Case Digest (G.R. No. 208281)
Facts:
Metroplex Berhad and Paxell Investment Limited, G.R. No. 208281, June 28, 2021, Supreme Court Third Division, Hernando, J., writing for the Court. Petitioners Metroplex (a Malaysian corporation) and Paxell (a Western Samoa corporation) challenged approvals by certain Operating Departments of the Securities and Exchange Commission (SEC) that allowed Sinophil Corporation (a Philippine publicly‑listed company) to reduce its authorized capital stock; Belle Corporation and several SEC directors and assistant directors were respondents.In August 1998 (which respondents later said occurred in March 1997), Sinophil entered into a Share Swap Agreement with the Metroplex group, by which Metroplex and Paxell received Sinophil shares in exchange for Legend International Resorts Limited shares. Metroplex later pledged two billion of its Sinophil shares to banks to secure Legend’s loans. In August 2001 Sinophil and Belle executed an Unwinding Agreement with Metroplex and Paxell rescinding the Swap Agreement; Metroplex and Paxell were unable to return 1.87 billion Sinophil shares and two billion remained pledged.
Stockholder meetings on February 18, 2002 and June 3, 2005 approved a reduction of Sinophil’s authorized capital stock. On March 28–29, 2006, the SEC’s Company Registration and Monitoring Department (CRMD) and Corporation Finance Department (CFD) approved the first amendment reducing authorized capital by 1.87 billion shares and Sinophil disclosed the approval to the Philippine Stock Exchange. A further shareholder approval occurred on June 21, 2007, and on June 24–30, 2008 the CRMD and CFD approved and Sinophil disclosed a further reduction of one billion shares.
On July 21, 2008, petitioners (and an individual petitioner Yaw) filed a Petition for Review Ad Cautelam Ex Abundanti before the SEC, alleging among others that: (a) they opposed the decrease and were not given the opportunity to be heard by the CFD; (b) the reduction lacked the requisite two‑thirds vote and unrestricted retained earnings; (c) the reduction was a “selective reduction” that prejudiced minority shareholders and effected an improper return of Metroplex and Paxell’s investments; and (d) creditors’ rights were prejudiced. The SEC considered whether the CRMD/CFD acted properly and whether a cease and desist order was warranted.
On February 26, 2009 the SEC En Banc denied the petition, holding that the decrease complied with Section 38 of the Corporation Code, that the SEC’s role was limited to determining compliance with formal requirements, and that petitioners failed to establish grounds for a cease and desist order; its dispositive clause denied the petition. Petitioners appealed to the Court of Appeals (CA) in CA G.R. SP No. 107942. On January 29, 2013 the CA affirmed t...(Pro-only)
Issues:
- Did the Court of Appeals err in affirming the SEC’s En Banc Order that found no error in its Operating Departments’ approval of Sinophil’s capital reduction?
- Was the SEC prohibited from reviewing the actions of its Operating Departments, or otherwise required to adjudicate contractual or substantive disputes between stockholders regarding the capital reduction?
- Did Sinophil fail to comply with the legal requirements for decreasing capital stock under Section 38 of the Corporation Code (including notice, voting, creditor safeguards, and unrestricted retained earnings)?
- Were petitioners entitled to injunctive relief (TRO/pr...(Pro-only)
Ruling:
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Ratio:
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Doctrine:
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