Title
Freeman, Inc. vs. Securities and Exchange Commission
Case
G.R. No. 110265
Decision Date
Jul 7, 1994
Freeman, Inc. defaulted on loans, leading to a compromise agreement, property auction, and SEC intervention. Supreme Court ruled SEC exceeded jurisdiction, affirming auctioned properties were no longer Freeman's assets.

Case Digest (G.R. No. 110265)
Expanded Legal Reasoning Model

Facts:

  • Background Transactions and Obligations
    • Freeman, Inc. (FREEMAN) secured a loan from Equitable Banking Corporation (EQUITABLE) in 1986–1987 evidenced by two promissory notes:
1.1. P.N. No. 125957 dated 8 December 1986 for ₱1,700,000.00, payable on 8 December 1987. 1.2. P.N. No. TL-369 dated 24 April 1987 for ₱6,000,000.00, payable on 24 April 1988.
  • Saw Chiao Lian, President of FREEMAN, signed as co-maker on both promissory notes.
  • Judicial and Extrajudicial Proceedings Arising from Non-Payment
    • Upon FREEMAN’s failure to pay its obligations, EQUITABLE initiated a collection suit against both FREEMAN and Saw Chiao Lian, also seeking preliminary attachment.
    • Intervention Claim by Private Respondents
2.1. On 27 May 1988, private respondents (Saw Mui, Ruben Saw, Dionisio Saw, Lina S. Chua, Lucila S. Ruste, and Evelyn Saw) intervened by filing an answer claiming minority interest in FREEMAN. 2.2. Their intervention was denied by the trial court and subsequently affirmed by both the Court of Appeals and the Supreme Court.
  • Auction Sale and Subsequent Controversies
    • Following non-compliance with the judgment against FREEMAN and Saw Chiao Lian, a writ of execution was issued on 30 January 1989.
    • Two parcels of land owned by FREEMAN (covered by TCT Nos. 34219 and 34220) were levied and sold at a public auction on 31 March 1989.
    • Freeman Management and Development Corporation (FREEMAN MANAGEMENT), one of the petitioners, emerged as the highest bidder and subsequently registered the certificate of sale.
  • SEC and Regional Trial Court Involvement
    • Private respondents, representing the minority shareholdings, filed a petition with the Securities and Exchange Commission (SEC) on 23 May 1989 seeking:
1.1. The dissolution of FREEMAN; 1.2. An accounting; and 1.3. Reconveyance of the properties subject to the auction sale.
  • A similar complaint was also filed on 5 April 1990 with the Regional Trial Court of Kalookan City by private respondents.
  • Petitioners moved for dismissal on the ground of duplication of the case pending in the SEC; however, the motion was denied, and the matter was redirected by the Court of Appeals in light of the ongoing SEC proceedings.
  • SEC’s Provisional Relief and Subsequent Petitions
    • On 7 January 1992, in SEC Case No. 3577, the SEC Hearing Officer granted a writ of preliminary injunction (on motion by private respondents) to prevent FREEMAN MANAGEMENT from consolidating its title over the auctioned properties.
    • Petitioners assailed this SEC order by filing a petition for certiorari with the SEC en banc, which was denied on 7 January 1993, followed by a motion for reconsideration which was also denied on 15 March 1993.
    • A petition for certiorari was subsequently filed with the Supreme Court on 22 April 1993 questioning the 15 March 1993 SEC order, which was initially dismissed for procedural deficiencies regarding dates of receipt of the SEC orders.
    • On 4 June 1993, the petition was refiled with the required amendments to include the omitted matters.
  • Allegations and Arguments Presented by the Petitioners and Respondents
    • Petitioners Allegations
1.1. The SEC acted with grave abuse of discretion and in excess of its jurisdiction by issuing the writ of injunction. 1.2. The SEC misconstrued precedents (Equitable Banking Corp. v. Hon. Mangay and Saw v. Court of Appeals) regarding its jurisdiction over the parties’ rights. 1.3. The SEC violated the principle that, as a coordinate body with the Regional Trial Court, it may not review or interfere with decisions rendered by that court. 1.4. The properties acquired by FREEMAN MANAGEMENT had already been excluded from the assets of FREEMAN following a fully satisfied judgment, rendering them outside the SEC’s contemplated relief.
  • Private Respondents Allegations
2.1. The petition was submitted beyond the reglementary period of thirty (30) days for appeal as stipulated under Sec. 1, Rule 17 of the SEC’s new rules of procedure. 2.2. They also pointed to established jurisdictional rulings in Saw v. Court of Appeals asserting that petitioners’ rights could be adequately litigated within the SEC proceedings.
  • The Office of the Solicitor General’s Position
3.1. Concurred with the petitioners’ contention regarding the SEC's overreach. 3.2. Asserted that the petition, being filed under Rule 65, was within a reasonable period (filed 35 days after receipt of the assailed orders) and merits due course.

Issues:

  • Jurisdictional Competence of the SEC
    • Whether the SEC had the legal authority to issue a writ of preliminary injunction enjoining the consolidation of title by FREEMAN MANAGEMENT over the auctioned properties.
    • Whether the inclusion of FREEMAN MANAGEMENT – a separate corporate entity in which private respondents had no interest – falls within the SEC’s jurisdiction under Section 5 and 6 of P.D. No. 902-A.
  • Interference in Judicial Proceedings
    • Whether the SEC improperly interfered with the proceedings and judgments of the Regional Trial Court and its decrees regarding the execution of the judgment in Civil Case No. 88-44404.
    • Whether the principle of non-interference was violated when the SEC decided to issue an injunction affecting the already satisfied and final judgment rendered in the trial court.
  • Timeliness and Appropriateness of the Petition
    • Whether the petition for certiorari under Rule 65 was filed within a “reasonable time” given that it was submitted 35 days after receipt of the SEC order denying the motion for reconsideration.
    • Whether the petition constitutes an appeal from a final order or a special civil action questioning the SEC’s legal competence in issuing interlocutory relief.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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