Case Summary (G.R. No. 252189)
Corporate and Financial Background
UDMC was incorporated in 1968 with a capital stock later increased to ₱15 million. The Crisostomo group owned approximately 40% and managed the hospital. In 1988, UDMC defaulted on a ₱55 million loan from the Development Bank of the Philippines, triggering foreclosure proceedings by the Asset Privatization Trust. To avert foreclosure and individual surety liability, UDMC officers invited the Yamadas and Enatsus to infuse fresh equity.
Foreign Capital Infusion and Approvals
The Japanese–Filipino group subscribed to 82.09% of UDMC’s outstanding shares through a Stock Purchase Agreement and Amended Memorandum of Agreement. The Board of Investments, Central Bank, and SEC reviewed and approved the transactions. Shares were issued by UDMC’s authorized officers, resulting in 30% foreign ownership (Japanese citizens) and 52% owned by a Filipina (Edita Enatsu), conforming to a 70% Filipino ownership declaration.
Initial Legal Challenges and Injunction
On the eve of the August 20, 1988 meetings, Petitioner filed SEC Case No. 3420 and a parallel civil action (RTC Makati Civil Case No. 88-1823) to enjoin the meetings, disqualify the foreign investors, and annul the equity agreements. The hearing officer granted a preliminary injunction on September 13, 1988 and appointed a management committee. Respondents elevated the matter by certiorari to the SEC en banc.
SEC En Banc Resolution and Orders
On February 14, 1989, the SEC en banc, through Commissioner Laureta with concurrences, granted certiorari, vacated the injunction and management committee, and ordered:
- Special stockholders’ meeting within 10 days to elect a new board;
- Board meeting to elect officers;
- Continued hearing of Petitioner’s SEC case on inspection, preemptive and appraisal rights;
- Corporate report on nursing school plans.
Court of Appeals Proceedings
Petitioner sought CA review (CA-G.R. SP No. 17435). On June 8, 1989, the CA dismissed his petition and lifted its own temporary restraining order against the SEC resolution. His motion for reconsideration was denied. The SEC then issued implementing orders on June 27 and July 21, 1989 directing UDMC’s corporate secretary to call the special meeting despite the pending motion for reconsideration.
Petition to the Supreme Court
Petitioner filed G.R. No. 89095 for certiorari and prohibition, seeking vacatur of the SEC’s en banc resolution and orders, and restoration of the hearing officer’s injunction. He alleged abuse of discretion by the SEC in:
- Overturning the hearing officer’s orders;
- Violating constitutional limits on foreign land and educational institution ownership;
- Premature implementation of its orders.
He also filed G.R. No. 89555 to review the CA decision, effectively raising identical issues.
Constitutional and Procedural Issues
Foreign Ownership Limits
- Article XII, Section 7: Private lands
- Article XII, Section 14; Article XIV, Section 4(2): Educational institutions require at least 60% Filipino capital
The SEC record showed 70% Filipino shareholding, precluding any constitutional breach. The foreign investors held equity but did not practice medicine, so no professional-practice violation arose.
Prematurity of SEC Orders
- Rule 39, Section 4: A judgment vacating a preliminary injunction is immediately executory and not subject to stay pending appeal.
CA’s lifting of its injunction allowed immediate SEC implementation.
Forum-Shopping
Petitioner litigated identical issues in multiple foru
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Case Syllabus (G.R. No. 252189)
Facts of the Case
- United Doctors Medical Center, Inc. (UDMC) organized in 1968; authorized capital initially ₱1,000,000, increased to ₱15,000,000 in 1972.
- Original stockholders (“Crisostomo group”) held roughly 40% of UDMC’s shares; the remaining 60% held by some 150 members of the United Medical Staff Association (UMSA).
- Despite minority shareholding, the Crisostomo group ran the corporation: Juanito Crisostomo as president, Ricardo Alfonso, Sr. as chairman, Carlos Crisostomo as corporate secretary, and Sixto Crisostomo as director and legal counsel.
- In 1988, UDMC defaulted on a ₱55 million loan from the Development Bank of the Philippines (DBP); the Asset Privatization Trust (APT) threatened foreclosure of UDMC’s hospital and the Crisostomos’ collateral.
- To avert foreclosure, principal officers Ricardo Alfonso and Juanito Crisostomo solicited P57 million fresh capital from spouses Shoji and Michiyo Yamada (Japanese nationals) and spouses Tomotada and Edita Enatsu (Tomotada Japanese, Edita Filipino).
- Investment structure: a Stock Purchase Agreement and an Amended Memorandum of Agreement subscribing the Japanese group to 82.09% of UDMC’s outstanding shares.
- All corporate approvals were obtained: board and stockholders of UDMC, Board of Investments, Central Bank of the Philippines, and Securities and Exchange Commission (SEC). Shares were duly issued, saving UDMC’s assets and freeing the Crisostomos from their surety liabilities to DBP.
- Pursuant to the Amended Memorandum, a special stockholders’ and board meeting was set for August 20, 1988 to reorganize management under the new controlling shareholders.
SEC Case No. 3420 and Trial Court Proceedings
- On August 19, 1988, Sixto Crisostomo filed SEC Case No. 3420 seeking to:
• Enjoin the holding of the August 20 meetings;
• Disqualify the Japanese investors from controlling UDMC or serving as directors/officers;
• Annul the Stock Purchase and Memorandum Agreements for alleged lack of true meeting of minds. - On September 2, 1988, Crisostomo filed Civil Case No. 88-1823 in the Makati RTC, praying for substantially identical reliefs; the RTC dismissed for lack of jurisdiction (pending on appeal as CA-G.R. No. 20285-CV).
- Hearing Officer Antonio Esteves granted a writ of preliminary injunction (September 13, 1988), enjoining respondents from:
• Holding stockholders or board meetings;
• Electing new directors/