Lessons Applicable: RTC v. SEC, contemplation of an election controversy properly within the jurisdiction of the regular courts
Laws Applicable:
FACTS:
- In view of the resignation of Camilo Quiason, the position of corporate secretary of Meralco became vacant.
- The board of directors of Meralco designated Jose Vitug to act as corporate secretary for the annual meeting. However, when the proxy validation began, the proceedings were presided over by respondent Anthony Rosete, assistant corporate secretary and in-house chief legal counsel of Meralco.
- GSIS filed a complaint seeking the declaration of certain proxies as invalid
- GSIS filed a Notice with the RTC manifesting the dismissal of the complaint. On the same day, GSIS filed an Urgent Petition with the Securities and Exchange Commission (SEC) seeking to restrain Rosete from “recognizing, counting and tabulating, directly or indirectly, notionally or actually or in whatever way, form, manner or means, or otherwise honoring the shares covered by” the proxies in favor of any officer representing MERALCO Management" and to annul and declare invalid said proxies.
- SEC issued a Show Cause Order
- Petitioners filed a petition for certiorari with prohibition with the Court of Appeals
- CA: complaint filed by GSIS in the SEC is hereby DISMISSED due to SEC’s lack of jurisdiction
1. W/N SEC can be private respondents
2. W/N it is a validation of the proxy within the SEC's jurisdiction (as opposed to Intra-Corporate Controversies within the RTC'S jurisdiction)
HELD: EXPUNGED for lack of capacity of the petitioner to bring forth the suit
1. NO
- Rule 65 does recognize that the SEC and its officers should have been designated as public respondents in the petition for certiorari filed with the Court of Appeals. Yet their involvement in the instant petition is not as original party-litigants, but as the quasi-judicial agency and officers exercising the adjudicative functions over the dispute between the two contending factions within Meralco. From the onset, neither the SEC nor Martinez or Guevarra has been considered as a real party-in-interest. Section 2, Rule 3 of the 1997 Rules of Civil Procedure provides that every action must be prosecuted or defended in the name of the real party in interest, that is “the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.” It would be facetious to assume that the SEC had any real interest or stake in the intra-corporate dispute within Meralco. At this point, only one petition remains—the petition for certiorari filed by GSIS in G.R. No. 183905.
- Under Section 4.6 that the ability to delegate functions to a single commissioner does not extend to the exercise of the review or appellate authority of the SEC. The issuance of the CDO is an act of the SEC itself done in the exercise of its original jurisdiction to review actual cases or controversies. If it has not been clear to the SEC before, it should be clear now that its power to issue a CDO can not, under the SRC, be delegated to an individual commissioner.
- Jurisdiction is conferred by no other source but law. Both sides have relied upon provisions of Rep. Act No. 8799, otherwise known as the Securities Regulation Code (SRC), its implementing rules (Amended Implementing Rules or AIRR-SRC), and other related rules to support their competing contentions that either the SEC or the trial courts has exclusive original jurisdiction over the dispute.
- the distinction between “proxy solicitation” and “proxy validation” cannot be dismissed offhand. The right of a stockholder to vote by proxy is generally established by the Corporation Code, but it is the SRC which specifically regulates the form and use of proxies, more particularly the procedure of proxy solicitation, primarily through Section 20.
- The investigatory power of the SEC established by Section 53.1 is central to its regulatory authority, most crucial to the public interest especially as it may pertain to corporations with publicly traded shares. For that reason, we are not keen on pursuing private respondents’ insistence that the GSIS complaint be viewed as rooted in an intra-corporate controversy solely within the jurisdiction of the trial courts to decide. It is possible that an intra-corporate controversy may animate a disgruntled shareholder to complain to the SEC a corporation’s violations of SEC rules and regulations, but that motive alone should not be sufficient to deprive the SEC of its investigatory and regulatory powers, especially so since such powers are exercisable on a motu proprio basis.
- Note that Section 6 is immediately preceded by Section 5, which originally conferred on the SEC “original and exclusive jurisdiction to hear and decide cases” involving “controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.” Thus, such power of the SEC then was incidental or ancillary to the “exercise of such jurisdiction. The cases referred to in Section 5 were transferred from the jurisdiction of the SEC to the regular courts with the passage of the SRC, specifically Section 5.2. Thus, the SEC’s power to pass upon the validity of proxies in relation to election controversies has effectively been withdrawn, tied as it is to its abrogated jurisdictional powers. Based on the foregoing, it is evident that the linchpin in deciding the question is whether or not the cause of action of GSIS before the SEC is intimately tied to an election controversy, as defined under Section 5(c) of Presidential Decree No. 902-A.
- Under the circumstances, we do not see it feasible for
GSIS to posit that its challenge to the solicitation or validation of
proxies bore no relation at all to the scheduled election of the board
of directors of Meralco during the annual meeting. GSIS very well knew
that the controversy falls within the contemplation of an election
controversy properly within the jurisdiction of the regular courts.
Otherwise, it would have never filed its original petition with the RTC
of Pasay. GSIS may have withdrawn its petition with the RTC on a new
assessment made in good faith that the controversy falls within the
jurisdiction of the SEC, yet the reality is that the reassessment is
precisely wrong as a matter of law.