Facts:

The case involves Datu Tagoranao Benito as the petitioner against the Securities and Exchange Commission (SEC) and Jamiatul Philippine-Al Islamia, Inc. as respondents. The events leading to the case began on February 6, 1959, when the Articles of Incorporation for Jamiatul Philippine-Al Islamia, Inc. (originally named Kamilol Islam Institute, Inc.) were filed with the SEC, receiving approval on December 14, 1962. The corporation had an authorized capital stock of P200,000.00, divided into 20,000 shares with a par value of P10.00 each. By that time, 8,058 shares worth P80,580.00 had been subscribed and fully paid, including 460 shares worth P4,600.00 subscribed by petitioner Datu Tagoranao Benito.

On October 28, 1975, the corporation filed a certificate to increase its capital stock from P200,000.00 to P1,000,000.00, which was approved during a stockholders' meeting on November 25, 1975. Subsequently, P110,980.00 worth of shares were issued from the unissued portion of ...

Facts:

Corporate Formation and Initial Capitalization

• On February 6, 1959, the Articles of Incorporation of what would later be known as Jamiatul Philippine-Al Islamia, Inc. (originally Kamilol Islam Institute, Inc.) were filed with the Securities and Exchange Commission (SEC).
• The Articles were approved on December 14, 1962, establishing the corporation with an authorized capital stock of P200,000.00, divided into 20,000 shares at a par value of P10.00 each.
• Of the authorized capital stock, 8,058 shares (worth P80,580.00) were subscribed and fully paid.
• Petitioner Datu Tagoranao Benito was among the initial subscribers, having subscribed to 460 shares, amounting to P4,600.00.

Subsequent Increase in Capital Stock and Additional Issuance

• On October 28, 1975, the corporation filed a certificate of increase of its capital stock from P200,000.00 to P1,000,000.00.
• The certificate stated that P191,560.00 worth of shares had been considered at a stockholders’ meeting held on November 25, 1975, where the increase was approved.
• Following the meeting, P110,980.00 worth of shares were issued by utilizing the unissued portion of the originally authorized capital stock.
• Separately, P160,000.00 worth of shares in the increased authorized capital stock were subscribed by other stockholders, namely Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman, and Mrs. Moki-in Alonto.

Petitioner's Allegations and Claims

• On November 18, 1976, petitioner Datu Tagoranao Benito filed a petition with the SEC alleging that:
• The additional issue of shares (worth P110,980.00) was made in violation of his pre-emptive right.
• The increase in the authorized capital stock from P200,000.00 to P1,000,000.00 was illegal because the stockholders of record were not notified of the meeting where the increase was on the agenda.
• Petitioner sought the cancellation of both the additional issue of shares and the shares issued from the increased capital stock.
• He also prayed for the registration of 2,540 shares he acquired from Domocao Alonto and Moki-in Alonto, and for the corporation to render an accounting of funds to the stockholders.
• In its answer, the respondents denied the allegations and claimed that the stock certificates allegedly issued to Patricia were only provided as collateral for a loan arrangement with Domocao Alonto and Moki-in Alonto.

SEC Proceedings and Decision

• On July 11, 1980, Hearing Officer Ledor E. Macalalag of the SEC rendered a decision following a hearing on the matter.
• The SEC decision, affirmed en banc on March 9, 1981, held that:
• The issuance of the unissued shares was valid and not subject to the pre-emptive rights of the stockholders, including petitioner.
• The certificates of stock held in the names of Domocao Alonto and Moki-in Alonto were to be cancelled upon petitioner's presentation and replaced with new certificates in his name.
• The corporation was directed to file annual financial statements, with the failure to do so triggering more drastic action if necessary.
• The election of nine Board of Trustees members (from the meeting on October 30, 1976) was declared irregular, with an order to convene a new stockholders’ meeting for the election of a new board, unless proper adjustments were made concerning the number of trustees.

Appeal and Contentions Presented by the Petitioner

• Petitioner raised several arguments in his petition for review, including:
• That the issuance of the 11,098 shares without stockholders’ consent or consideration was null and void.
• That the increase in authorized capital stock without the express or implied consent of the stockholders was null and void.
• That he was entitled to attorneys’ fees, damages, and litigation expenses due to the alleged irregularities.
• The petitioner further emphasized that he was not notified of the stockholders’ meeting held on November 25, 1975 because he was out of the country attending the Mecca pilgrimage, thus preventing him from exercising his pre-emptive rights.

Evidence and Legal Findings

• Documentary evidence confirmed that the petitioner was abroad during the meeting, thereby explaining his absence.
• Despite his objections regarding the authenticity of the minutes and certificate of increase, the SEC found the documentary records sufficiently detailed and compelling to negate claims of irregularity.
• The SEC pointed out that the pre-emptive right is generally applicable to new issues rather than to additional issues from originally authorized shares, a principle rooted in the understanding that initial subscribers accept a fixed proportionate share of the overall issuance.

Issue:

• Whether the additional issuance of shares amounting to P110,980.00, made from the unissued portion of the original authorized capital stock, violated the pre-emptive rights of the petitioner.
• Whether the increase in the authorized capital stock from P200,000.00 to P1,000,000.00 was legally valid, given that the stockholders of record were not properly notified of the meeting where the increase was proposed.
• Whether the petitioner is entitled to additional remedies including cancellation of the share issuances, registration of shares acquired from third parties, and recovery of attorneys’ fees, damages, and litigation expenses.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)