SEC EB Case No. 11-14-350ALLIANCE SELECT FOODS INTERNATIONAL, INC., Appellant, v. ENFORCEMENT AND INVESTOR PROTECTION DEPARTMENT, Appellee.

Securities and Exchange Commission COMMISSION EN BANC Republic of the Phiippines Department of Financ

INTERNATIONAL, INC., ALLIANCE SELECT FOODS

Appellant,

- versus- SEC En Banc Case No. 11-14-350

Promulgated: 29 September 2022

ENFORCEMENT DEPARTMENT (EIPD), INVESTOR PROTECTION AND

Appellee.

F

DECISION

Article 6(A)(i)(iv) of the Revised Code of Corporate Governance (the "Code"). October 2014 (the "Assailed Order") issued by the Enforcement and Investor Protection Department (EIPD) which imposed upon ASFII a penalty of fine in the amount of One Hundred Thousand Pesos (P100,000.00), for violation of 2014 (the Appeal"),filed by Appellant Alliance Select Foods International Inc.(ASFII) on 21 November 2014,seeking the reversal of the Order dated 28 For consideration is the Memorandum on Appeal dated 14 November

RELEVANT FACTS

stockholder when he was prevented from attending the annual stockholder's alleged violation of Article 6(A)(i)(iv) of the Code. Mr. Sytengco alleged that ASFII's violation of the Code consisted in its disregard of his rights as a meeting held on 16 June 2014 Sytengco), the EIPD issued a Show Cause Letteri dated 12 September 2014 directing the Board of Directors and Officers of ASFII to explain why no administrative sanction should be imposed against the Corporation for Acting on the letter-complaints filed by Mr. Necesito U. Sytengco (Mr

ASFII denied having disregarded the rights of Mr. Sytengco, and explained that In its Letter dated 22 September 20142 (the "Written Explanation")

2 Annex "E" of the Memorandum on Appeal 1 AnnexDof the Memorandum on Appeal

Alliance Select Foods International vs. EIPr SEC EB Case No.11-14-350 Page 2 of ? DECISION

the meeting was his rude and abrasive behavior, and for his failure to show the reason for the Corporate Secretary's decision not to admit Mr. Sytengco to proof that he is a stockholder of ASFII.

EIPD found that ASFFI did not give any explanation, despite having been informed of the possible sanction as to why Mr. Sytengco was barred from to have violated the Code3 and directed it to pay the monetary penalty. The attending the stockholder's meeting. On 28 October 2014, the EIPD issued the Assailed Order finding ASFII

thereof, ASFII maintained that the finding of violation of the Code was infirm as it was made in violation of its right to due process, i.e., the EIPD did not consider the Written Explanation filed by ASFII. which was duly received by the Commission on 23 September 2014 as evidenced by the Barcode Page,5 contrary to the finding the EIPD. On account In its Appeal, ASFII alleged that it submitted its Written Explanation4

Receiving Section of the Commission. This notwithstanding, the EIPD adopted and reiterated the contents of Assailed Order, and manifested that it is not filing a Reply Memorandum that it indeed failed to consider the Written Explanation in passing upon the issue, as the said Written Explanation was not forwarded to it by the Central In its Manifestation dated 26 November 2014, the EIPD acknowledged

premise that ASFII failed to submit its Written Explanation. that the Assailed Order should be reversed as it was issued on the mistaken On 15 December 2014, Appellant filed a Counter-Manifestation arguing

ISSUE

basis of a finding of violation of Article 6(A)(i)(iv) of the Code. Whether the EIPD committed reversibie error in penalizing ASFII on the

RULING

We reverse the Assailed Order.

participate at the annual stockholder's meeting of ASFII, which he allegedly that what Mr. Sytengco was asserting and seeking to enforce, is his right to A careful review of the allegations of the complaint will readily show

3 Annex "G" of the Memorandum of Appeat 4Annex *E" of the Memorandum Appeal 5Annex "F" of the Memorandum Appeal

Alliance Select Foods International vs.EIPD SEC EB Case No.11-14-350 Page 3 of ? DECISION

claimed to be entitled to as a stockhoider. This is supported by the fact that in the Code which provides: relation to Mr. Sytengco, the EIPD found ASFII to have violated Section 6 of

for in the Corporation Code, namely: A} The Board shall respect the rights of the stockholders as provided

(v (i v v} j Appraisal right. Right to vote on all matters that require their consent or Pre-emptive right to all stock issuances of the corporation; Right to inspect corporate books and records: Right to information; Right to dividends; and approval;

intra-corporate dispute which is no longer within the jurisdiction of the reversible error in taking cognizance of the complaint, in determining the rights and obligations of the parties, and in penalizing ASFll on the basis of such determination, because the issue presented partakes of the nature of an Commission. Given the foregoing, the Commission finds that the EIPD committed

of them and the corporation. To determine if a suit partakes of a nature of an intra-corporate dispute, the Supreme Court has consistently applied the relationship test and the nature of the controversy test, simultaneously, thus: corporate relations, or between or among stockholders, or between any or all An intra-corporate dispute is understood as suit arising from intra-

two tests are applied - the relationship test and the 'nature of the To determine whether or not a case involves an intra-corporate dispute. controversy test.

partners, members, or officers; and (4) among the stockhoiders, partners, or associates themselves. Under the relationship test, there is an intra-corporate controversy when the conflict is (1) between the corporation, partn. the public; (2) between the corporation, partnership, or association and the State insofar as its franchise, permit, or license to operate is corcerned; (3) between the corporation, partnership, or association and its stockholders ership, or asso ociation and

On the other hand, in accordance with the nature of controversy test, an intra-corporate controversy arises when the controversy is not only rooted in the existence of an intra-corporate relationship, but also in the enforcement of the parties' correlative rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation.

Strategic Alliance Development Corporation vs Star infrustructure Deveiopment Corporation (G.R. No 187872.November 17,2010)

Alliance Select Foods International vs. EIPD SEC EB Case No.11-14-350 Page 4 of 7 DECISION

Based on the foregoing tests, it is clear that this case involves an intra- corporation, which satisfies the relationship test, and it involves the enforcement of the right of Ozamiz, as a stockholder, to inspect the books of PHC and the obligation of the latter to allow its stockholder to inspect its books "? corporate dispute. It is a conflict between a stockholder and the

being a stockholder, and to deny attendance to rude and abrasive stockholders. This satisfies the nature of the controversy test. stockholder, i.e., Mr. Sytengco, which satisfies the relationship test. Second. the controversy involves or relates to the enforcement of their respective rights, i.e., from the perspective of Mr. Sytengco is his right to attend the meeting, while from the perspective of ASFII is its right to demand proof of affirm, at a first glance, that the matter subject hereof is intra-corporate in nature. First, the conflict is between a corporation, i.e. ASFIl, and its Applying the foregoing tests to the instant case, it is not difficuit to

Regulation Code (SRC), the jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A, which includes intra-corporate disputes, is already with the Regional Trial Court, to wit: Relative thereto, we emphasize that under Section 5.2 of the Securities

payment/rehabilitation cases filed as of 30 June 2000 until finally intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over the cases. The Commission shall retain jurisdiction over pending cases involving Commission shall disposed.' "rhe Commission's jurisdiction over all cases enumerated under section 5 retain jurisdiction over pending suspension 0

: "Section S. In addition to the regulatory and adjudicative functions of the Securities and Exchange granted under existing laws and decrees. it shall have original and exclusive jurisdiction to hear and decide 7 San jose vs Ozamiz (G.R. No. 190590. July 12, 2017} Commission over corporations, partnerships and other forms of associations registered with it as expressly cases involving. } b C "Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partnership, amounting to fraud and misrepresentation which may be detrimental Controversies arising out of intra-corporate or partnership relations, between and among respectively; and between such corporation, partnership or association and the state insofar Controversies in the election or appointments of directors, trustees, officers or managers of to the interest of the public and/or of the stockholder, partners, members of associations or stockholders, members, or associates; between any or all of them and the corporation. partnership or association of which they are stockholders, members or associates, such corporations, partnerships or associations." (Emphasis supplied Organizations registered with the Commission. as it concerns their individual franchise or right to exist as such entity:

Alliance Select Foods International vs.EIPD SEC EB Case No.11-14-3S0 DECISION Page 5 of 7

find this established legal principle reiterated in the case of Bilag vs Ay-ay,9 notwithstanding the clear provisions of Section 5.2 of the SRC rendered the Assailed Order null and void for having been issued without jurisdiction. We where the Supreme Court categorically ruled that: determination by the EIPD Thus, the assumption of jurisdiction over the complaint, and the ) of the matter/issue : presented therein.

It remains a basic fact in law that the choice of the proper forum is crucial. as the decision of a court or tribunal without jurisdiction is a total nullity. A void judgment for want of jurisdiction is no judgment at all. All acts performed pursuant to it and all claims emanating from it have no legal effect. (Emphasis supplied) "A judgment rendered by a court without jurisdiction is null and void and may be attacked anytime. It creates no rights and produces no effect.

justifying the nullification of a decision of this Commission which was issued without jurisdiction, to wit: In fact, the afore-quoted doctrine was applied by Supreme Court in

administrative body in specialized corporate matters. It follows, therefore. that where the controversy does not call for the use of any technical expertise, but the application of general laws, the case is cognizable by the ordinary courts. In Macapaian v. Katalbas-Moscardon, we said- jurisdiction between the SEC and ordinary courts. The delineation is based on the very purpose for which the SEC was granted quasi-judicial powers in the first place. Under PD 902-A, the SEC exercised jurisdiction over intra corporate controversies precisely because it is a highly-specialized "The development of both the concept and application of the relationship test and controversy test reveals a growing emphasis on the delineated

power vested in the courts would render the judiciary virtually impotent in the discharge of the duties assigned to it by the like the SEC with the power to adjudicate matters coming under solution of the problems submitted to them. This would also relieve the regular courts of a substantial number of cases that with the general laws that do not require any particular expertise or training to interpret and apply. Otherwise, the creeping take-over by the administrative agencies of the judicial It is true that the trend is towards vesting administrative bodies their particular specialization, to insure a more knowledgeable would otherwise swell their already clogged dockets. But as expedient as this policy may be, it should not deprive the courts of justice of their power to decide ordinary cases in accordance Constitution.28

jurisdiction to order the cancellation of the sale between Napal and Cruz. It Applying these principles to this case, we rule that the SEC does not have

" G.R. 189950, April 24, 2017

Alliance Select Foods International vs. Elpr SEC EB Case No.11-14-350 Page 6 of ? DECISION

NIDSLAND. also has no jurisdiction to cancel Cruz's TCT and order its transfer to

XXX XXX XXX

the rights of Cruz, cancelled the deed of sale, and took away his property In this case, the SEC, in rendering the decision, disregarded established law and jurisprudence on the jurisdiction of the SEC. Further, it adjudicated or without giving him the opportunity to be heard. It is a breach of the basic requirements of due process.

XXXXXXXXX Hence, because the SEC Decision was issued with grave abuse of discretion and is therefore void, all acts emanating from it have no force and effect. Thus, the Deed of Conveyance issued pursuant to it has no legal effect."

implementing the principles on good corporate governance, intended to be rights and obligations of shareholders, members, directors, officers of the corporation, the enforcement thereof is now within the exclusive jurisdiction adopted by covered corporations in the conduct of its operations consistent with established and accepted best practices. Hence, while the Code, as embodied in the Manual on Corporate Governance of ASFII, is a source of Corporate Governance of ASFII, which is a corporate document in the nature of a contract. In this regard, it should be pointed out that SEC Memorandum Governance, a document which contains the minimum standards of the RTC Commission that what the EIPD used as basis for its decision is the Manual on Circular No. 6, Series of 2009, provides for the Revised Code of Corporate The foregoing notwithstanding, it does not escape the attention of this

respective Manuals on Corporate Governance is found in Article 9 of the Code which provides that: The requirement for covered corporations to come up and submit their

however, that corporations that have earlier submitted their manual may. to determine its compliance with this Code taking into consideration the nature, size and scope of the business of the corporation; provided, at their option, continue to use the said manual as long as it complies with embodied in a manual that can be used as reference by the members of the Board and Management. The manual should be submitted to the Commission for its evaluation within one hundred eighty (180) business days from the date this Code becomes effective to enable the Commission the provisions of this Code. governance..rules..in..accordance .with...this .Code. The rules shall be "All covered corporations shall establish and implement their corporate

Alliance Select Foods International vs.EIPD SEC EB Case No.11-14-350 Page 7 of 7 DECISION

The manual shall be made available for inspection by any shareholder at reasonable hours on business days."

and caution in taking cognizance of the complaint considering that what was being enforced by Mr. Sytengco is essentially a contractual right embodied in the Corporate Governance Manual of ASFII, that rendered the matter an intra- corporate dispute which is outside the jurisdiction of the Commission. The foregoing, again, should have alerted the EIPD to exercise prudence

2014 is hereby NULLIFIED for having been issued without jurisdiction. Foods International, Inc. is hereby GRANTED. The Order dated 28 October WHEREFORE, premises considered, the Appeal filed by Alliance Select

SO ORDERED.

Makati City, Philippines.

EMILIO B.AQUINO W Chairperson C

JAVEYPAUL D.FRANCISCO Commissioner KELVINLT Commissioner TERK.LEE

KARLO S.BELLO Commissioner MCJILL BRYANT T. FERNANDEZ Commissioner