G.R. No. 131715 - Philippine National Construction Corp. vs. Pabion

Private respondents Ernesto Pabion and Louella Ramiro, claiming to be stockholders of Philippine National Construction Corporation (PNCC), filed a verified petition before the Securities and Exchange Commission (SEC) on September 16, 1994.
They alleged PNCC failed for twelve years (since 1982) to hold a stockholders’ meeting to elect its board of directors, violating its By-Laws and the Corporation Code.
They prayed that SEC order PNCC officers or alternatively authorize the petitioners to call a stockholders’ meeting for electing new directors.

PNCC contended that it is a government-owned and/or controlled corporation (GOCC), governed by Administrative Order (AO) No. 59, issued by President Corazon Aquino in 1988.
PNCC asserted its board members are appointed by the President of the Philippines, not elected by stockholders, relying on Article IV, Section 16(1) of AO No. 59 which mandates presidential appointment of GOCC boards.
It feared that granting the petition would contravene AO No. 59 and interfere with presidential control.
It further claimed that under Executive Order No. 399 (1951), GOCCs are not required to hold general stockholders’ meetings but only submit annual reports to the President.

SEC Hearing Officer Manuel Perea initially ordered parties to secure a ruling/opinion from competent authority on whether PNCC is a GOCC before proceeding, effectively halting further proceedings (January 30, 1996).
Petitioners moved for reconsideration but were denied by the hearing officer in April 1996.
Petitioners elevated the case to the SEC en banc via a petition for certiorari, accusing the hearing officer of grave abuse of discretion and demanding trial on the merits.

On October 2, 1996, SEC en banc ruled that Hearing Officer Perea acted with grave abuse of discretion by refusing to hear the merits.
SEC en banc declared PNCC is subject to Section 50 of the Corporation Code, requiring regular stockholders’ meetings for electing directors.
It held that PNCC is an “acquired asset corporation” under AO 59, hence not considered a GOCC properly subject to presidential appointment under that order.
SEC en banc ordered PNCC to call a special stockholders’ meeting within 30 days for electing its board, directing the Corporate Secretary to issue notices.
The SEC denied PNCC’s motion for reconsideration on April 11, 1997.

SEC’s ruling was affirmed by the Court of Appeals on October 23, 1997, which held:

PNCC is a private corporation despite majority government ownership;
PNCC must hold regular stockholders’ meetings under the Corporation Code;
The SEC has jurisdiction over intra-corporate controversies including this case;
Administrative Order No. 59 excludes “acquired asset corporations” from GOCC classification, thus PNCC is not a GOCC under AO 59;
SEC en banc was justified in ruling on merits without remand due to sufficient records.

PNCC filed this petition questioning the CA and SEC rulings, raising jurisdictional and substantive issues regarding its status as a GOCC, the SEC’s jurisdiction, and the president’s appointment powers.
The Office of the Solicitor General (OSG) represented SEC and sided with respondents, reinforcing SEC’s jurisdiction and rulings.

Whether PNCC is a government-owned and/or controlled corporation (GOCC).
Whether the Securities and Exchange Commission has jurisdiction to order PNCC to hold a stockholders’ meeting to elect its board of directors.
Whether PNCC is required under law to hold stockholders’ meetings for election of directors.
Whether SEC, in certiorari proceedings, can rule on the merits of a case prior to reception of evidence by the hearing officer.