SEC En Banc Case No. 11-08-150, SEC-CFD Case No. 2008-03 Omico Corporation, Petitioner - versus - Hon. Director Justina F. Callangan, in her capacity as Director of the Corporation Finance Department, Astra Securitries Corporation, Respondents.

Securities and Exchange Commission SEC Building, EDSA, Greenhills, Mandaluyong City Republic of the Philippines Department of Finance

OMICO CORPORATION, Petitioner,

-versus- SEC En Banc Case No.11-08-150

SEC-CFD Case No. 2008-03

Finance Department, and ASTRA SECURITIES CORPORATION HON. DIRECTOR JUSTINA F. CALLANGAN, in her capacity as Director of the Corporation Respondents.

DECISION

the Cease and Desist Order (CDO) issued by the then Corporate Finance Department petitioner Omico Corporation (Omico) on even date questioning the force and effect of (CFD) on 30 October 2008 finding that: Before us is a Petition for Review on Certiorari, dated 5 December 2008, filed by

20(11)(b)(xviii), which prohibits brokers/dealers from giving any proxy, consent or authorization, in respect of any security carried for the account of a customer. (2)(B)(ii)(b)withregardtoproxy CORPORATION, EMILIO S. TENG, JUANA LOURDES M. BUYSON and MA. ELENA ALQUEZA, in their capacity as members of the Board of Inspectors and TOMMY KIN HING TIA, are hereby ordered to immediately CEASE AND DESIST from accepting and including all the objected proxies issued in favor of Tommy Kin Hing Tia, in determining the quorum and in electing the members of the board of directors during the annual meeting of stockholders of Omico set on 03 November 2008 meeting before the issues relating to the violation of proxies are resolved, to prevent grave and irreparable injury or prejudice to the investing public." without the express written authorization of such customer, and SRC Rule 20 "There being a prima facie evidence that there is a violation of SRC Rule solicitation, respondentsOMCO

As culled from the records, the facts and proceedings are as follows:

Stock Exchange, Inc. Omico is a company whose shares of stock are listed and traded in the Philippine

of Omico owning about 18% of the latter's outstanding capital stock. Private respondent Astra Securities Corporation (Astra) is one of the stockholders

1 Now, Corporate Governance and Finance Department.

W

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meeting of its stockholders shall be held on the last Friday of May of each year However, due to lack of quorum the meeting was adjourned. Accordingly, Omico scheduled the 2008 Annual Stockholders' Meeting on 30 May 2008. Based on Section I, Article II of Omico's Amended By-Laws, the regular annual

proxies on 23 October 2008 and the validation of proxies on 25 October 2008. for the adjourned meeting to 3 November 2008. It set the deadline for submission of On 22 August 2008, Omico's Board of Directors approved the setting of the date

representing about 2% of the outstanding capital stock of Omico. Tia (Tia), representing 38% of the outstanding capital stock of Omico. Astra also objected to the inclusion of the proxies issued in favor of Tia and/or Martin Buncio, Astra objected to the validation of the proxies issued in favor of Tommy Kin Hing

proxies issued in favor of Tia were valid. Despite the objections of Astra, Omico's Board of Inspectors declared that the

November 2008 meeting, and, (4) issuance of a CDO, enjoining Omico from holding of No. 2008-03. of proxies prior to the canvasing of votes for purposes of determining a quorum in the 3 Omico's Annual Stockholders' Meeting until the Commission had resolved the issues October 2008, filed the complaint before the CFD praying for the (1) invalidation of all the proxies issued in favor of Tommy Kin Hing Tia (Tia), (2) imposition of administrative sanctions against Tia, (3) resolution of the issues relating to the validation pertaining to the validation of proxies. The complaint was docketed as SEC-CFD Case Thus, due to alleged irregularities during the proxy validation, Astra, on 27

electing the members of the board of directors during the annual stockholders' meeting from accepting and including the questioned proxies in determining a quorum and in on 3 November 2008. On 30 October 2008, the Commission issued the assailed CDO enjoining Omico

meeting proceeded as scheduled with 52.3% of the outstanding capital stock of Omico present in person or by proxy. The nominees for the board of directors were elected upon motion. Attempts to serve the CDO on 3 November 2008 failed, and the stockholders

of the issuance of the CDO, as well as the holding of the reconvened stockholders meeting and election contest. Subsequently, various cases were filed by the parties against each other as a result

Indirect Contempt2 against Omico for disobedience of the CDO. On 18 November 2008 Pasig City, Branch 158. Astra also filed an Election Contest3 against Omico with the Regional Trial Court of On 5 November 2008, Astra instituted before the Commission a Complaint for

2 SEC En Banc Case No. 11-08-147 3 SEC Case No. 08-111

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SP No. 106006. (CA) a Petition for Certiorari and Prohibition imputing grave abuse of discretion on the part of the Commission for issuing the CDO. Omico asked the CA to enjoin the Commission from implementing and enforcing the questioned CDO. Omico also prayed that the CA prohibit the Commission form acting on or taking cognizance of any and all orders and proceeding in SEC-CFD Case No. 2008-03, such as contempt proceedings and imposition of penalties, for being null and void. The petition was docketed as CA G.R. On the other hand, 12 November 2008, Omico filed before the Court of Appeals

Certiorari with the Commission raising the sole issue of: Then, on 5 December 2008, Omico filed the instant Petition for Review on

EFFECT OF THE CEASE AND DESIST ORDER (CDO) DATED 30 OCTOBER 2008 ISSUED IN CONNECTION WITH SEC-CFD CASE NO) 2008-03 HAD BEEN ELEVATED TO THE COURT OF APPEALS, THE CORPORATIONFINANCEDEPARTMENT, JURISDICTION TO ACT ON THE SAID CASE." "WHETHER OR NOT ONCE QUESTIONS ON THE FORCE AND EFFECTIVELY LOST

We now resolve the Petition.

amendeding Section 7, Rule 65 of the Rules of Court, among others, which now provides: On December 4, 2007, the Supreme Court issued A.M. No. 07-7-12-SC

the petition is filed may issue orders expediting the proceedings, and it may also grant a temporary restraining order or a writ of preliminary injunction for the preservation of the rights of the parties pending such proceedings. The petition shall not interrupt the course of the principal case, unless a temporary restraining order or a writ of preliminary injunction has been issued, enjoining the public respondent from further proceeding with the case. "Sec. 7. Expediting proceedings; injunctive relief. The court in which

(10) days from the filing of a_petition for certiorari with a higher court or tribunal, absent a temporary restraining order or a preliminary injunction, or upon its expiration. Failure of the public respondent to proceed with the principal case may be a ground for an administrative charge. The public respondent shall proceed with the principal case within ten

Certiorari under Rule 65 of the Rules of Court does not divest the CFD of its jurisdiction 0Ver SEC-CFD CASE NO. 2008-03. From the foregoing, it is clear that Omico's mere filing of the Petition for

5 Amendments to Rules 41, 45, 58 AND 65 of the Rules of Court. 4 CA G.R. SP No. 106006

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the Court when it promulgated GSIS v. Court of Appeals, Rosete, et al.", thus: Decision, dated 22 October 2014, affirming the Decision of the Court of Appeals in CA G.R. SP No. 106006 and declaring that the issue raised therein was squarely answered by However, during the pendency of this case, the Supreme Court rendered its

promulgated GSIS v. CA, which squarely answered the above issue in the negative. "About a month after the CA issued the assailed Decision, this Court

ancillary powers enumerated in Section 6. 902-A dated 11 March 1976 conferred on SEC the power "[to] pass upon the validity of the issuance and use of proxies and voting trust agreements for absent stockholders or members." Section 6, however, opens thus: "In order to effectively exercise such jurisdiction xxx." This opening clearly refers to the preceding Section 5. The Court pointed out therein that the power to pass upon the validity of proxies was merely incidental or ancillary to the powers conferred on the SEc under Section 5 of the same decree. With the passage of the SRC, the powers granted to SEC under Section 5 were withdrawn, together with the incidental and In that case, we observed that Section 6(g) of Presidential Decree No. (P.D.)

involving controversies in the election of directors, it was not clear whether the SRC also transferred to these courts the incidental and ancillary powers of the SEC as enumerated in Section 6 of PD 902-A. Thus, in GSIS vs. CA, it was necessary for the Court to determine whether the action to invalidate the proxies was intimately tied to an election controversy. Hence, the Court pronounced: While the regular courts now have the power to hear and decide cases

election contests or controversies under Section 5 (c) does not extend to the election of directors or trustees, in which stockholders are authorized to participate under Section 24 of the Corporation Code. every potential subject that may be voted on by shareholders, but only to "xxx Evidently, the jurisdiction of the regular courts over so-called

corporate directors, the resulting controversy, even if it ostensibly raise the an election controversy within the original and exclusive jurisdiction of the trial courts by virtue of Section 5.2 of the SRC in relation to Section 5(c) of violation of the SEC rules on proxy solicitation, should be properly seen as Presidential Decree No. 902-A. xxx However, when proxies are solicited in relation to the election of

XX XXX

place in instances when stockholders vote on matters other than the election of directors. The test is whether the controversy relates to such election. All matters The Court explained that the power of the SEC to regulate proxies remains in

6 SEC v. Court of Appeals, et al., G. R. No. 187802 and Astra Securities Corporation v. Omico Corporation 7 603 SCRA 676, G.R. No. 183905, April 16, 2009. et al.,G.R.No.189014

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cognizable by the regular courts. Otherwise, these matters may be before the SEC affecting the manner and conduct of the election of directors are properly for resolution based on the regulatory powers it exercises over corporations, partnerships and associations.

XXX -XXX

that there was no actual voting did not make the election any less so, especially since Astra had never denied that an election of directors took place." the existence of a quorum. Nonetheless, it is a quorum for the election of the directors, and, as such, which requires the presence -- in person or by proxy -- of the owners of the majority of the outstanding capital stock of Omico. Also, the fact Indeed, the validation of proxies in this case relates to the determination of

Commission's Motion for Reconsideration of the Decision dated 22 October 2014. On 25 February 2015, the Supreme Court resolved to deny with finality the

instant Petition for Certiorari questioning the force and effect of the assailed CDO issued by the Commission has become academic. The Supreme Court has already declared that the Commission lost jurisdiction over the instant case for being an election contest in relation to the election of directors cognizable by the regular commercial courts. In view of the foregoing pronouncements of the Supreme Court, the issue in the

TERMINATED in view of the Supreme Court's decision in GR No. 187702, with the title "Securities and Exchange Commission vs. Court of Appeals, et al." and GR No. 189014, with the title "Astra Securities Corporation vs. Omico Corporation, et al" WHEREFORE, premises considered, the case is hereby deemed CLOSED and

SO ORDERED.

Mandaluyong City, Philippines; 21 September 2015

TERESITA J. HERBOSA Chairperson

MANUEL HUBERTO B. GAITE Commissioner ANTONIETA F. IBE Commission X

EPHYRO LUIS B. AMATONG 3A1WAX Commissioner BLAS JAMES G.VITERBO as bn&s6V Idommissioner M

* On Official Business