G.R. No. L-47536 - Quasha vs. Securities and Exchange Commission

On October 10, 1977 and October 17, 1977, petitioner William H. Quasha filed his complaints and a continuing opposition with the Securities and Exchange Commission (SEC).
The complaints challenged the filing by respondent Manila Polo Club, Inc. of its Amended Articles of Incorporation and Amended By-Laws, which purportedly converted the club into a proprietary club.

Petitioner contended that the proposed amendments were illegal, inequitable, and immoral.
He alleged that the conversion would allow members to appropriate the club’s property by paying a paltry amount of P12,500.00 for each proprietary membership despite the club’s assets being valued at significantly higher amounts (e.g., 25 hectares of prime real estate in Forbes Park valued at approximately P200 million, and buildings and equipment valued at about P20 million).
Petitioner argued that the current members, nearly 2,000 in number, would unjustly enrich themselves at the expense of predecessors who had long supported the club through money, time, and effort.
He further claimed that the amendments were not adopted by the requisite two-thirds vote as mandated by law.

On October 25, 1977, respondent Manila Polo Club issued notices setting December 28, 1977, as the deadline for members to purchase a proprietary share.
The payment terms stated that members could pay P12,500.00 either in one lump sum or through 24 monthly installments (with a 14% per annum interest rate), subject to a P5,000 downpayment.
Members who did not purchase a proprietary share were given the option to remain as Associate Members upon notifying the club.

The SEC ordered both parties to appear before it on October 28, 1977 to determine the propriety of granting a restraining order.
During the hearing, both parties submitted their respective memoranda and ancillary evidence.
Petitioner made urgent representations in November and December requesting the issuance of a restraining order to halt the club’s conversion process.
On December 22, 1977, the SEC’s hearing officer, Jose C. Castro, issued an Order denying the injunctive relief. The denial was based on what was deemed an insufficient factual basis and a manifest lack of merit.

Whether the required number of votes was secured to amend the Articles of Incorporation.
Whether the meetings held on August 22 and September 26, 1977, were regular.
Whether the valuation assigned to each proprietary share complied with existing laws and regulations for proprietary clubs.

On December 23, 1977, immediately after the SEC’s adverse ruling, petitioner directly filed a petition with the Court.
The petition asserted a violation of his right to due process, criticizing that the SEC’s procedure had instead adjudicated issues that should have been fully heard on their merits following a comprehensive hearing.
Petitioner sought a restraining order to prevent the enforcement of the SEC’s order and to stop the sale and acceptance of payments for the proprietary shares.

On December 27, 1977 (the first working day after Christmas), the Court issued a temporary restraining order.
The SEC, in its subsequent comment, raised the issue of non-exhaustion of administrative remedies, insisting that:

The determination on the merits was still pending before the Commission.
Petitioner could have purchased the proprietary share under protest, thereby preserving his rights since any payments would be refunded should the conversion be annulled after trial on merits.

The required number of affirmative votes had been met, despite factual disputes regarding the exact number of eligible voting members (with petitioner citing 2,404 versus the club’s claim of 1,504).
A significant number of members had already paid for their proprietary shares before the issuance of the restraining order (1,550 paid and an additional 163 expressed their intent, albeit with refused payments after the restraining order was enforced).

Whether petitioner, by directly filing his petition with the Court without exhausting the administrative remedy available with the SEC, was justified to seek immediate judicial relief.
Whether the exceptionally limited time frame available prior to the club’s conversion deadline rendered the administrative appeal unsuitable as a plain, speedy, and adequate remedy.

Whether the SEC’s hearing officer’s order denying the injunctive relief was legally sound and supported by sufficient factual allegations, given that petitioner had not presented corroborative evidence with his memorandum.
Whether a full-blown trial on the merits should be instituted to resolve:

Questions concerning the adequacy of the vote to amend the Articles of Incorporation.
The regularity of the meetings held by the club.
The conformity of the proprietary share valuation with relevant laws and regulations.

Whether the rights of petitioner and other members who were either unable or unwilling to purchase the proprietary shares before the original deadline were being prejudiced.

Whether the temporary restraining order previously issued should be maintained or lifted, considering the conditions attached by the SEC and the overall fairness to all affected parties.
Whether the respondent club should be ordered to extend the purchase period for the proprietary shares to ensure that members have a fair chance to exercise their option under protest or otherwise.