SEC Adm. Case No. 08-04-33 Silver Spirit Plastic, Inc. vs. CWB Plastic Corporation

Department of Trade and Industry Republic of the Philippines

Securities and Exchange Commission SEC Bidg.EDSA.Grecnhils. Mandaluyong City

SILVER SPIRIT PLASTIC, INC Petitioner.

CWB PLASTIC CORPORATION, -versus- Respondent. (CRMD Case No. 04-08-692) SEC Case No. 08-04-33

DECISION

registration of CWB Plastics Corp. (`CWB" for brevity) Order dated 04 Auqust 2004 lifting the order that .revoked the certificate of For consideration of the.Commission En Banc is a petition to set aside the

The relevant facts of the case are:

1994 under SEC Reg. No. AS94003329. On the other hand, Silver Spirit Plastic, Inc. ("Silver Spirit" for brevity) is also a domestic corporation registered with the Commission on 26 July 1996 with SEC Reg. No. A199602992. CWB is a domestic corporation registered with the Commission on 13 April

September 2003 for non-compliance with the Commission's reportorial requirements. CWB then filed a petition praying that the order revoking its certificate of registration be set aside. Finding the petition meritorious, the Director of the Company CWB's Certificate of Registration was revoked by virtue of SEC Order dated 30

Registration and Monitoring Department of the Commission issued an Order dated 04 August 2004 granting the petition.

based on the following grounds: Upon discovering the questioned order, Silver Spirit filed the instant petition

1. The Commission has no power to set aside the revocation order.

2: The Order lifting the Revocation Order caused undue injury to Silver Spirit.

Comments and for the latter to submit its rejoinder. "To date, however, no reply or 01 June 2007, an Order was issued directing Silver Spirit to file its reply to CWB's rejoinder was fied. Thus, the case is now submitted for resolution. On 01 October 2004, CWB filed its Comments: dated 30 September 2004. On

The petition is unmeritorious.

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Silver Spirit Plastic vs. CWB Plastic Corporat:on SEC Case No. 08-04-33, Page 2 of 4

First Issue: Power to set aside the k?vocation Order

The power of the Commissior to register, monitor and revoke the franchise of corporations, partnerships, and other forms of associations is stated in the Securities Regulation Codel:

functions provided by this Code, Presidentiat Decree No.. 902-A, Corporation Code, the Investment Houses d_aw, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions: Commission 'shall act: with transparency and shall have the powers and "SEC. 5. Powers and Function's of the Commission. 5.1. The the

or associations who are the grantees of primary franchises and/or a license or permit issued by the Government; (a) Have jurisdiction and supervision over all corporations, partnerships

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franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds2 provided by law; and (m) Suspend, or revoke, after proper notice and hearing the

the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws. as those which may be implied from, or which are necessary or incidental to n Exercise such other powers as may be provided by law as well

The power to register includes the power to revoke the primary franchise of

has also the power entities registered with the Commission. By necessary implication the Commission $c set aside Te which in its estimation is not in conformance With the existind Further, the Commission is empowered to ACi an org evoked the certificate of registration of a corporation fhaf 3n eportorial reauirements of the Commission such as SUDmisst 1.1 Information Sheet and Audited Financial Statements. iatte ubiic policy that corporations should be protected from the danger of losing their corporate existence simply because the assigned corporate officers were remiss in their duty to submit reportorial

Some of the grounds are enumerated in P.D. No. 902-A, Section 6.i): R. A. No. 8799 (2000) 1. Fraud in procuring its certificate of registration; 2 3 Serious misrepresentation as to what the corporation can do or is doing to the great Refusal to comply or defiance of any lawful order of the Commission restraining Continuous inoperation for a period of at (east five (5) years; Failure to file by-laws within the required poriod; Failure to file required reports in appropriate forms as determined by the Commission prejudice of or damage to the general public; commission of acts which would amount to a grave violation of its franchise;

within the prescribed period.

Silver Spirit Plastic vs. CWB Plastic Corporation SEC Case No. 08-04-33, Page 3 of 4

continue pursuing its business activities.3 reguirements especially if the corporation is in active operation or is willing to

file its periodic reports. CWB sought reconsideration and raised the ground that it its operation as soon as the disagreement among its officers is resolved. The failure of the corporate officers of CWB to file the required reports with the Commission failed to submit the required reports due to some internal disputes and will resumel should not prejudice the right of the corporation to exist. This does not mean, however, that the negligent officers should also get away with such failure to discharge their functions with utmost diligence: The stockholders of cwB, or even its board of directors, may hoid the corporate officers who are remiss in their duty liable for the wrong done to CWB. In the case of CWB, its certificate of registration was revoked for its failure to

Second Issue: Undue injury to Silver Spirit

Silver Spirit further alleges that the reinstatement of the registration of CWB caused undue injury to it (Silver Spirit). CWB asserts however that Silver Spirit is not even a stockholder of CWB and the truth of the matter is that it is CWB that has controlling shares in Silver Spirit. The cognizance by the Commission of the instant petition shall in no way be construed to mean that the Commission is declaring who between the contending parties is the majority stockhoider of CWB since such matter is deemed an intra-corporate controversy, which the Supreme Court explained in this wise:

and is to be heard and decided by the Branches of the [Regional Trial Court] RTC specifically designated by the Court to try and decide such cases, two "To determine whether a case involves an intra-corporate controversy.

nature of the question that is the subject of their controversy. elements must concur: (a) the status or reiationship of the parties; and (2) the

The first element .requires that the controversy must arise out of intra- corporate or partnership relations between any or all of the parties and the corporation, partnership or association of which they are stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are. stockholders, members or associates, respectively;: and between such corporation, partnership or association and the State insofar as it concerns their individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporattion.'

The' determination of who between Silver Spirit and CWB has the controlling interest'was transferred from the Comrnission to the courts of general jurisdiction, or the appropriate RTC pursuant to Section 5.2 of R.A. No. 8799, the pertinent portion of which reads: "The Commission's jurisdiction over all cases enumerated under

16A Fletcher Cyc Corp (Perm Ed) 203 Speed Distributing Corp., et al. vs. Court of Appeals, et al., G.R. No. 1.49351, 17 March 2004.

Silver Spirit Plastic vs. CWB Plastic Corporation SEC Case No. 08-04-33, Page 4 of 4

a particular corporation falls within the jurisdiction of the appropriate RTC. Section 55 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court. xxx" Given the nature of the relationship of the parties in this case, the resolution of the issue of ownership in

is the owner of the premises where the factory of CWB was situated is :civii in character; hence, the reguiar court likewise has jurisdiction over the said issue. In resolution of setting aside the revocation order. other words, whether Silver Spirit suffered undue injury is not material to the Further, the matter of. the ejectment suit in which Siiver Plastic ciaims that it

Order dated 04 August 2004 issued by the Director of the Company Registration and Monitoring Department is AFFIRMED. WHEREFORE, the instant appeal is hereby DENIED. Consequently, the

SO ORDERED.

Mandaluyong City, 10 June 2010.

JME B: BARIN Chairperso

Ma..Juanita e. cueto* Com ioner RAUL J. PALABrIC Commissione

ManUel RTO B. GAITE ElAdioM: jala MMM

5 uSEC. 5. In addiion to the regulatory and adjudicative* functions of the Securities and Exchange expressly granted under existing faws and decrees, it shali have original and exclusive jurisdiction to hear and decide cases involving. Commission over corporations, partnerships and other forms of associations registered with. it as c:\cases\cwb\cwb_plastics4.docx *on leave Commissioner Comnis joner

a) Devices or schemes employed by or any acts, of the board of directors, business may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission; associates, its officers or partnership, amounting to fraud and misrepresentation which

b) Controversies arising out of int:ra-corporate or partnership relations, between and among insofar as it concerns their individual franchise or right to exist as such entity; stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectiveiy; and between such corporation, partnership or association and the state XXX XXX XXX