G.R. No. 130328 - UBS Marketing Corp. vs. Court of Appeals

Case Summary (G.R. No. 130328)

Factual Background

Petitioner Johnny K.H. Uy and private respondents Ban Hua Uy-Flores and Ban Ha U. Chua were siblings within the Uy family. The parties were interlocking stockholders and corporate officers of UBS Marketing Corporation and Soon Kee Commercial, Inc. In that capacity, Ban Hua and Ban Ha served as managing directors and had custody, control, and supervision of corporate accounting and tax records and of corporate funds. Roland King acted as the corporations’ accountant and was likewise involved with the accounting functions for allied Uy family enterprises.

Because of serious disagreements within the family, the members conducted several conciliation meetings before their selected Board of Mediators. They agreed to divide the family business so that UBS Marketing Corporation would be assigned to Johnny K.H. Uy, while Soon Kee Commercial, Inc. would be allocated to the rest of the Uy family, including Ban Hua and Ban Ha. The division was formalized on 5 June 1987 through deeds of assignment covering stockholdings: Johnny Uy and his wife transferred their interests in Soon Kee to Ban Hua, Ban Ha, or other Uy family members, while Ban Hua and Ban Ha transferred their interests in UBS to Johnny Uy or his wife. On 1 July 1987, the parties finalized the settlement’s formal terms.

Despite the segregation, Johnny Uy and UBS Marketing Corporation later alleged that Ban Hua and Ban Ha, together with Roland King, retained and controlled corporate accounting records and corporate funds and refused to account for and turn over assets, properties, and receivables that should have reverted to petitioners in accordance with the settlement.

SEC Case and the Initial Jurisdictional Fight

On 6 April 1988, petitioners filed with the SEC a complaint (petition) docketed as SEC Case No. 03328, seeking recovery of UBS Marketing Corporation’s corporate books and accounting records, and seeking accounting and turn over of corporate funds and properties belonging to UBS Marketing Corporation. The petition alleged that, prior to the business segregation, Ban Hua and Ban Ha were not only stockholders and directors but also corporate officers with custody and control of UBS records, properties, and funds. It also alleged that Roland King served as accountant for the Uy family businesses including UBS Marketing Corporation, and that after the segregation petitioners demanded turn over of UBS records but the respondents refused without just cause. Petitioners further alleged that respondents held and refused to account for funds and properties, including portions that should benefit petitioners under their settlement agreement.

Instead of answering, respondents moved to dismiss, asserting that the SEC had no jurisdiction over them and over the nature of the action because no intra-corporate relationship existed. A SEC Hearing Officer denied the motion on 30 May 1998. On appeal, the CA reversed and declared that the SEC had no jurisdiction over the controversy. However, on a petition for review filed by the SEC and by petitioners, the Court declared that the controversy in SEC Case No. 3328 was an intra-corporate controversy that fell within the SEC’s original and exclusive jurisdiction under Section 5(b) of PD No. 902-A, as amended.

Default Proceedings and SEC Hearing Officer’s Decision

After that Court decision became final and executory, petitioners filed in the SEC a motion for ex parte reception of evidence. The SEC hearing officer granted the motion. Petitioners then presented testimonial and documentary evidence.

On 3 May 1995, the SEC Hearing Officer rendered a default judgment, commanding respondents to produce and turn over corporate accounting books from 1981 to 1987, and to render a full accounting of the assets, properties, moneys, and receivables of both corporations within the specified periods. The default judgment further ordered monetary awards and specific reliefs, including: payment of separation pay to Johnny Uy with interest; payment of damages based on computed percentages of actual income; cancellation or reversion of transfer certificates of title and return or execution of deeds of conveyance for properties allegedly still held in other corporate names; return or payment for a Nissan or Isuzu truck; return of a Hongkong property; payment of attorney’s fees; and making a writ of preliminary mandatory injunction permanent.

SEC En Banc, CA Reversal, and the Present Petition

Respondents appealed to the SEC en banc. The SEC en banc set aside the SEC Hearing Officer’s default decision save for paragraph 2 of the dispositive portion, effectively directing respondents to render a full and complete accounting of all the assets, properties, and receivables of Soon Kee Commercial, Inc. and UBS Marketing Corporation.

Respondents then moved for partial reconsideration, but the SEC en banc denied the motion in a resolution dated 24 June 1996. On further appeal, the CA reversed and set aside the SEC en banc’s order. The CA ruled that the SEC en banc erred in ordering a full and complete accounting because that relief was supposedly not prayed for in the SEC petition. The CA also reversed and set aside the SEC Hearing Officer’s decision and SEC en banc resolution in their entirety, with no pronouncement as to costs.

Petitioners sought review on certiorari, assigning errors that included: (a) the CA’s alleged due course despite an asserted procedural defect relating to attachment of an affidavit of material dates; (b) the CA’s acceptance of respondents’ position that the acts complained of were in the nature of a specific performance action to be filed in the Regional Trial Court; (c) the CA’s application of Section 6, Rule 43 of the 1997 Rules of Civil Procedure; and (d) the CA’s reversal of the SEC en banc’s order requiring a full accounting.

Resolution of Procedural Issues

The Court found no reversible merit in petitioners’ procedural assignments involving the CA’s handling of the petition and the CA’s application of Section 6, Rule 43. The Court observed that petitioners did not show that they had seasonably raised before the CA the issue on the affidavit of material dates. For that reason, petitioners could not raise the same belatedly. The Court also rejected petitioners’ contention concerning impleading the SEC. It noted that respondents correctly did not implead the SEC in their petition for review before the CA because Section 6 of Administrative Circular No. 1-95 (Revised Circular 1-91) expressly provided that the lower court or agency that rendered the appealed judgment or order should not be impleaded either as petitioner or respondent.

The Court’s Ruling on the Accounting Relief and Its Jurisdictional Character

On the substantive assignments of error, the Court held that the CA committed reversible error. The CA’s core reason was that the SEC en banc granted relief ordering respondents “to render a full and complete accounting of all the assets, properties and receivables of Soon Kee Commercial, Inc. and UBS Marketing Corporation,” yet this was supposedly not prayed for in the petition filed before the SEC Hearing Officer. The CA apparently relied on Section 5, Rule 18 of the old Rules of Court, which limited a default judgment so that it would not exceed the amount or differ in kind from that prayed for. The CA further characterized requiring a full accounting as a matter of specific performance, outside the SEC’s jurisdiction.

The Court ruled that the CA’s reliance on the old default limitation was misplaced because the Revised Rules of Procedure in the SEC had no provision similar to Section 5, Rule 18. The Court further pointed out that the SEC’s relevant rule on default permitted the hearing officer, upon declared default, to receive evidence ex parte and render judgment granting such relief as the petition or complaint and the facts proven may warrant. Applying the SEC default rule, the Court held that the SEC en banc committed no reversible error in granting relief warranted by the petition and the evidence, even if the relief was not expressed verbatim as a specific prayer.

The Court then addressed the “different in kind” concern even under the framework of the old Rules. It held that the accounting relief was not different in kind from what the petition’s allegations and requested reliefs necessarily entailed. The SEC petition alleged, among others, that Ban Hua and Ban Ha took charge of the accounting and handling of UBS funds and controlled collections and accounts receivables for Uy family corporations; that Roland King was in charge of accounting and bookkeeping; that respondents misappropriated a contingency fund set aside for UBS and Soon Kee obligations; and that respondents refused, despite repeated demands, to account for “slow moving receivables” and to turn over amounts received therefrom for distribution to the corporations.

The Court emphasized that the petition’s prayers repeatedly sought reliefs that could not stand in isolation from the broader financial accounting. Petitioners asked, in various causes of action, for mandatory injunction relief ordering turn over of corporate accounting records and financial documents; for permanent mandatory injunction relief after trial; for delivery of the contingency fund to the Board of Mediators; for an order requiring respondents to account for and turn over collections from slow moving receivables to the Board of Mediators for distribution; for payment of Johnny Uy’s separation pay and bonuses from funds under respondents’ control; for delivery of a truck; and for accounting and turn over of petitioners’ share in profits derived from use of Soon Kee’s corporate name, together with damages and attorney’s fees.

The Court considered these prayers as interdependent components of the requested remedies anchored on respondents’ alleged refusal to account and turn over corporate fi

Case Syllabus (G.R. No. 130328)

The petitioners sought review on certiorari to reverse the Court of Appeals (CA) decision dated 21 August 1997 in CA-G.R. SP No. 41198.
The petition targeted the CA action that reversed and set aside two issuances of the Securities and Exchange Commission (SEC) en banc dated 21 December 1995 and 24 June 1996.
The SEC en banc had ordered the private respondents to render a full and complete accounting of assets, properties, and receivables of Soon Kee Commercial, Inc. and UBS Marketing Corporation.

Parties and Procedural Posture

UBS Marketing Corporation and Johnny K.H. Uy were petitioners before the Supreme Court.
The Honorable Special Third Division of the Court of Appeals, Ban Hua U. Flores, Ban Ha U. Chua, and Rolando M. King were respondents.
The CA had acted on a petition for review that overturned the SEC en banc’s accounting orders.
The Supreme Court reinstated the SEC en banc’s Order and Resolution, after finding reversible errors in the CA rulings.

Background of Corporate Dispute

The Supreme Court identified a family conflict within the Uy family of Bacolod City involving multiple corporations.
The Uy family owned both UBS Marketing Corporation and Soon Kee Commercial, Inc., among other enterprises.
Johnny K.H. Uy and private respondents Ban Hua Uy-Flores and Ban Ha Uy-Chua were brother and sisters.
The individuals were interlocking stockholders and officers of the two corporations.
The private respondents Ban Hua Uy-Flores and Ban Ha Uy-Chua served as managing directors and had custody of corporate accounting and tax records and corporate funds.
Rolando King served as the accountant of the Uy family businesses and handled the accounting and bookkeeping functions for the relevant corporations.

Settlement and Business Segregation

The family dispute led to disagreements and conciliation meetings before a selected Board of Mediators.
The parties agreed to divide the family business, assigning UBS Marketing Corporation to Johnny K.H. Uy while assigning Soon Kee Commercial, Inc. to the rest of the Uy family, including Ban Hua Uy-Flores and Ban Ha Uy-Chua.
The parties executed deeds of assignment on 5 June 1987 reflecting stock transfers in both corporations.
The division was formalized on 1 July 1987 along with other settlement terms.

SEC Complaint and Allegations

Petitioners filed with the SEC on 6 April 1988 a complaint against Ban Hua Uy-Flores, Ban Ha Uy-Chua, Rolando King, and Soon Kee Commercial, Inc..
The SEC complaint sought recovery of UBS Marketing Corporation’s corporate books and records and demanded accounting and turnover of funds and properties.
The petition alleged that prior to segregation, Ban Hua Uy-Flores and Ban Ha Uy-Chua were not only stockholders and directors but also officers who had custody, control, and supervision of records, property, and funds.
The petition alleged that Rolando King was the accountant of the Uy family businesses, including UBS Marketing Corporation.
The petition alleged that after segregation, petitioners demanded turnover of UBS Marketing Corporation records, but respondents refused without just cause.
The petition alleged that respondents held back and refused to account for funds and property, including items allegedly required to be shared under the settlement agreement.
The complaint was docketed as SEC Case No. 033 28.

Jurisdictional Determination in Prior Ruling

The respondents did not file an answer and instead moved to dismiss, arguing the SEC lacked jurisdiction because there was no intra-corporate relationship.
The SEC hearing officer denied the dismissal on 30 May 1998.
On appeal, the CA ruled the SEC lacked jurisdiction.
The Supreme Court later declared that the controversy in SEC Case No. 3328 was an intra-corporate controversy within the SEC’s original and exclusive jurisdiction under Section 5(b) of PD No. 902-A, as amended.
The Supreme Court referenced its earlier decision as Securities and Exchange Commission v. Court of Appeals, 201 SCRA 124 (1991), involving the same parties.

Default Proceedings and SEC Orders

After the Supreme Court decision became final and executory, petitioners moved for ex-parte reception of evidence before the SEC hearing officer.
The hearing officer granted the motion and petitioners presented testimonial and documentary evidence.
On 3 May 1995, SEC Hearing Officer Enrique L. Flores, Jr. rendered a judgment by default.
The SEC default judgment commanded multiple forms of relief, including accounting, turnover of books, cancellation and reversion of titles to UBS Marketing Corporation, return and execution of conveyance documents, monetary awards described as damages and separation pay-related relief, and an order making preliminary mandatory injunction permanent.
Respondents appealed to the SEC en banc, which set aside the default judgment save for paragraph number 2 of its dispositive portion.
The SEC en banc ordered respondents to render a full and complete accounting of all assets, properties, and receivables of both Soon Kee and UBS as a form of partial affirmation of the default outcome.
Respondents sought partial reconsideration, but the SEC en banc denied it in a resolution dated 24