Title
Securities and Exchange Commission vs. Court of Appeals
Case
G.R. No. 93832
Decision Date
Aug 23, 1991
Siblings dispute corporate records post-family business division; Supreme Court rules SEC retains jurisdiction despite former stockholder status.

Case Digest (A.M. No. RTJ-02-1693)

Facts:

  • Parties and Corporate Background
    • Petitioner Profile
      • The Securities and Exchange Commission (SEC) and Hearing Officer Josefina Pasay-Paz initiated the controversy.
      • Petitioner Johnny K. H. Uy, an integral member of the Uy family, is involved as he held stock and executive positions.
      • UBS Marketing Corporation, a family-controlled corporation, was also among the petitioners.
    • Respondent Profile
      • Private respondents include Ban Hua Uy-Flores and Ban Ha Uy-Chua, siblings from the Uy family, who held prominent roles as managing directors.
      • Private respondent Roland King acted as the accountant for family enterprises.
      • Soon Kee Commercial, Inc. formed an integral part of the Uy family business portfolio.
    • Family Business Structure
      • The Uy family owned and controlled several interrelated corporations, notably UBS Marketing Corporation and Soon Kee Commercial, Inc.
      • All key individuals acted both as stockholders and as officers, thereby establishing an intra-corporate framework.
  • Intra-Corporate Relationships and Disputes
    • Interlocking Stockholdings and Roles
      • The petitioners and respondents were all interlocking stockholders and officers, directly involved in the business management and control of the corporations.
      • Custody of corporate books, accounts, and funds was in the hands of Ban Hua Uy-Flores, Ban Ha Uy-Chua, and Roland King.
    • Disagreements and Business Segregation
      • Severe disagreements among the Uy family members led to the decision to divide the family business.
      • Several conciliation meetings were held before a Board of Mediators, resulting in an agreement on the division of assets and control.
  • Execution of Deeds and Formalization of the Division
    • Deeds of Assignment
      • On 5 June 1987, deeds of assignment were executed whereby:
        • Petitioner Johnny K. H. Uy and his wife, Magdalena Uy, assigned all their stockholdings in Soon Kee Commercial, Inc. to private respondents Ban Hua Uy-Flores, Ban Ha Uy-Chua, and other family members.
        • Conversely, private respondents Ban Hua Uy-Flores and Ban Ha Uy-Chua assigned their stockholdings in UBS Marketing Corporation to petitioner Johnny K. H. Uy (or his wife).
      • These deeds were considered intra-corporate transactions performed among interlocking stockholders.
    • Formal Settlement
      • On 1 July 1987, the division of the family business was formalized, incorporating the terms agreed upon during the conciliation meetings.
  • Initiation of the SEC Complaint
    • Filing of the Complaint
      • On 6 April 1988, petitioners Johnny K. H. Uy and UBS Marketing Corporation filed a complaint with the SEC (docketed as SEC Case No. 03328).
      • The complaint sought the recovery of the corporate books, books of account, and the accounting and turnover of funds and properties of UBS Marketing Corporation.
    • Allegations
      • It was alleged that private respondents, while initially stockholders, had custody and control over corporate records and funds and subsequently refused to turn them over after the business division.
      • The private respondents maintained that they acted within the parameters of the settlement agreement reached during the intra-family division.
  • Respondents’ Motion and Subsequent Proceedings
    • Motion to Dismiss
      • Instead of filing an answer to the complaint, the private respondents moved to dismiss it.
      • Their grounds for dismissal centered on the argument that the SEC lacked jurisdiction, given that no intra-corporate relationship existed after the division (i.e., the petitioners were no longer stockholders/officers in the relevant capacities).
    • Hearing Officer’s Decision and Further SEC Proceedings
      • On 30 May 1988, Hearing Officer Josefina Pasay-Paz denied the motion to dismiss.
      • The private respondents then petitioned the SEC en banc for certiorari and prohibition (docketed as Case No. EB-180), which was dismissed on 8 January 1989.
      • A subsequent motion for reconsideration was denied on 10 May 1989.
  • Court of Appeals Decision and Escalation to the Supreme Court
    • Court of Appeals Ruling
      • On 26 January 1990, the Court of Appeals, in CA-G.R. SP No. 1792, granted the petition filed by the private respondents and ruled that the SEC lacked jurisdiction.
      • The appellate court reasoned that when the complaint was filed (23 April 1988), the petitioners had ceased to be stockholders, thereby eliminating the intra-corporate relationship essential for SEC jurisdiction.
      • A motion for reconsideration by the petitioners was denied in a subsequent resolution dated 4 June 1990.
    • Appeal to the Supreme Court
      • The SEC, through the Solicitor General, and petitioners Johnny K. H. Uy and UBS Marketing Corporation appealed to the Supreme Court (in G.R. Nos. 93832 and 93839 respectively).
      • The Supreme Court consolidated the two cases on 6 August 1990, with the central issue being the SEC’s jurisdiction over the controversy.
  • Controversial Issue on Jurisdiction
    • Central Inquiry
      • Whether or not the SEC had original and exclusive jurisdiction over controversies arising from intra-corporate relations as defined under Section 5(b) of PD No. 902-A, as amended by PD No. 1653.
    • Contextual Framework
      • The case facts, particularly the execution of intra-corporate deeds of assignment and the pre-existing relationships among family members, positioned the dispute within the ambit of intra-corporate controversy despite ensuing changes in shareholding status.

Issues:

  • Jurisdiction of the SEC
    • Whether the SEC has original and exclusive jurisdiction over the subject matter of SEC Case No. 03328.
    • Whether a controversy arising out of intra-corporate relations, particularly through the execution of intra-corporate deeds of assignment among interlocking stockholders, falls within the SEC’s purview.
  • Impact of Stockholder Status Change
    • Whether the cessation of stockholder status of petitioners (or respondents) at the time of filing the complaint divests the SEC of its jurisdiction.
    • Whether the prior existence of an intra-corporate relationship, from which the dispute arose, is sufficient to invoke SEC jurisdiction even if the relationship no longer exists at the time of litigation.
  • Applicability of Precedent Cases
    • Whether rulings in analogous cases—such as Rivera, Sunset View Condominium, Saavedra v. SEC, and Boman Enterprises—support the SEC’s jurisdiction despite changes in the parties’ stockholder status.
    • Whether the legal tests for determining an “intra-corporate controversy” are met in the present case.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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