 and in voting the undelivered shares are based on the mandate of R.A. 2640, the interpretation of which is outside of the competence or province of this Commission, we hold that this Commission has no jurisdiction over the subject matter of this case. II. On the question of lack of cause of action . The Motion To Dismiss filed by VFP on the ground of lack of cause of action is premised on two (2) points, namely: (1) there is no showing that petitioners are members of VFP; and (2) there is no showing that there exists an intra-corporate dispute in VFP over which the Commission may exercise its jurisdiction. In support of the above points, VFP requested for admissions on certain facts and for a full-blown hearing to prove the facts not admitted by petitioners. Petitioners vigorously objected to this request by VFP for a hearing upon elementary rule that in a motion to dismiss based on lack of cause of action, only the averments in the complainant or petitions must be considered. After careful consideration, however, this Commission acceded to the request of VFP for one principal reason. The Petition, it will be noted, specifically prayed that Resolution No. 30-81 of VFP, on the basis of which Gen. Romeo Espino voted the undelivered shares of stock of missing veterans during the election in question, be declared " null and void ab initio " and in point of fact, the Petition, particularly paragraphs VIII, IX, X and XV thereof, made averments precisely on the subject Resolution and the unauthorized issuance and illegal use thereof by VFP and Gen. Romeo Espino. It was in the context of this specific prayer and averments of petitioners that VFP requested for a stipulation of facts and for an opportunity to present countervailing evidence to prove the validity and legality of the issuance of Resolution No. 30-81. Proceeding now to the substance of this particular ground of lack of cause of action asserted by VFP, this Commission takes note of the following admissions and stipulations arrived at between the parties and the evidence submitted: 1. VFP was created by a special law Republic Act No. 2640 and has no articles of Incorporation filed with, and approved by this Commission; (TSN of 24 Sept. 1981 pp. 10 & 12); 2. Section 4 of Republic Act No. 2640 stipulates that VFP is duty-bound to protect, uphold, represent and defend the interests of the veterans (TSN of 24 Sept. 1981, pp. 13-14); 3. Resolution No. 30-81 was passed by VFP pursuant to Section 4 of Republic Act No. 2640 (TSN of 24 Sept. 1981, pp. 16-17); 4. The elections in question were held on 14 July 1981 pursuant to P.D. 236 and after a certification was made by the Corporate Secretary of PVB on the existence of a quorum (TSN of 24 Sept. 1981, pp. 21-22); 5. The more than 200,000 undelivered shares of veterans were voted by VFP through Gen. Romeo Espino pursuant to, and in accordance with, Resolution No. 30-81 and the provisions of Republic Act No. 2640 (TSN of 24 Sept. 1981, pp. 27-28); 6. The results of the elections in question were canvassed (TSN of 24 Sept. 1981, pp. 28-29); 7. The Supreme Council and Executive Board of VFP passed Resolution No. 30-81 in accordance with its authority under Republic Act No. 2640 and pursuant to the constitution and by-laws of VFP (TSN of 24 Sept. 1981, p. 36); 8. The members of VFP are veterans organizations and not individual veterans (TSN of 24 Sept. 1981, pp. 39-42); 9. Exhibits indicating the basis and underlying reason for the acts of VFP in the passage of Res. 30-81, authorizing Gen. Romeo Espino as President of the VFP to represent the over 200,000 undelivered shares of stock the missing veterans in the questioned stockholders meeting of July 14, 1981, and the regularity of the conduct of the said meeting. (Exhs. "1" to "16"). While the above admissions and documentary exhibits offered and admitted in evidence, taken together, show that the petition states no cause of action against VFP, this Commission feels that no definitive resolution need be made considering its basic position that the Commission has no jurisdiction over the person of the Philippine Veterans Bank, being a corporation created by a special law; and that it has no jurisdiction over the subject matter of the action considering that the resolution of the legality or validity of the acts complained would require the interpretation of the provisions of Republic Act No. 2640, which this Commission has no judicial qualification to make. The dispute or controversy subject matter of this case is best resolved by the regular civil courts. LLjur WHEREFORE, premises considered, the Petition is hereby dismissed without permission as to costs. SO ORDERED. (SGD.) SIXTO V. VILLANUEVA Director * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .