G.R. No. 209284 - Tanchuling vs. Cantela

Nieves G. Argonza and Placida G. de los Reyes filed charges with the Securities and Exchange Commission (SEC) against Marcos Pimentel and Julia B. Pimentel, officers of International Colleges, Inc., alleging a violation of Section 51 of the Corporation Law which mandates that corporations "keep and carefully preserve a record of all business transactions."
The SEC, inclined to the validity of the charges, determined that a trial examination of the corporation's books and records was necessary, based on its statutory authority.

On December 13, 1948, the SEC ordered a trial examination of the books and records of International Colleges, Inc.
Subsequently, on December 20, 1948, the SEC issued a subpoena duces tecum requiring Marcos Pimentel to deliver the designated books and records to the Commission’s office on the morning of December 21, 1948.
Marcos Pimentel refused to comply with the subpoena.

On December 23, 1948, both Marcos Pimentel and Julia B. Pimentel filed an opposition to the trial examination order.
The SEC overruled the opposition with its January 11, 1949 order, insisting on compliance with any lawful directive from its chief examiner.
On January 18, 1949, when the SEC’s representative demanded the production of the books and records, Marcos Pimentel again refused, reinforcing the Commission's determination to enforce the order.

The SEC filed a case with the Court of First Instance of Manila, seeking to have Marcos Pimentel declared in contempt of the Commission for his repeated noncompliance.
The trial court found Marcos Pimentel guilty of contempt, imposing a fine of P50.00 with subsidiary imprisonment in case of insolvency, in addition to the costs, and ordering him to produce the records as required.
Marcos Pimentel appealed the trial court’s decision.

The SEC’s power to order the trial examination was derived from Section 1 of Commonwealth Act No. 287, which transfers the regulatory functions from the Bureau of Commerce to the SEC and charges it with the enforcement of all laws affecting corporations and associations.
Respondent-appellant argued that the SEC’s power was limited to matters of registration, referencing Section 2 of Commonwealth Act No. 287 and claims about the exclusive authority of the President to order such investigations.

Whether the power conferred upon the SEC by Section 1 of Commonwealth Act No. 287 extends beyond the registration of corporations to include the enforcement of all laws affecting corporations and associations.
Whether this broad authority allows the SEC to order a trial examination of corporate books and records under Section 51 of the Corporation Law.

Whether the examination of the records by the SEC, which involved non-stockholder petitioners (Nieves G. Argonza and Placida G. de los Reyes), is a legitimate exercise of statutory authority and does not infringe upon the rights reserved only for stockholders or officers.
Whether enforcing compliance with the subpoena by the SEC interferes with or is encroached upon by the visitorial powers of the President of the Philippines.

Whether the exercise of the SEC’s investigatory function, as mandated by Commonwealth Act No. 287, creates overlapping functions with other government bureaus or offices, thereby leading to confusion or absurd results.