G.R. No. 179452 - Civil Service Commission vs. Alfonso

Commart (Phils.), Inc. was organized by the Maglutac brothers to engage in brokerage for importing fertilizers and other commodities.
Jesus T. Maglutac served as president, chairman of the board, and chairman of the executive committee, while Mariano T. Maglutac was executive vice-president and vice-chairman until their separation in April 1984.

In June 1984, the brothers agreed to part ways; Mariano sold his 25% shareholding in Commart to Jesus.
A “Cooperative Agreement” was signed wherein Commart ceded part of its business to Mariano (or an acceptable entity he might create) while pledging mutual cooperation, thereby enabling Mariano to establish his own corporation.
Alice M. Maglutac, Mariano’s wife, maintained her status as a stockholder and director in Commart despite the sale.

Mariano alleged that Jesus Maglutac, assisted by other directors including his wife Corazon, had been siphoning and diverting substantial commission income into their private bank accounts in the United States and Hong Kong.
On August 22, 1989, Mariano and Alice Maglutac filed a complaint (SEC Case No. 2673) with the Securities and Exchange Commission (SEC) alleging mismanagement and diversion of corporate funds.
The complaint prayed for:

An order for Jesus, Corazon, and others to account for and return approximately US$2.5 million to the corporation, along with corresponding interest.
Remedial measures by the respondents as members of the Board of Directors to safeguard the corporation’s funds and property.
Rescission or annulment of the sale of Mariano’s shares with an alternative remedy for equitable compensation.
Payment of attorney’s fees and litigation expenses.

Albert and Bernard Maglutac sought dismissal on the ground that Mariano lacked capacity and that the complaint did not state a cause of action against them.
Jesus and Corazon Maglutac contended that the SEC lacked jurisdiction over the nature of the suit.

An amended complaint was later filed incorporating Commart as a party complainant, seeking its placement under receivership and attachment of the properties of certain respondents.
Commart filed a Manifestation/Notice of Dismissal on May 10, 1985 to withdraw the action initiated by Mariano and Alice, which the complainants contested on the basis that a derivative suit should remain within the shareholder’s control.
The Hearing Panel, on May 27, 1985, denied the motions to dismiss and the manifestation/notice of dismissal, finding that the complaint revealed a case of mismanagement and derivative action meant to protect the corporation’s interests.

Subsequent motions for reconsideration were filed by Commart and by Jesus and Corazon Maglutac, which were opposed by Mariano and Alice.
On September 12, 1988, the SEC en banc denied the petition for certiorari filed by the petitioners, remanding the case to the Securities Investigation and Clearing Department for further proceedings.
The SEC’s Order held that:

Exhaustion of intra-corporate remedies may be dispensed with where such remedy is unavailable or futile.
The mere allegation that a complainant is a stockholder is sufficient to vest jurisdiction, although the complainant must prove continuous stockholder status at the time of the acts complained of.

Whether the SEC committed grave abuse of discretion by denying the petition for certiorari despite the Notice of Dismissal filed by Commart.
Whether the SEC erred in its handling of the “conflict of interest” issue, particularly in relation to allegations that Alice Maglutac held majority stocks in a rival corporation, M. M. International Sales, Inc.

Whether the facts alleged in the complaint sufficiently established that the action was a derivative suit aimed at remedying mismanagement and protecting the corporation’s interests.
Whether the failure of complainants to exhaust intra-corporate remedies should bar the action, considering the alleged uselessness of such a remedy due to board control by the principal defendants.

Whether jurisdiction is validly based on the allegations in the amended complaint that the complainants were stockholders at the requisite times.
Whether defenses presented in motions to dismiss could preclude the SEC from exercising jurisdiction over the case.