G.R. No.

161057

BETTY GABIONZA and ISABELITA TAN, Petitioners,

- versus - CARPIO MORALES,

TINGA,

VELASCO, JR., and COURT OF APPEALS, LUKE BRION, JJ. ROXAS and EVELYN
NOLASCO,

FACTS:

On 21 August 2000, petitioners charged private respondents Rexas and Evelyn

with several criminal acts. Roxas was the president of ASB Holdings, Inc. (ASBHI) while
Nolasco was the senior vice president and treasurer of the same corporation.
ASBHI was incorporated in
1996 with its declared primary purpose to invest in any and all real and personal
properties of every kind or otherwise acquire the stocks, bonds, and other securities or
evidence of indebtedness of any other corporation, and to hold or own, use, sell, deal in,
dispose of, and turn to account any such stocks. As stated in the articles of
incorporation ASBHI was organized with an authorized capital stock of P500,000.00.

Both petitioners had previously placed monetary investment with the Bank of
Southeast Asia (BSA). They alleged that between 1996 and 1997, they were convinced
by the officers of ASBHI to lend or deposit money with the corporation. They and other
investors were urged to lend, invest or deposit money with ASBHI, and in return they
would receive checks from ASBHI for the amount so lent, invested or deposited. At first,
they were issued receipts reflecting the name "ASB Realty Development" which they
were told was the same entity as BSA or was connected therewith, but beginning in
March 1998, the receipts were issued in the name of ASBHI. They claimed that they
were told that ASBHI was exactly the same institution that they had previously dealt
with.

ASBHI would issue two (2) postdated checks to its lenders, one representing the
principal amount and the other covering the interest thereon. The checks were drawn
against DBS Bank and would mature in 30 to 45 days. On the maturity of the checks,
the individual lenders would renew the loans, either collecting only the interest
earnings or rolling over the same with the principal amounts.5

In the first quarter of 2000, DBS Bank started to refuse to pay for the checks
purportedly by virtue of "stop payment" orders from ASBHI. In May of 2000, ASBHI
filed a petition for rehabilitation and receivership with the Securities and Exchange
Commission (SEC), and it was able to obtain an order enjoining it from paying its
outstanding liabilities.6 This series of events led to the filing of the complaints by
petitioners against ASBHI. The complaints were for estafa under Article 315(2)(a) and
(2)(d) of the Revised Penal Code, estafa under Presidential Decree No. 1689, violation of
the Revised Securities Act and violation of the General Banking Act.

A special task force, the Task Force on Financial Fraud (Task Force), was
created by the Department of Justice (DOJ) to investigate the several complaints that
were lodged in relation to ASBHI.8 The Task Force, dismissed the complaint, and the
dismissal was concurred in by the assistant chief state prosecutor and approved by the
chief state prosecutor. With respect to the charges of estafa under Article 315(2) of the
Revised Penal Code and of violation of the Revised Securities Act (which form the crux
of the issues before this Court), the Task Force concluded that the subject transactions
were loans which gave rise only to civil liability; that petitioners were satisfied with the
arrangement from 1996 to 2000; that petitioners never directly dealt with Nolasco and
Roxas; and that a check was not a security as contemplated by the Revised Securities
Act.

The Secretary of Justice issued a resolution which partially reversed the Task Force
and instead directed the filing of five (5) Informations for estafa under Article 315(2)(a)
of the Revised Penal Code. The Court of Appeals, in its assailed Decision reversed the
DOJ and ordered the dismissal of the criminal cases. The dismissal was sustained by
the appellate court when it denied petitioners’ motion for reconsideration in a
Resolution. Hence this petition filed by Gabionza and Tan.

At the outset, it is critical to set forth the key factual findings of the DOJ which
led to the conclusion that probable cause existed against the respondents. The
DOJ Resolution states, to wit:

(1) WON petitioners are guilty of estfa under Article 315 (2) a()

The transactions in question appear to be mere renewals of the loans the

complainant-petitioners earlier granted to BSA. However, just after they agreed to
renew the loans, the ASB agents who dealt with them issued to them receipts
indicating that the borrower was ASB Realty, with the representation that it was "the
same entity as BSA or connected therewith." On the strength of this representation,
along with other claims relating to the status of ASB and its supposed financial
capacity to meet obligations, the complainant-petitioners acceded to lend the funds to
ASB Realty instead. As it turned out, however, ASB had in fact no financial capacity to
repay the loans as it had an authorized capital stock of only P500,000.00 and paid up
capital of only P125,000.00. Clearly, the representations regarding its supposed
financial capacity to meet its obligations to the complainant-petitioners were simply
false. Had they known that ASB had in fact no such financial capacity, they would not
have invested millions of pesos.

The false representations made by the ASB agents who dealt with the complainant-
petitioners and who inveigled them into investing their funds in ASB are properly
imputable to respondents Roxas and Nolasco, because they, as ASB’s president and
senior vice president/treasurer, respectively, in charge of its operations, directed its
agents to make the false representations to the public, including the complainant-
petitioners, in order to convince them to invest their moneys in ASB. They cannot
escape criminal liability on the ground that they did not personally deal with the
complainant-petitioners in regard to the transactions in question.

Article 315(2)(a) of the Revised Penal Code states:

ART. 315. Swindling (estafa). — Any person who shall defraud another by any of the
means mentioned herein below shall be punished by:

(2) By means of any of the following false pretenses or fraudulent acts executed prior to
or simultaneous with the commission of the fraud:

(a) By using a fictitious name, or falsely pretending to possess power, influence,

qualifications, property, credit, agency, business or imaginary transactions, or by
means of other similar deceits;
The elements of estafa by means of deceit as defined under Article 315(2)(a) of the
Revised Penal Code are as follows: (1) that there must be a false pretense, fraudulent
act or fraudulent means; (2) that such false pretense, fraudulent act or fraudulent
means must be made or executed prior to or simultaneously with the commission of
the fraud; (3) that the offended party must have relied on the false pretense, fraudulent
act or fraudulent means, that is, he was induced to part with his money or property
because of the false pretense, fraudulent act or fraudulent means; and (4) that as a
result thereof, the offended party suffered damage.17

Do the findings embodied in the DOJ Resolution align with the foregoing
elements of estafa by means of deceit?

First. The DOJ Resolution explicitly identified the false pretense, fraudulent act or
fraudulent means perpetrated upon the petitioners. It narrated that petitioners were
made to believe that ASBHI had the financial capacity to repay the loans it enticed
petitioners to extend. In estafa under Article 315(2)(a), it is essential that such false
statement or false representation constitute the very cause or the only motive which
induces the complainant to part with the thing.21

Private respondents argue before this Court that the true capitalization of ASBHI
has always been a matter of public record, reflected as it is in several documents
which could be obtained by the petitioners from the SEC. The material
misrepresentations have been made by the agents or employees of ASBHI to petitioners,
to the effect that the corporation was structurally sound and financially able to
undertake the series of loan transactions that it induced petitioners to enter into.

Moreover, respondents’ argument assumes that there is legal obligation on the part of
petitioners to undertake an investigation of ASBHI before agreeing to provide the loans.
There is no such obligation. It is unfair to expect a person to procure every available
public record concerning an applicant for credit to satisfy himself of the latter’s
financial standing. At least, that is not the way an average person takes care of his
concerns.

Second. The DOJ Resolution also made it clear that the false representations have
been made to petitioners prior to or simultaneously with the commission of the fraud.
The assurance given to them by ASBHI that it is a worthy credit partner occurred
before they parted with their money. Relevantly, ASBHI is not the entity with whom
petitioners initially transacted with, and they averred that they had to be convinced
with such representations that Roxas and the same group behind BSA were also
involved with ASBHI.

Third. As earlier stated, there was an explicit and reasonable conclusion drawn by the
DOJ that it was the representation of ASBHI to petitioners that it was creditworthy and
financially capable to pay that induced petitioners to extend the loans. Petitioners, in
their respective complaint-affidavits.

Fourth. The DOJ Resolution established that petitioners sustained damage as a result
of the acts perpetrated against them. The damage is considerable as to petitioners.

To the benefit of private respondents, the Court of Appeals ruled, citing Sesbreno v.
Court of Appeals, that the subject transactions "are akin to money market placements
which partake the nature of a loan, the non-payment of which does not give rise to
criminal liability for estafa." The citation is woefully misplaced. Sesbreno affirmed that
"a money market transaction partakes the nature of a loan and therefore
‘nonpayment thereof would not give rise to criminal liability for estafa through
misappropriation or conversion.’" Estafa through misappropriation or conversion is
punishable under Article 315(1)(b), while the case at bar involves Article 315 (2)(a), a
mode of estafa by means of deceit.

Indeed, Sesbreno explains: "In money market placement, the investor is a lender
who loans his money to a borrower through a middleman or dealer. Petitioner
here loaned his money to a borrower through Philfinance. When the latter failed to
deliver back petitioner's placement with the corresponding interest earned at the
maturity date, the liability incurred by Philfinance was a civil one." That rationale is
wholly irrelevant to the complaint at bar, which centers not on the inability of ASBHI to
repay petitioners but on the fraud and misrepresentation committed by ASBHI to
induce petitioners to part with their money.

To be clear, it is possible to hold the borrower in a money market placement liable for
estafa if the creditor was induced to extend a loan upon the false or fraudulent
misrepresentations of the borrower. Such estafa is one by means of deceit. The
borrower would not be generally liable for estafa through misappropriation if he or she
fails to repay the loan, since the liability in such instance is ordinarily civil in nature.

We can thus conclude that the DOJ Resolution clearly supports a prima facie
finding that the crime of estafa under Article 315 (2)(a) has been committed
against petitioners. Does it also establish a prima facie finding that there has
been a violation of the then-Revised Securities Act, specifically Section 4 in
relation to Section 56 thereof?

(2) WON that there has been a violation of the then-Revised Securities Act,
specifically Section 4 in relation to Section 56 thereof?

Section 4 of Batas Pambansa Blg. 176, or the Revised Securities Act, generally requires
the registration of securities and prohibits the sale or distribution of unregistered
securities. The DOJ extensively concluded that private respondents are liable for
violating such prohibition against the sale of unregistered securities:

Respondents Roxas and Nolasco do not dispute that in 1998, ASB borrowed funds
about 700 individual investors amounting to close to P4 billion, on recurring, short-
term basis, usually 30 or 45 days, promising high interest yields, issuing therefore
mere postdate checks. Under the circumstances, the checks assumed the character
of "evidences of indebtedness," which are among the "securities" mentioned
under the Revised Securities Act. The term "securities" embodies a flexible rather
than static principle, one that is capable of adaptation to meet the countless and
variable schemes devised by those who seek to use the money of others on the
promise of profits.

Thus, it has been held that checks of a debtor received and held by the lender
also are evidences of indebtedness and therefore "securities" under the Act,
where the debtor agreed to pay interest on a monthly basis so long as the
principal checks remained uncashed, it being said that such principal extent as
would have promissory notes payable on demand.

In the instant case, the checks were issued by ASB in lieu of the securities enumerated
under the Revised Securities Act in a clever attempt, or so they thought, to take the
case out of the purview of the law, which requires prior license to sell or deal in
securities and registration thereof. The scheme was to designed to circumvent the law.
Checks constitute mere substitutes for cash if so issued in payment of obligations in
the ordinary course of business transactions. But when they are issued in exchange for
a big number of individual non-personalized loans solicited from the public, numbering
about 700 in this case, the checks cease to be such.

In such a circumstance, the checks assume the character of evidences of indebtedness.

This is especially so where the individual loans were not evidenced by appropriate debt
instruments, such as promissory notes, loan agreements, etc., as in this case.
Purportedly, the postdated checks themselves serve as the evidences of the
indebtedness. A different rule would open the floodgates for a similar scheme, whereby
companies without prior license or authority from the SEC. This cannot be
countenanced.

But was ASBHI able to successfully evade the requirements under the Revised
Securities Act?

As found by the DOJ, there is ultimately a prima facie case that can at the very least
sustain prosecution of private respondents under that law. The DOJ Resolution is
persuasive in citing American authorities which countenance a flexible definition of
securities. Moreover, it bears pointing out that the definition of "securities" set forth in
Section 2 of the Revised Securities Act includes "commercial papers evidencing
indebtedness of any person, financial or non-financial entity, irrespective of maturity,
issued, endorsed, sold, transferred or in any manner conveyed to another."31 A check is
a commercial paper evidencing indebtedness of any person, financial or non-financial
entity. Since the checks in this case were generally rolled over to augment the creditor’s
existing investment with ASBHI, they most definitely take on the attributes of
traditional stocks.

"[T]he postdated checks themselves serve as the evidences of the indebtedness. A

different rule would open the floodgates for a similar scheme, whereby companies
without prior license or authority from the SEC. This cannot be countenanced."32

In 1909-1910, the Philippine and United States Supreme Courts affirmed the principle
that when the repealing act reenacts substantially the former law, and does not
increase the punishment of the accused, "the right still exists to punish the accused for
an offense of which they were convicted and sentenced before the passage of the later
act." This doctrine was reaffirmed as recently as 2001, where the Court, through
Justice Quisumbing, held in Benedicto v. Court of Appeals36 that an exception to the
rule that the absolute repeal of a penal law deprives the court of authority to punish a
person charged with violating the old law prior to its repeal is "where the repealing act
reenacts the former statute and punishes the act previously penalized under the old
law."

It is ineluctable that the DOJ Resolution established a prima facie case for
violation of Article 315 (2)(a) of the Revised Penal Code and Sections 4 in relation
to 56 of the Revised Securities Act. We now turn to the critical question of
whether the same charges can be pinned against Roxas and Nolasco likewise.

The DOJ Resolution did not consider it exculpatory that Roxas and Nolasco had not
themselves dealt directly with petitioners, observing that "to commit a crime,
inducement is as sufficient and effective as direct participation."39 This conclusion finds
textual support in Article 1740 of the Revised Penal Code. The Court of Appeals was
unable to point to any definitive evidence that Roxas or Nolasco did not instruct or
induce the agents of ASBHI to make the false or misleading representations to the
investors, including petitioners. Instead, it sought to acquit Roxas and Nolasco of any
liability on the ground that the traders or employees of ASBHI who directly made the
dubious representations to petitioners were never identified or impleaded as
respondents.

Assuming that the traders could be tagged as principals by direct participation in

tandem with Roxas and Nolasco – the principals by inducement – does it make
sense to compel that they be jointly charged in the same complaint to the extent
that the exclusion of one leads to the dismissal of the complaint? It does not.
Unlike in civil cases, where indispensable parties are required to be impleaded in order
to allow for complete relief once the case is adjudicated, the determination of criminal
liability is individual to each of the defendants. Even if the criminal court fails to
acquire jurisdiction over one or some participants to a crime, it still is able to try those
accused over whom it acquired jurisdiction. The criminal court will still be able to
ascertain the individual liability of those accused whom it could try, and hand down
penalties based on the degree of their participation in the crime. The absence of one or
some of the accused may bear impact on the available evidence for the prosecution or
defense, but it does not deprive the trial court to accordingly try the case based on the
evidence that is actually available.

At bar, if it is established after trial that Roxas and Nolasco instructed all the
employees, agents and traders of ASBHI to represent the corporation as financially able
to engage in the challenged transactions and repay its investors, despite their
knowledge that ASBHI was not established to be in a position to do so, and that
representatives of ASBHI accordingly made such representations to petitioners, then
private respondents could be held liable for estafa. The failure to implead or try the
employees, agents or traders will not negate such potential criminal liability of Roxas
and Nolasco. It is possible that the non-participation of such traders or agents in the
trial will affect the ability of both petitioners and private respondents to adduce
evidence during the trial, but it cannot quell the existence of the crime even before trial
is had. At the very least, the non-identification or non-impleading of such traders or
agents cannot negatively impact the finding of probable cause.

Is there sufficient basis then to establish probable cause against Roxas and
Nolasco? Taking into account the relative remoteness of private respondents to
petitioners, the DOJ still concluded that there was. To repeat:

The false representations made by the ASB agents who dealt with the complainant-
petitioners and who inveigled them into investing their funds in ASB are properly
imputable to respondents Roxas and Nolasco, because they, as ASB’s president and
senior vice president/treasurer, respectively, respectively, in charge of its operations,
directed its agents to make the false representations to the public, including the
complainant-petitioners, in order to convince them to invest their moneys in ASB. It is
difficult to make a different conclusion, judging from the fact that respondents Roxas
and Nolasco authorized and accepted for ASB the fraud-induced loans.43

Indeed, the facts as thus established cannot lead to a definite, exculpatory conclusion
that Roxas and Nolasco did not instruct, much less forbid, their agents from making
the misrepresentations to petitioners.There is also the fact that ABSHI, their
corporation, actually received the alleged amounts of money from petitioners. It is
especially curious that according to the ASBHI balance sheets dated 31 December 1999,
which petitioners attached to their affidavit-complaints,44 over five billion pesos were
booked as "advances to stockholder" when, according to the general information sheet
for 1999, Roxas owned 124,996 of the 125,000 subscribed shares of
ASBHI.45 Considering that ASBHI had an authorized capital stock of only P500,000 and
a subscribed capital of P125,000, it can be reasonably deduced that such large
amounts booked as "advances to stockholder" could have only come from the loans
extended by over 700 investors to ASBHI.

The Court’s conclusion is that the DOJ’S decision to prosecute private respondents is
founded on sufficient probable cause, and the ultimate determination of guilt or
acquittal is best made through a full trial on the merits. Indeed, many of the points
raised by private respondents before this Court, related as they are to the factual
context surrounding the subject transactions, deserve the full assessment and
verification only a trial on the merits can accord.

WHEREFORE, the petition is GRANTED. The assailed Decision and

Resolution of the Court of Appeals dated 18 July 2003 and 28 November 2003 are
REVERSED and SET ASIDE. The Resolutions of the Department of Justice in I.S.
Nos. 2000-1418 to 1422 dated 15 October 2001 and 3 July 2002 are
REINSTATED. Costs against private respondents.
 G.R. No. 164197 January 25, 2012

SECURITIES AND EXCHANGE COMMISSION, Petitioner,

vs.
PROSPERITY.COM, INC., Respondent.

This case involves the application of the Howey test in order to determine if a particular
transaction is an investment contract.

FACTS:

Prosperity.Com, Inc. (PCI) sold computer software and hosted websites without
providing internet service. To make a profit, PCI devised a scheme in which, for the
price of US$234.00 (subsequently increased to US$294), a buyer could acquire from it
an internet website of a 15-Mega Byte (MB) capacity. At the same time, by referring to
PCI his own down-line buyers, a first-time buyer could earn commissions, interest in
real estate in the Philippines and in the United States, and insurance coverage worth
₱50,000.00.

To benefit from this scheme, a PCI buyer must enlist and sponsor at least two other
buyers as his own down-lines. These second tier of buyers could in turn build up their
own down-lines. For each pair of down-lines, the buyer-sponsor received a US$92.00
commission. But referrals in a day by the buyer-sponsor should not exceed 16 since
the commissions due from excess referrals inure to PCI, not to the buyer-sponsor.

Apparently, PCI patterned its scheme from that of Golconda Ventures, Inc. (GVI), which
company stopped operations after the Securities and Exchange Commission (SEC)
issued a cease and desist order (CDO) against it. As it later on turned out, the same
persons who ran the affairs of GVI directed PCI’s actual operations.

In 2001, disgruntled elements of GVI filed a complaint with the SEC against PCI,
alleging that the latter had taken over GVI’s operations. After hearing,1 the SEC,
through its Compliance and Enforcement unit, issued a CDO against PCI. The SEC
ruled that PCI’s scheme constitutes an Investment contract and, following the
Securities Regulations Code,2 it should have first registered such contract or securities
with the SEC.

During the pendency of PCI’s action before the SEC, however, the CA issued a TRO,
enjoining the enforcement of the CDO. In response, the SEC filed with the CA a motion
to dismiss the petition on ground of forum shopping. In a Resolution,4 the CA initially
dismissed the petition, finding PCI guilty of forum shopping. But on PCI’s motion, the
CA reversed itself and reinstated the petition.The CA ruled that, following
the Howey test, PCI’s scheme did not constitute an investment contract that needs
registration pursuant to R.A. 8799, hence, this petition.

ISSUE: WON PCI’s scheme constitutes an investment contract that requires

registration under R.A. 8799.

HELD:

The Securities Regulation Code treats investment contracts as "securities"

that have to be registered with the SEC before they can be distributed and sold.
An investment contract is a contract, transaction, or scheme where a person
invests his money in a common enterprise and is led to expect profits primarily
from the efforts of others.
The United States Supreme Court held in Securities and Exchange Commission v. W.J.
Howey Co.10 that, for an investment contract to exist, the following elements, referred
to as the Howey test must concur: (1) a contract, transaction, or scheme; (2) an
investment of money; (3) investment is made in a common enterprise; (4) expectation
of profits; and (5) profits arising primarily from the efforts of others.Thus, to sustain
the SEC position in this case, PCI’s scheme or contract with its buyers must have all
these elements.

Here, PCI’s clients do not make such investments. They buy a product of some value to
them: an Internet website of a 15-MB capacity. The client can use this website to
enable people to have internet access to what he has to offer to them, say, some skin
cream. The buyers of the website do not invest money in PCI that it could use for
running some business that would generate profits for the investors. The price of
US$234.00 is what the buyer pays for the use of the website, a tangible asset that PCI
creates, using its computer facilities and technical skills.

Actually, PCI appears to be engaged in network marketing, a scheme adopted by

companies for getting people to buy their products outside the usual retail system
where products are bought from the store’s shelf. Under this scheme, adopted by most
health product distributors, the buyer can become a down-line seller. The latter earns
commissions from purchases made by new buyers whom he refers to the person who
sold the product to him. The network goes down the line where the orders to buy come.

The commissions, interest in real estate, and insurance coverage worth ₱50,000.00 are
incentives to down-line sellers to bring in other customers. These can hardly be
regarded as profits from investment of money under the Howey test.

The CA is right in ruling that the last requisite in the Howey test is lacking in the
marketing scheme that PCI has adopted. Evidently, it is PCI that expects profit
from the network marketing of its products. PCI is correct in saying that the
US$234 it gets from its clients is merely a consideration for the sale of the
websites that it provides.

WHEREFORE: WON that there has been a violation of the then-Revised Securities Act,
specifically Section 4 in relation to Section 56 thereof.
 G.R. No. 191995 August 3, 2011

PHILIPPINE VETERANS BANK, Petitioner,

vs.
JUSTINA CALLANGAN, in her capacity as Director of the Corporation Finance
Department of the Securities and Exchange Commission and/or the SECURITIES
AND EXCHANGE COMMISSION, Respondent.

FACTS:
On March 17, 2004, respondent Callangan, the Director of the Corporation
Finance Department of the Securities and Exchange Commission (SEC), sent the Bank
a letter, informing it that it qualifies as a "public company" under Section 17.2 of the
Securities Regulation Code (SRC) in relation with the Amended Implementing Rules
and Regulations of the SRC. The Bank is thus required to comply with the reportorial
requirements set forth in Section 17.1 of the SRC.2
The Bank responded by explaining that it should not be considered a "public
company" because it is a private company whose shares of stock are available only to a
limited class or sector, i.e., to World War II veterans, and not to the general public.

Director Callangan rejected the Bank’s explanation and assessed it a total

penalty of One Million Nine Hundred Thirty-Seven Thousand Two Hundred Sixty-Two
and 80/100 Pesos (₱1,937,262.80) for failing to comply with the SRC reportorial
requirements from 2001 to 2003. The Bank moved for the reconsideration of the
assessment, but Director Callangan denied the motion prompting the Bank to file a
petition for review with the Court of Appeals (CA).
The CA dismissed the petition and affirmed the assailed SEC as well as the
motion for reconsideration, opening the way for the Bank’s petition for review on
certiorari filed with this Court.

ISSUE: WON the Bank is a "public company" burdened with the reportorial
requirements ordered by the SEC under sections 17.1 and 17.2 of the SRC.

HELD:

17.1. Every issuer satisfying the requirements in Subsection 17.2 hereof shall file
with the Commission:

a) Within one hundred thirty-five (135) days, after the end of the issuer’s fiscal year, or
such other time as the Commission may prescribe, an annual report which shall
include, among others, a balance sheet, profit and loss statement and statement of
cash flows, for such last fiscal year, certified by an independent certified public
accountant, and a management discussion and analysis of results of operations; and

b) Such other periodical reports for interim fiscal periods and current reports on
significant developments of the issuer as the Commission may prescribe as necessary
to keep current information on the operation of the business and financial condition of
the issuer.

17.2. The reportorial requirements of Subsection 17.1 shall apply to the following:

c) An issuer with assets of at least Fifty million pesos (₱50,000,000.00) or such

other amount as the Commission shall prescribe, and having two hundred (200) or
more holders each holding at least one hundred (100) shares of a class of its
equity securities: Provided, however, That the obligation of such issuer to file reports
shall be terminated ninety (90) days after notification to the Commission by the issuer
that the number of its holders holding at least one hundred (100) shares is reduced to
less than one hundred (100). (emphases supplied)

We also cite Rule 3(1)(m) of the Amended Implementing Rules and Regulations of the
SRC, which defines a "public company" as "any corporation with a class of equity
securities listed on an Exchange or with assets in excess of Fifty Million
Pesos (₱50,000,000.00) and having two hundred (200) or more holders, at least
two hundred (200) of which are holding at least one hundred (100) shares of a
class of its equity securities."

From these provisions, it is clear that a "public company," as contemplated by the SRC,
is not limited to a company whose shares of stock are publicly listed; even companies
like the Bank, whose shares are offered only to a specific group of people, are
considered a public company, provided they meet the requirements enumerated above.

The records establish, and the Bank does not dispute, that the Bank has assets
exceeding ₱50,000,000.00 and has 395,998 shareholders.10 It is thus considered a
public company that must comply with the reportorial requirements set forth in Section
17.1 of the SRC.

Additionally, and contrary to the Bank’s claim, the Bank’s obligation to provide its
stockholders with copies of its annual report is actually for the benefit of the veterans-
stockholders, as it gives these stockholders access to information on the Bank’s
financial status and operations, resulting in greater transparency on the part of the
Bank.

WHEREFORE, premises considered, petitioner Philippine Veterans Bank’s motion for

reconsideration is hereby DENIED with finality.
 G.R. No. 171815 August 7, 2007

CEMCO HOLDINGS, INC., Petitioner,

vs.
NATIONAL LIFE INSURANCE COMPANY OF THE PHILIPPINES, INC., Respondent.

FACTS:
Union Cement Corporation (UCC), a publicly-listed company, has two principal
stockholders – UCHC, a non-listed company, with shares amounting to 60.51%, and
petitioner Cemco with 17.03%. Majority of UCHC’s stocks were owned by BCI with
21.31% and ACC with 29.69%. Cemco, on the other hand, owned 9% of UCHC stocks.

In a disclosure letter, BCI informed the Philippine Stock Exchange (PSE) that it
and its subsidiary ACC had passed resolutions to sell to Cemco BCI’s stocks in UCHC
equivalent to 21.31% and ACC’s stocks in UCHC equivalent to 29.69%.
In the PSE Circular for Brokers, it was stated that as a result of petitioner
Cemco’s acquisition of BCI and ACC’s shares in UCHC, petitioner’s total beneficial
ownership, direct and indirect, in UCC has increased by 36% and amounted to at least
53% of the shares of UCC.

As a consequence of this disclosure, the PSE, in a letter to the SEC dated 15

July 2004, inquired as to whether the Tender Offer Rule under Rule 19 of the
Implementing Rules of the Securities Regulation Code is not applicable to the purchase
by petitioner of the majority of shares of UCC.
SEC’s Corporate Finance Department responded to the query of the PSE that
while it was the stance of the department that the tender offer rule was not applicable,
the matter must still have to be confirmed by the SEC en banc.

Thereafter, in a subsequent letter, Director Callangan confirmed that the SEC en banc
had resolved that the Cemco transaction was not covered by the tender offer rule.

Feeling aggrieved by the transaction, respondent National Life Insurance

Company of the Philippines, Inc., a minority stockholder of UCC, sent a letter to Cemco
demanding the latter to comply with the rule on mandatory tender offer. Cemco,
however, refused. A
A Share Purchase Agreement was then executed by ACC and BCI, as sellers,
and Cemco, as buyer. The transaction was consummated and closed. Respondent
National Life Insurance Company of the Philippines, Inc. filed a complaint with the SEC
asking it to reverse its Resolution and to declare the purchase agreement of Cemco void
and praying that the mandatory tender offer rule be applied to its UCC shares.
In their comments, they were uniform in arguing that the tender offer rule
applied only to a direct acquisition of the shares of the listed company and did not
extend to an indirect acquisition arising from the purchase of the shares of a holding
company of the listed firm.

The SEC ruled in favor of the respondent by reversing and setting aside its
Resolution and directed petitioner Cemco to make a tender offer for UCC shares to
respondent and other holders of UCC shares similar to the class held by UCHC in
accordance with Section 9(E), Rule 19 of the Securities Regulation Code.

Petitioner filed a petition with the Court of Appeals which affirmed the decision
of the SEC.

ISSUES: 1. Whether or not the SEC has jurisdiction over respondent’s complaint and
to require Cemco to make a tender offer for respondent’s UCC shares; 2. Whether or
not the rule on mandatory tender offer applies to the indirect acquisition of shares in a
listed company, in this case, the indirect acquisition by Cemco of 36% of UCC, a
publicly-listed company, through its purchase of the shares in UCHC, a non-listed
company; 3. Whether or not the questioned ruling of the SEC can be applied
retroactively to Cemco’s transaction which was consummated under the authority of
the SEC’s prior resolution.

HELD:
1. Whether or not the SEC has jurisdiction over respondent’s complaint and to
require Cemco to make a tender offer for respondent’s UCC shares;

On the first issue, petitioner Cemco contends that while the SEC can take cognizance
of respondent’s complaint on the alleged violation by petitioner Cemco of the
mandatory tender offer requirement under Section 19 of Republic Act No. 8799, the
same statute does not vest the SEC with jurisdiction to adjudicate and determine the
rights and obligations of the parties since, under the same statute, the SEC’s authority
is purely administrative. Petitioner stresses that there is nothing in the statute which
authorizes the SEC to issue orders granting affirmative reliefs.

In taking cognizance of respondent’s complaint against petitioner and eventually

rendering a judgment which ordered the latter to make a tender offer, the SEC
was acting pursuant to Rule 19(13) of the Amended Implementing Rules and
Regulations of the Securities Regulation Code, to wit:

13. Violation

If there shall be violation of this Rule by pursuing a purchase of equity shares of a

public company at threshold amounts without the required tender offer, the
Commission, upon complaint, may nullify the said acquisition and direct the holding of
a tender offer. This shall be without prejudice to the imposition of other sanctions
under the Code.

The foregoing rule emanates from the SEC’s power and authority to regulate,
investigate or supervise the activities of persons to ensure compliance with the
Securities Regulation Code, more specifically the provision on mandatory tender offer
under Section 19 thereof.7

Another provision of the statute, which provides the basis of Rule 19(13) of the
Amended Implementing Rules and Regulations of the Securities Regulation Code, is
Section 5.1(n), viz:

[T]he Commission shall have, among others, the following powers and functions:

(n) Exercise such other powers as may be provided by law as well as those which may
be implied from, or which are necessary or incidental to the carrying out of, the express
powers granted the Commission to achieve the objectives and purposes of these laws.

The foregoing provision bestows upon the SEC the general adjudicative power which is
implied from the express powers of the Commission or which is incidental to, or
reasonably necessary to carry out, the performance of the administrative duties
entrusted to it. As a regulatory agency, it has the incidental power to conduct
hearings and render decisions fixing the rights and obligations of the parties. In fact, to
deprive the SEC of this power would render the agency inutile, because it would
become powerless to regulate and implement the law. A definite inference may be
drawn from the provisions of the SRC that the SEC has the authority not only to
investigate complaints of violations of the tender offer rule, but to adjudicate certain
rights and obligations of the contending parties and grant appropriate reliefs in the
exercise of its regulatory functions under the SRC. Section 5.1 of the SRC allows a
general grant of adjudicative powers to the SEC which may be implied from or are
necessary or incidental to the carrying out of its express powers to achieve the
objectives and purposes of the SRC.

The power conferred upon the SEC to promulgate rules and regulations is a legislative

Moreover, petitioner is barred from questioning the jurisdiction of the SEC. It must be
pointed out that petitioner had participated in all the proceedings before the SEC and
had prayed for affirmative relief. In fact, petitioner defended the jurisdiction of the SEC
in its Comment filed with the SEC. Petitioner did not question the jurisdiction of the
SEC when it rendered an opinion favorable to it. It was only when the case was before
the Court of Appeals and after the SEC rendered an unfavorable judgment against it
that petitioner challenged the SEC’s competence.

On the second issue, petitioner asserts that the mandatory tender offer rule
applies only to direct acquisition of shares in the public company.

This contention is not meritorious.

Tender offer is a publicly announced intention by a person acting alone or in concert

with other persons to acquire equity securities of a public company.12 A public
company is defined as a corporation which is listed on an exchange, or a corporation
with assets exceeding ₱50,000,000.00 and with 200 or more stockholders, at least 200
of them holding not less than 100 shares of such company.13 Stated differently, a
tender offer is an offer by the acquiring person to stockholders of a public company for
them to tender their shares therein on the terms specified in the offer. Tender offer is in
place to protect minority shareholders against any scheme that dilutes the share value
of their investments. It gives the minority shareholders the chance to exit the company
under reasonable terms, giving them the opportunity to sell their shares at the same
price as those of the majority shareholders.

Under Section 19 of Republic Act No. 8799, it is stated:

Tender Offers. 19.1. (a) Any person or group of persons acting in concert who intends
to acquire at least fifteen percent (15%) of any class of any equity security of a listed
corporation or of any class of any equity security of a corporation with assets of at least
Fifty million pesos (₱50,000,000.00) and having two hundred (200) or more
stockholders with at least one hundred (100) shares each or who intends to acquire at
least thirty percent (30%) of such equity over a period of twelve (12) months shall make
a tender offer to stockholders by filing with the Commission a declaration to that effect;
and furnish the issuer, a statement containing such of the information required in
Section 17 of this Code as the Commission may prescribe. Such person or group of
persons shall publish all requests or invitations for tender, or materials making a
tender offer or requesting or inviting letters of such a security. Copies of any additional
material soliciting or requesting such tender offers subsequent to the initial solicitation
or request shall contain such information as the Commission may prescribe, and shall
be filed with the Commission and sent to the issuer not later than the time copies of
such materials are first published or sent or given to security holders.

Under existing SEC Rules,16 the 15% and 30% threshold acquisition of shares under
the foregoing provision was increased to thirty-five percent (35%). It is further provided
therein that mandatory tender offer is still applicable even if the acquisition is less than
35% when the purchase would result in ownership of over 51% of the total outstanding
equity securities of the public company.17

The SEC and the Court of Appeals ruled that the indirect acquisition by
petitioner of 36% of UCC shares through the acquisition of the non-listed UCHC
shares is covered by the mandatory tender offer rule.

This interpretation given by the SEC and the Court of Appeals must be sustained.

The SEC and the Court of Appeals accurately pointed out that the coverage of the
mandatory tender offer rule covers not only direct acquisition but also indirect
acquisition or "any type of acquisition." This is clear from the discussions of the
Bicameral Conference Committee on the Securities Act of 2000, on 17 July 2000.

Petitioner counters that the legislator’s reference to "any type of acquisition" during the
deliberations on the Securities Regulation Code does not indicate that congress meant
to include the "indirect" acquisition of shares of a public corporation to be covered by
the tender offer rule. These arguments are not convincing. The legislative intent of
Section 19 of the Code is to regulate activities relating to acquisition of control of the
listed company and for the purpose of protecting the minority stockholders of a listed
corporation. Whatever may be the method by which control of a public company is
obtained, either through the direct purchase of its stocks or through an indirect means,
mandatory tender offer applies.

As to the third issue, petitioner stresses that the ruling on mandatory tender
offer rule by the SEC and the Court of Appeals should not have retroactive effect
or be made to apply to its purchase of the UCHC shares as it relied in good faith
on the letter dated 27 July 2004 of the SEC which opined that the proposed

The action of the SEC on the PSE request for opinion on the Cemco transaction cannot
be construed as passing merits or giving approval to the questioned transaction. As
aptly pointed out by the respondent, the letter of the SEC was nothing but an approval
of the draft letter prepared by Director Callanga. There was no public hearing where
interested parties could have been heard. Hence, it was not issued upon a definite and
concrete controversy affecting the legal relations of parties thereby making it a
judgment conclusive on all the parties. Said letter was merely advisory. Jurisprudence
has it that an advisory opinion of an agency may be stricken down if it deviates from
the provision of the statute. Since the letter dated 27 July 2004 runs counter to the
Securities Regulation Code, the same may be disregarded as what the SEC has done in
its decision.

WHEREFORE, the Decision and Resolution of the Court of Appeals dated 24

October 2005 and 6 March 2006, respectively, affirming the Decision dated 14
February 2005 of the Securities and Exchange Commission En Banc, are hereby
AFFIRMED. Costs against petitioner.
 G.R. No. 180064 September 16, 2013

JOSE U. PUA and BENJAMIN HANBEN U. PUA, Petitioners,

vs.
CITIBANK, N. A., Respondent.

FACTS:
On December 2, 2002, petitioners filed before the RTC a Complaint for
declaration of nullity of contract and sums of money with damages against respondent.
In their complaint, petitioners alleged that they had been depositors of Citibank
Binondo Branch (Citibank Binondo) since 1996. Sometime in 1999, Guada Ang,
Citibank Binondo’s Branch Manager, invited petitioner to a dinner party where he was
introduced to several officers and employees of Citibank Hongkong Branch (Citibank
Hongkong). A few months after, the Vice-President of Citibank Hongkong, came to the
Philippines to sell securities to Jose and required the latter to open an account with
Citibank Hongkong as it is one of the conditions for the sale of the aforementioned
securities. After opening such account, Yau offered and sold to petitioners numerous
securities.

The offer, sale, and signing of the subscription agreements of said securities
were all made and perfected at Citibank Binondo in the presence of its officers and
employees. Later on, petitioners discovered that the securities sold to them were not
registered with the Securities and Exchange Commission (SEC)and that the terms and
conditions covering the subscription were not likewise submitted to the SEC for
evaluation, approval, and registration. Asserting that respondent’s actions are in
violation of Republic Act No.8799, entitled the "Securities Regulation Code" (SRC), they
assailed the validity of the subscription agreements and the terms and conditions
thereof for being contrary to law and/or public policy.14

ISSUE: WON Petitioners’ action which involves a violation of the Securities Regulation
Code falls within the primary jurisdiction of the SEC.

HELD:

At the outset, the Court observes that respondent erroneously relied on the
Baviera ruling to support its position that all complaints involving purported violations
of the SRC should be first referred to the SEC. A careful reading of the Baviera case
would reveal that the same involves a criminal prosecution of a purported violator of
the SRC, and not a civil suit such as the case at bar. The pertinent portions of the
Baviera ruling thus read:

A criminal charge for violation of the Securities Regulation Code is a specialized dispute.
Hence, it must first be referred to an administrative agency of special competence, i.e.,
the SEC. Under the doctrine of primary jurisdiction, courts will not determine a
controversy involving a question within the jurisdiction of the administrative tribunal,
where the question demands the exercise of sound administrative discretion requiring
the specialized knowledge and expertise of said administrative tribunal to determine
technical and intricate matters of fact. The Securities Regulation Code is a special law.
Its enforcement is particularly vested in the SEC.

Hence, all complaints for any violation of the Code and its implementing rules and
regulations should be filed with the SEC. Where the complaint is criminal in nature,
the SEC shall indorse the complaint to the DOJ for preliminary investigation and
prosecution as provided in Section 53.1 earlier quoted.
We thus agree with the Court of Appeals that petitioner committed a fatal procedural
lapse when he filed his criminal complaint directly with the DOJ. Verily, no grave abuse
of discretion can be ascribed to the DOJ in dismissing petitioner’s complaint.

Records show that petitioners’ complaint constitutes a civil suit for declaration
of nullity of contract and sums of money with damages, which stemmed from
respondent’s alleged sale of unregistered securities, in violation of the various
provisions of the SRC and not a criminal case such as that involved in Baviera.

In this light, when the Court ruled in Baviera that "all complaints for any
violation of the [SRC] x x x should be filed with the SEC,"33 it should be construed
as to apply only to criminal and not to civil suits such as petitioners’ complaint.

It is apparent that the SRC provisions governing criminal suits are separate and
distinct from those which pertain to civil suits. On the one hand, Section 53 of
the SRC governs criminal suits involving violations of the said law, viz.:

SEC. 53. Investigations, Injunctions and Prosecution of Offenses. –

53.1. The Commission may, in its discretion, make such investigations as it deems
necessary to determine whether any person has violated or is about to violate any
provision of this Code, any rule, regulation or order thereunder, or any rule of an
Exchange, registered securities association, clearing agency, other self-regulatory
organization, and may require or permit any person to file with it a statement in writing,
under oath or otherwise, as the Commission shall determine, as to all facts and
circumstances concerning the matter to be investigated. The Commission may publish
information concerning any such violations, and to investigate any fact, condition,
practice or matter which it may deem necessary or proper to aid in the enforcement of
the provisions of this Code, in the prescribing of rules and regulations thereunder, or in
securing information to serve as a basis for recommending further legislation
concerning the matters to which this Code relates: Provided, however, That any person
requested or subpoenaed to produce documents or testify in any investigation shall
simultaneously be notified in writing of the purpose of such investigation: Provided,
further, That all criminal complaints for violations of this Code, and the
implementing rules and regulations enforced or administered by the Commission
shall be referred to the Department of Justice for preliminary investigation and
prosecution before the proper court:

Provided, furthermore, That in instances where the law allows independent civil or
criminal proceedings of violations arising from the same act, the Commission shall take
appropriate action to implement the same: Provided, finally, That the investigation,
prosecution, and trial of such cases shall be given priority.

On the other hand, Sections 56, 57, 58, 59, 60, 61, 62, and 63 of the SRC pertain to
civil suits involving violations of the same law. Among these, the applicable provisions
to this case are Sections 57.1 and 63.1 of the SRC which provide:

SEC. 57. Civil Liabilities Arising in Connection With Prospectus, Communications and
Reports.

– 57.1. Any person who:

(a) Offers to sell or sells a security in violation of Chapter III; or

(b) Offers to sell or sells a security, whether or not exempted by the provisions of this
Code, by the use of any means or instruments of transportation or communication, by
means of a prospectus or other written or oral communication, which includes an
untrue statement of a material fact or omits to state a material fact necessary in order
to make the statements, in the light of the circumstances under which they were made,
not misleading (the purchaser not knowing of such untruth or omission), and who shall
fail in the burden of proof that he did not know, and in the exercise of reasonable care
could not have known, of such untruth or omission, shall be liable to the person
purchasing such security from him, who may sue to recover the consideration paid for
such security with interest thereon, less the amount of any income received thereon,
upon the tender of such security, or for damages if he no longer owns the security.

SEC. 63. Amount of Damages to be Awarded. – 63.1. All suits to recover damages
pursuant to Sections 56, 57, 58, 59, 60 and 61 shall be brought before the Regional
Trial Court which shall have exclusive jurisdiction to hear and decide such suits. The
Court is hereby authorized to award damages in an amount not exceeding triple the
amount of the transaction plus actual damages.

Based on the foregoing, it is clear that cases falling under Section 57of the SRC, which
pertain to civil liabilities arising from violations of the requirements for offers to sell or
the sale of securities, as well as other civil suits under Sections 56, 58, 59, 60, and 61
of the SRC shall be exclusively brought before the regional trial courts. Therefore,
based on these considerations, it stands to reason that civil suits falling under
the SRC are under the exclusive original jurisdiction of the regional trial courts
and hence, need not be first filed before the SEC, unlike criminal cases wherein
the latter body exercises primary jurisdiction.
 G.R. No. 187702 October 22, 2014

SECURITIES AND EXCHANGE COMMISSION, Petitioner,

vs.
THE HONORABLE COURT OF APPEALS, OMICO CORPORATION, EMILIO S. TENG
AND TOMMY KIN HING TIA, Respondents.

x-----------------------x

G.R. No. 189014

ASTRA SECURITIES CORPORATION, Petitioner,

vs.
OMICO CORPORATION, EMILIO S. TENG AND TOMMY KIN HING TIA, Respondents.

FACTS:
Omico Corporation (Omico) is a company whose shares of stock are listed and
traded in the Philippine Stock Exchange, Inc. Astra Securities Corporation (Astra) is
one of the stockholders of Omico owning about 18% of the latter’s outstanding capital
stock.
Omico scheduled its annual stockholders’ meeting on 3 November 2008.6 It set
the deadline for submission of proxies on 23 October 2008 and the validation of proxies
on 25 October 2008. Astra objected to the validation of the proxies issued in favor of
Tia representing about 38% of the outstanding capital stock of Omico. Astra also
objected to the inclusion of the proxies issued in favor of Tia and/or Martin Buncio,
representing about 2% of the outstanding capital stock of Omico.

Astra maintained that the proxy issuers, who were brokers, did not obtain the required
express written authorization of their clients when they issued the proxies in favor of
Tia. In so doing, the issuers were allegedly in violation of SRC Rule as Tia did not
comply with the rules on proxy solicitation, in violation of Section 20.1 of the SRC.

Despite the objections of Astra, Omico’s Board of Inspectors declared that the proxies
issued in favor of Tia were valid. Astra filed a Complaint14 before the Securities and
Exchange Commission (SEC) praying for the invalidation of the proxies issued in favor
of Tia. The SEC issued the CDO enjoining Omico from accepting and including the
questioned proxies in determining a quorum and in electing the members of the board
of directors during the annual stockholders’ meeting on 3 November 2008
The CA held that the controversy was an intra-corporate dispute. The SRC
expressly transferred the jurisdiction over actions involving intracorporate
controversies from the SEC to the regional trial courts. Furthermore, Section 2, Rule
623 of the Interim Rules of Procedure Governing Intra-Corporate
Disputes,24 provides that any controversy or dispute involving the validation of
proxies is an election contest, the jurisdiction over which has also been
transferred by the SRC to the regular courts.
Aggrieved by the CA Decision, the SEC filed before the instant Petition for
Certiorari.

ISSUE: WON the SEC has jurisdiction over controversies arising from the validation of
proxies for the election of the directors of a corporation.

HELD:
Section 632 (g) of Presidential Decree No. (P.D.) 902-A conferred on SEC the
power "[t]o pass upon the validity of the issuance and use of proxies and voting trust
agreements for absent stockholders or members." Section 6, however, opens thus: "In
order to effectively exercise such jurisdiction. This opening clearly refers to the
preceding Section 5.33 The Court pointed out therein that the power to pass upon
the validity of proxies was merely incidental or ancillary to the powers conferred
on the SEC under Section 5 of the same decree. With the passage of the SRC, the
powers granted to SEC under Section 5 were withdrawn, together with the incidental
and ancillary powers enumerated in Section 6.

While the regular courts now had the power to hear and decide cases involving
controversies in the election of directors, it was not clear whether the SRC also
transferred to these courts the incidental and ancillary powers of the SEC as
enumerated in Section 6 of P.D. 902-A. Thus, in GSIS v. CA, it was necessary for the
Court to determine whether the action to invalidate the proxies was intimately
tied to an election controversy. Hence, the Court pronounced:

Under Section 5(c) of Presidential Decree No. 902-A, in relation to the SRC, the
jurisdiction of the regular trial courts with respect to election related controversies is
specifically confined to "controversies in the election or appointment of directors,
trustees, officers or managers of corporations, partnerships, or associations."
Evidently, the jurisdiction of the regular courts over so-called election contests
or controversies under Section 5 (c) does not extend to every potential subject
that may be voted on by shareholders, but only to the election of directors or
trustees, in which stockholders are authorized to participate under Section 24 of
the Corporation Code.

The power of the SEC to investigate violations of its rules on proxy solicitation is
unquestioned when proxies are obtained to vote on matters unrelated to the cases
enumerated under Section 5 of Presidential Decree No. 902-A. However, when proxies
are solicited in relation to the election of corporate directors, the resulting
controversy, even if it ostensibly raised the violation of the SEC rules on proxy
solicitation, should be properly seen as an election controversy within the
original and exclusive jurisdiction of the trial courts by virtue of Section 5.2 of
the SRC in relation to Section 5 (c) of Presidential Decree No. 902-A.

Section 2, Rule 6 of the Interim Rules broadly defines the term "election contest" as
encompassing all plausible incidents arising from the election of corporate directors,
including: (1) any controversy or dispute involving title or claim to any elective office in
a stock or nonstock corporation, (2) the validation of proxies, (3) the manner and
validity of elections and (4) the qualifications of candidates, including the proclamation
of winners. From the languageof Section 5 (c) of Presidential Decree No. 902-A, it is
indubitable that controversies as to the qualification of voting shares, or the validity of
votes cast in favor of a candidate for election to the board of directors are properly
cognizable and adjudicable by the regular courts exercising original and exclusive
jurisdiction over election cases.

The Court explained that the powerof the SEC to regulate proxies remains in
place in instances when stockholders vote on matters other than the election of
directors. The test is whether the controversy relates to such election. All matters
affecting the manner and conduct of the election of directors are properly cognizable by
the regular courts. Otherwise, these matters may be brought before the SEC for
resolution based on the regulatory powers it exercises over corporations, partnerships
and associations.

Indeed, the validation of proxies in this case relates to the determination of the
existence of a quorum.1âwphi1 Nonetheless, it is a quorum for the election of the
directors, and, as such, which requires the presence – in person or by proxy – of the
owners of the majority of the outstanding capital stock of Omico. Also, the fact that
there was no actual voting did not make the election any less so, especially since Astra
had never denied that an election of directors took place.

WHEREFORE, the petition in G.R. No. 187702 is EXPUNGED for lack of capacity of
petitioner to file the suit.