Escolar Documentos
Profissional Documentos
Cultura Documentos
On June 4, 1996, PALI filed its 2. In applying its clear and reasonable
Comment to the Petition for Review and standards on the suitability for listing of
subsequently, a Comment and Motion to shares, PSE has failed to justify why it
Dismiss. On June 10, 1996, PSE filed its acted differently on the application of
Reply to Comment and Opposition to PALI, as compared to the IPOs of other
Motion to Dismiss. companies similarly that were allowed
On June 27, 1996, the Court of listing in the Exchange;
Appeals promulgated its Resolution
dismissing the PSEs Petition for 3. It appears that the claims and issues
Review. Hence, this Petition by the PSE. on the title to PALIs properties were
even less serious than the claims
The appellate court had ruled that against the assets of the other
the SEC had both jurisdiction and companies in that, the assertions of the
authority to look into the decision of the Marcoses that they are owners of the
petitioner PSE, pursuant to Section disputed properties were not
3[3] of the Revised Securities Act in substantiated enough to overcome the
relation to Section 6(j) and 6(m)[4] of P.D. strength of a title to properties issued
No. 902-A, and Section 38(b)[5] of the under the Torrens System as evidence
Revised Securities Act, and for the of ownership thereof;
purpose of ensuring fair administration
of the exchange. Both as a corporation 4. No action has been filed in any court
and as a stock exchange, the petitioner of competent jurisdiction seeking to
is subject to public respondents nullify PALIs ownership over the
jurisdiction, regulation and disputed properties, neither has the
control. Accepting the argument that the government instituted recovery
public respondent has the authority proceedings against these properties.
merely to supervise or regulate, would Yet the import of PSEs decision in
amount to serious consequences, denying PALIs application is that it
considering that the petitioner is a stock would be PALI, not the Marcoses, that
exchange whose business is impressed must go to court to prove the legality of
with public interest. Abuse is not remote its ownership on these properties before
if the public respondent is left without its shares can be listed.
any system of control. If the securities
act vested the public respondent with In addition, the argument that the
jurisdiction and control over all PALI properties belong to the
corporations; the power to authorize the Military/Naval Reservation does not
establishment of stock exchanges; the inspire belief. The point is, the PALI
right to supervise and regulate the properties are now titled. A property
same; and the power to alter and losses its public character the moment it
supplement rules of the exchange in the is covered by a title. As a matter of fact,
the titles have long been settled by a the countrys security policies are
final judgment; and the final decree patterned, to the effect of giving the
having been registered, they can no Securities Commission less control over
longer be re-opened considering that stock exchanges, which in turn are
the one year period has already given more lee-way in making the
passed. Lastly, the determination of decision whether or not to allow
what standard to apply in allowing PALIs corporations to offer their stock to the
application for listing, whether the public through the stock exchange. This
discretion method or the system of is in accord with the business judgment
public disclosure adhered to by the rule whereby the SEC and the courts
SEC, should be addressed to the are barred from intruding into business
Securities Commission, it being the judgments of corporations, when the
government agency that exercises both same are made in good faith. The said
supervisory and regulatory authority rule precludes the reversal of the
over all corporations. decision of the PSE to deny PALIs listing
application, absent a showing a bad
On August 15, 1996, the PSE, after faith on the part of the PSE. Under the
it was granted an extension, filed an listing rule of the PSE, to which PALI
instant Petition for Review on Certiorari, had previously agreed to comply, the
taking exception to the rulings of the PSE retains the discretion to accept or
SEC and the Court of Appeals. reject applications for listing. Thus, even
Respondent PALI filed its Comment to if an issuer has complied with the PSE
the petition on October 17, 1996. On the listing rules and requirements, PSE
same date, the PCGG filed a Motion for retains the discretion to accept or reject
Leave to file a Petition for Intervention. the issuers listing application if the PSE
This was followed up by the PCGGs determines that the listing shall not
Petition for Intervention on October 21, serve the interests of the investing
1996. A supplemental Comment was public.
filed by PALI on October 25, 1997. The
Office of the Solicitor General, Moreover, PSE argues that the SEC
representing the SEC and the Court of has no jurisdiction over sequestered
Appeals, likewise filed its Comment on corporations, nor with corporations
December 26, 1996. In answer to the whose properties are under
PCGGs motion for leave to file petition sequestration. A reading of Republic of
for intervention, PALI filed its Comment the Philippines vs. Sandiganbayan, G.R.
thereto on January 17, 1997, whereas No. 105205, 240 SCRA 376, would
the PSE filed its own Comment on reveal that the properties of PALI, which
January 20, 1997. were derived from the Ternate
Development Corporation (TDC) and
On February 25, 1996, the PSE the Monte del Sol Development
filed its Consolidated Reply to the Corporation (MSDC), are under
comments of respondent PALI (October sequestration by the PCGG, and the
17, 1996) and the Solicitor General subject of forfeiture proceedings in the
(December 26, 1996). On may 16, 1997, Sandiganbayan. This ruling of the Court
PALI filed its Rejoinder to the said is the law of the case between the
consolidated reply of PSE. Republic and the TDC and MSDC. It
PSE submits that the Court of categorically declares that the assets of
Appeals erred in ruling that the SEC had these corporations were sequestered by
authority to order the PSE to list the the PCGG on March 10, 1986 and April
shares of PALI in the stock 4, 1988.
exchange. Under presidential decree It is, likewise, intimidated that the
No. 902-A, the powers of the SEC over Court of Appeals sanction that PALIs
stock exchanges are more limited as ownership over its properties can no
compared to its authority over ordinary longer be questioned, since certificates
corporations. In connection with this, the of title have been issued to PALI and
powers of the SEC over stock more than one year has since lapsed, is
exchanges under the Revised Securities erroneous and ignores well settled
Act are specifically enumerated, and jurisprudence on land titles. That a
these do not include the power to certificate of title issued under the
reverse the decisions of the stock Torrens System is a conclusive
exchange. Authorities are in abundance evidence of ownership is not an
even in the United States, from which absolute rule and admits certain
exceptions. It is fundamental that forest even as it provides that the Commission
lands or military reservations are non- shall have absolute jurisdiction,
alienable. Thus, when a title covers a supervision, and control over all
forest reserve or a government corporations, partnerships or
reservation, such title is void. associations, who are the grantees of
primary franchises and/or a license or
PSE, likewise, assails the SECs permit issued by the government to
and the Court of Appeals reliance on the operate in the Philippines The SECs
alleged policy of full disclosure to uphold regulatory authority over private
the listing of the PALIs shares with the corporations encompasses a wide
PSE, in the absence of a clear mandate margin of areas, touching nearly all of a
for the effectivity of such policy. As it is, corporations concerns. This authority
the case records reveal the truth that springs from the fact that a corporation
PALI did not comply with the listing rules owes its existence to the concession of
and disclosure requirements. In fact, its corporate franchise from the state.
PALIs documents supporting its
application contained The SECs power to look into the
misrepresentations and misleading subject ruling of the PSE, therefore, may
statements, and concealed material be implied from or be considered as
information. The matter of sequestration necessary or incidental to the carrying
of PALIs properties and the fact that the out of the SECs express power to insure
same form part of military/naval/forest fair dealing in securities traded upon a
reservations were not reflected in PALIs stock exchange or to ensure the fair
application. administration of such exchange.[7] It is,
likewise, observed that the principal
It is undeniable that the petitioner function of the SEC is the supervision
PSE is not an ordinary corporation, in and control over corporations,
that although it is clothed with the partnerships and associations with the
marking of a corporate entity, its end in view that investment in these
functions as the primary channel entities may be encouraged and
through which the vessels of capital protected, and their activities pursued
trade ply. The PSEs relevance to the for the promotion of economic
continued operation and filtration of the development.[8]
securities transactions in the country
gives it a distinct color of importance Thus, it was in the alleged exercise
such that government intervention in its of this authority that the SEC reversed
affairs becomes justified, if not the decision of the PSE to deny the
necessary. Indeed, as the only application for listing in the stock
operational stock exchange in the exchange of the private respondent
country today, the PSE enjoys a PALI. The SECs action was affirmed by
monopoly of securities transactions, and the Court of Appeals.
as such, it yields an immense influence
upon the countrys economy. We affirm that the SEC is the entity
with the primary say as to whether or
Due to this special nature of stock not securities, including shares of stock
exchanges, the countrys lawmakers has of a corporation, may be traded or not in
seen it wise to give special treatment to the stock exchange. This is in line with
the administration and regulation of the SECs mission to ensure proper
stock exchanges.[6] compliance with the laws, such as the
Revised Securities Act and to regulate
These provisions, read together the sale and disposition of securities in
with the general grant of jurisdiction, and the country.[9] As the appellate court
right of supervision and control over all explains:
corporations under Sec. 3 of P.D. 902-A,
give the SEC the special mandate to be
Paramount policy also supports the
vigilant in the supervision of the affairs
authority of the public respondent to
of stock exchanges so that the interests
review petitioners denial of the listing.
of the investing public may be fully
Being a stock exchange, the petitioner
safeguarded.
performs a function that is vital to the
Section 3 of Presidential Decree national economy, as the business is
902-A, standing alone, is enough affected with public interest. As a matter
authority to uphold the SECs challenged of fact, it has often been said that the
control authority over the petitioner PSE economy moves on the basis of the rise
and fall of stocks being traded. By its Thus, notwithstanding the
economic power, the petitioner certainly regulatory power of the SEC over the
can dictate which and how many users PSE, and the resultant authority to
are allowed to sell securities thru the reverse the PSEs decision in matters of
facilities of a stock exchange, if allowed application for listing in the market, the
to interpret its own rules liberally as it SEC may exercise such power only if
may please. Petitioner can either allow the PSEs judgment is attended by bad
or deny the entry to the market of faith. In board of Liquidators vs. Kalaw,
[13]
securities. To repeat, the monopoly, it was held that bad faith does not
unless accompanied by control, simply connote bad judgment or
becomes subject to abuse; hence, negligence. It imports a dishonest
considering public interest, then it purpose or some moral obliquity and
should be subject to government conscious doing of wrong. It means a
regulation. breach of a known duty through some
motive or interest of ill will, partaking of
The role of the SEC in our national the nature of fraud.
economy cannot be minimized. The
In reaching its decision to deny the
legislature, through the Revised
application for listing of PALI, the PSE
Securities Act, Presidential Decree No.
considered important facts, which in the
902-A, and other pertinent laws, has
general scheme, brings to serious
entrusted to it the serious responsibility
question the qualification of PALI to sell
of enforcing all laws affecting
its shares to the public through the stock
corporations and other forms of
exchange. During the time for receiving
associations not otherwise vested in
objections to the application, the PSE
some other government office.[10]
heard from the representative of the late
This is not to say, however, that the President Ferdinand E. Marcos and his
PSEs management prerogatives are family who claim the properties of the
under the absolute control of the SEC. private respondent to be part of the
The PSE is, after all, a corporation Marcos estate. In time, the PCGG
authorized by its corporate franchise to confirmed this claim. In fact, an order of
engage in its proposed and duly sequestration has been issued covering
approved business. One of the PSEs the properties of PALI, and suit for
main concerns, as such, is still the reconveyance to the state has been filed
generation of profit for its in the Sandiganbayan Court. How the
stockholders. Moreover, the PSE has all properties were effectively transferred,
the rights pertaining to corporations, despite the sequestration order, from the
including the right to sue and be sued, TDC and MSDC to Rebecco Panlilio,
to hold property in its own name, to and to the private respondent PALI, in
enter (or not to enter) into contracts with only a short span of time, are not yet
third persons, and to perform all other explained to the Court, but it is clear that
legal acts within its allocated express or such circumstances give rise to serious
implied powers. doubt as to the integrity of PALI as a
stock issuer. The petitioner was in the
A corporation is but an association right when it refused application of PALI,
of individuals, allowed to transact under for a contrary ruling was not to the best
an assumed corporate name, and with a interest of the general public. The
distinct legal personality. In organizing purpose of the Revised Securities Act,
itself as a collective body, it waives no after all, is to give adequate and
constitutional immunities and perquisites effective protection to the investing
appropriate to such body.[11] As to its public against fraudulent
corporate and management decisions, representations, or false promises, and
therefore, the state will generally not the imposition of worthless ventures.[14]
interfere with the same. Questions of
policy and of management are left to the It is to be observed that the U.S.
honest decision of the officers and Securities Act emphasized its avowed
directors of a corporation, and the courts protection to acts detrimental to
are without authority to substitute their legitimate business, thus:
judgment for the judgment of the board
of directors. The board is the business The Securities Act, often referred to as
manager of the corporation, and so long the truth in securities Act, was designed
as it acts in good faith, its orders are not not only to provide investors with
reviewable by the courts.[12] adequate information upon which to
base their decisions to buy and sell trust by Rebecco Panlilio. It is also
securities, but also to protect legitimate alleged by the petitioner that these
business seeking to obtain capital properties belong to naval and forest
through honest presentation against reserves, and therefore beyond private
competition form crooked promoters and dominion. If any of these claims is
to prevent fraud in the sale of securities. established to be true, the certificates of
(Tenth Annual Report, U.S. Securities title over the subject properties now held
and Exchange Commission, p. 14). by PALI may be disregarded, as it is an
established rule that a registration of a
As has been pointed out, the effects of certificate of title does not confer
such an act are chiefly (1) prevention of ownership over the properties described
excesses and fraudulent transactions, therein to the person named as
merely by requirement of that details be owner. The inscription in the registry, to
revealed; (2) placing the market during be effective, must be made in good
the early stages of the offering of a faith. The defense of indefeasibility of a
security a body of information, which Torrens Title does not extend to a
operating indirectly through investment transferee who takes the certificate of
services and expert investors, will tend title with notice of a flaw.
to produce a more accurate appraisal of
In any case, for the purpose of
a security. x x x. Thus, the Commission
determining whether PSE acted
may refuse to permit a registration
correctly in refusing the application of
statement to become effective if it
PALI, the true ownership of the
appears on its face to be incomplete or
properties of PALI need not be
inaccurate in any material respect, and
determined as an absolute fact. What is
empower the Commission to issue a
material is that the uncertainty of the
stop order suspending the effectiveness
properties ownership and alienability
of any registration statement which is
exists, and this puts to question the
found to include any untrue statement of
qualification of PALIs public offering. In
a material fact or to omit to state any
sum, the Court finds that the SEC had
material fact required to be stated
acted arbitrarily in arrogating unto itself
therein or necessary to make the
the discretion of approving the
statements therein not
application for listing in the PSE of the
misleading. (Idem).
private respondent PALI, since this is a
matter addressed to the sound
Also, as the primary market for discretion of the PSE, a corporate entity,
securities, the PSE has established its whose business judgments are
name and goodwill, and it has the right respected in the absence of bad faith.
to protect such goodwill by maintaining
a reasonable standard of propriety in the The question as to what policy is, or
entities who choose to transact through should be relied upon in approving the
its facilities. It was reasonable for PSE, registration and sale of securities in the
therefore, to exercise its judgment in the SEC is not for the Court to determine,
manner it deems appropriate for its but is left to the sound discretion of the
business identity, as long as no rights Securities and Exchange
are trampled upon, and public welfare is Commission. In mandating the SEC to
safeguarded. administer the Revised Securities Act,
and in performing its other functions
In this connection, it is proper to under pertinent laws, the Revised
observe that the concept of government Securities Act, under Section 3 thereof,
absolutism in a thing of the past, and gives the SEC the power to promulgate
should remain so. such rules and regulations as it may
The observation that the title of consider appropriate in the public
PALI over its properties is absolute and interest for the enforcement of the said
can no longer be assailed is of no laws. The second paragraph of Section
moment. At this juncture, there is the 4 of the said law, on the other hand,
claim that the properties were owned by provides that no security, unless exempt
the TDC and MSDC and were by law, shall be issued, endorsed, sold,
transferred in violation of sequestration transferred or in any other manner
orders, to Rebecco Panlilio and later on conveyed to the public, unless
to PALI, besides the claim of the registered in accordance with the rules
Marcoses that such properties belong to and regulations that shall be
Marcos estate, and were held only in promulgated in the public interest and
for the protection of investors by the investors, impose before the security
Commission. Presidential Decree No. can be registered;
902-A, on the other hand, provides that
the SEC, as regulatory agency, has (iv) had been engaged or is engaged or
supervision and control over all is about to engaged in fraudulent
corporations and over the securities transactions;
market as a whole, and as such, is
given ample authority in determining (v) is in any was dishonest of is not of
appropriate policies. Pursuant to this good repute; or
regulatory authority, the SEC has
manifested that it has adopted the policy (vi) does not conduct its business in
of full material disclosure where all accordance with law or is engaged in a
companies, listed or applying for listing, business that is illegal or contrary or
are required to divulge truthfully and government rules and regulations.
accurately, all material information about
themselves and the securities they sell, (3) The enterprise or the business of the
for the protection of the investing public, issuer is not shown to be sound or to be
and under pain of administrative, based on sound business principles;
criminal and civil sanctions. In
connection with this, a fact is deemed
(4) An officer, member of the board of
material if it tends to induce or otherwise
directors, or principal stockholder of the
effect the sale or purchase of its
issuer is disqualified to such officer,
securities.[15] While the employment of
director or principal stockholder; or
this policy is recognized and sanctioned
by laws, nonetheless, the Revised
Securities Act sets substantial and (5) The issuer or registrant has not
procedural standards which a proposed shown to the satisfaction of the
issuer of securities must satisfy. Commission that the sale of its security
[16]
Pertinently, Section 9 of the Revised would not work to the prejudice to the
Securities Act sets forth the public interest or as a fraud upon the
possible Grounds for the Rejection of purchaser or investors. (Emphasis Ours)
the registration of a security:
A reading of the foregoing grounds
- - The Commission may reject a reveals the intention of the lawmakers to
registration statement and refuse to make the registration and issuance of
issue a permit to sell the securities securities dependent, to a certain
included in such registration statement if extent, on the merits of the securities
it finds that - - themselves, and of the issuer, to be
determined by the Securities and
Exchange Commission. This measure
(1) The registration statement is on its
was meant to protect the interest of the
face incomplete or inaccurate in any
investing public against fraudulent and
material respect or includes any untrue
worthless securities, and the SEC is
statement of a material fact or omits to
mandated by law to safeguard these
state a material facts required to be
interests, following the policies and rules
stated therein or necessary to make the
therefore provided. The absolute
statements therein not misleading; or
reliance on the full disclosure method in
the registration of securities is,
(2) The issuer or registrant - - therefore, untenable. At it is, the Court
finds that the private respondent PALI,
(i) is not solvent or not is sound financial on at least two points (nos. 1 and 5) has
condition; failed to support the propriety of the
issue of its shares with unfailing clarity,
(ii) has violated or has not complied with thereby lending support to the
the provisions of this Act, or the rules conclusion that the PSE acted correctly
promulgated pursuant thereto, or any in refusing the listing of PALI in its stock
order of the Commission; exchange. This does not discount the
effectivity of whatever method the SEC,
(iii) has failed to comply with any of the in the exercise of its vested authority,
applicable requirements and conditions chooses in setting the standard for
that the Commission may, in the public public offerings of corporations wishing
interest and for the protection of 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 my
mere administrative issuance.
In resum, 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.
ACCORDINGLY, in view of the
foregoing considerations, the Court
hereby GRANTS the Petition for Review
on Certiorari. The decisions of the Court
of Appeals and the Securities and
Exchage Commission dated July 27,
1996 and April 24, 1996, respectively,
are hereby 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.
SO ORDERED.
Regalado (Chairman) and Puno,
JJ., concur.
Mendoza, J., in the result.