SEC Adm. Case No. 01-10-198 Lilibeth D. Anglo vs. Howard M. Calleja

SEC Bldg. EDSA, Greenhills, Mandaluyong City Securi ies and Exchange Commission Republic of the Philippines

LILIBETH D. ANGLO Complainant-Appellant,

-- versus -- SEC En Banc Case No. 01-10-198

HOWArd M. CALLEJA Respondent-Appellee

X

DECISION

appeals1 to the Commissicn the order issued by Director Hubert B. Guevara of the Complainant-Appeliant. Lilibeth D. Anglo (hereinafter referred to as "Appellant")

Enforcement and Prosecution Department (EPD) dismissing the complaint filed by Appellant? instituted aaainst Respondent-Appellee Howard M. Calleia (hereinafter referred

. to courts of generail jurisdiction or appropriate Regional Trial Court."3 Regulation Code (SRC) which "trarrsferred the Commission's original and exctusive to as "Appellee") for lack of jurisdiction in view of Section 5.2 of the Securities and jurisdiction over controversies in the election or appointment of directors of corporations

The Facts of the Case

Appellant alleges to be a stockholder of VYD Hoidings, Inc. while Appellee is a proxy of Violeta Domingo, allegedly another stockholder of the VYD Holdings, Inc.

4 Par. 4, Memorandum on Appeai, p. 2. 1 Manifestation dated 25 March 2010 stating to the effect that the Notice of Appeal and Memorandum on 2 Annex "A" of the Memorandum on Appeal. 3 Letter from Director Guevara of the EPD to Complainant-appellant dated 01 March 2010 Appeal were filed and paid for on 24 March 2010 via money order and an advance copy was submitted on 25 March 2010 to the Commission.

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majority stockholders of the corporation.5 Appellant appointed five (5) proxies? to attend 2009 at Makati City, called by Francisco Domingo, Fritzie Domingo and Violeta Domingo, the meeting on her behalf.7 At the meeting, her proxies inquired as to the whereabouts of validated by the Philippine Embassy or the Philippine Consulate abroad.1o Violeta Domingo, Chairman of the Board and President, and were informed that Violeta Was represented by her proxy, Appellee Calleja.& When Appellant's proxies perused the proxy form of Violeta authorizing the Appellee to represent her, it was indicated that the form on the ground that it did not conform to the requirements of the Securities and Exchange Commission that proxy forms executed abroad should be authenticated and proxy was executed in California. Appellant's proxies objected to the validity of the proxy A special stockholders' meeting of VYD Holdings, Inc. was heid on 10 November

committed a violation of SEC Memorandum Circular No. 5-1996 in relation to Appellant filed a complaint with the EPD on 21 January 2010, alleging that Appellee

accepted the unauthenticated proxy of Violeta Domingo. Memorandum 5-2001 during the stockholders' meeting of VYD Holdings, Inc. when he

citing Section 5.2 of the Securities and Regulation. Code12 transferring jurisdiction of the Commission over intra-corporate matters to the regular courts and the case of GSIS ys. Court of Appeals13 where the Supreme Court ruled that "when proxies are solicited in relation to the election of corporate directors, the resulting controversy, even if it ostensibly raised the violation of the SEC rules on proxy solicitation, should be properly The EPD dismissed the Appellanit's complaint for iack of jurisdiction over the case.

seen as an election controversy within the original and exclusive jurisdiction of the trial courts.

of fines and/or penalties upon Appellee for violations of the Corporation Code14' or any Appellant maintains that the SEC has the power and jurisdiction over the imposition

other laws being impiemented by this Commission, the pertinent rules and regulations, its orders, decisions and/or rulings as provided in Section 6 of PD 902-A.15 In particular, Appellant reiterates the rule1 that proxies executed abroad shall be duly authenticated by the Philippine Embassy or Consular Office17 . which she alleges the Appellee viotated by accepting the unauthenticated proxy of Violeta Domingo and thus opens him to administrative sanctions.

5 Annex "A," Memorandum on Appeal. 14 As provided in Section 144, Batas Pambansa BIg. 80 (1980). 7.Par. 6, Memorandum on Appeal, p. 3. 3 Par. 7, Memorandum on Appeat, p. 3. 16 Citing Section 16 of SEC Memorandum Circular No. 5, series cf 1996. 17 Rule 20, 11(b)(xvi) of the Amended implementing Rules and Regulations of the Securities Regulation 5 Par. 5, Memorandum on Appeal, p. 2. 9 Par. 8, Memorandum on Appeal, p. 3. 1 Letter from Dir. Hubert Guevara to appellant, 1 March 2010. 12 Republic Act No. 8799 (2000). 15 Par. 11, Memorandum on Appeal, p. 4. 10 Par. 8.1, Memorandum on Appeal, p. 3. 13 G.R. No. 183905, April 16, 2009.

Code which took effect on 28 February 2004.

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Appellee on the other hand, usserts that the Commission has no jurisdiction over

the jurisdiction of the Commission.ig him.18 Appellee further asserts that the case is intra-corporate in nature and thus outside

The Issue

controversy. The issue is whether or not the Commission has jurisdiction over the instant

Ruling

We uphold the ruling of the EPD.

The jurisdiction over the instant controversy lies with the proper court. We quote relevant portions of the decision of the Supreme Court in GSIS vs. CA, et ai.:

"There is an interesting point, which neither party raises, and it concerns Section 6(g) of Presidential Decree No. 902-A, which states:

SEC. 6. In order to effectiveiy exercise: such jurisdiction, the Commission shall possess the following powers:

XXX

(g) To pass upon the validity of the issuance and use of proxies and voting trust agreements for absent stockhciders or members;

XXX

As promulgated then, the provision would confer on the SEC the power to adjudicate controversies relating not only to proxy solicitation, but also to proxy validation. Shouid the proposition hold true up to the present, the position of GSIS wouid have merit, especially since Section 6 of Presidential Decree No. 902-A was not expressly repealed or abrogated by the SRC.

Yet a cioser reading of the provision indicates that such power of the SEC then was incidental or ancillary to the "exercise of such jurisdiction." Note that Section 6 is immediately preceded by Section 5, which originally conferred on the SEc "originai and exciusive jurisdiction to hear and decide cases" involving "controversies in the eiection or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations." The cases referred to in Section 5 were transferred from the jurisdiction of the SEC to the regular courts'with the passage of the SRC, specifically Section 5.2. Thus, the SEC's power to pass upon the validity of proxies in relation to election controversies has effectively been withdrawn, tied as it is to its abrogated jurisdictional powers." (emphasis supplied)

1s Par. 4. Reply Memorandum Ad Cautelam. 18 Par. 3, Reply Memorandum Ad Cautelam, received on 29 April 2010.

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In fine, as correctly pointed.out by Director Hubert M. Guevara of the EPD, the SEC

virtue of Sec. 5.2 of Republic Act No. 8799 (Securities and Regulation Code). no longer has jurisdiction over the issues raised by Appellant which are intimately tied to an election controversy,2o the jurisdiction over which now lies with the proper court by

the proxy is invalid, lacking the proper authentication by the Philippine Embassy or Consular Office. "1 case, the SEC is not being called upon to determine tie validity of the proxy since clearly. Appellant tried to reframe the issue differently by stating it in this wise: "In this

Appellant also asserts22 that in Faibia vs. CA23, the Supreme Court ruled that:

"[Tlhe filing of the civil/intra-corporate case before the SEC does not before the regular courts; such that, a fraudulent act may give rise to liability for violation of the rules and regulations of the SEC cognizabie and proceeded independently, and may be simultaneously with the preclude the simultaneous and concomitant filing of a criminal action by the SEC itself, as well as criminal liability for violation of the Revised Penal Code cognizable by the regular courts, both charges to be filed other.

However:

Presidentiai Decree No. 902-A. However, when proxies are solicited in relation to the election of corporate directors, the resulting controversy, "The power of the SEC to investigate violations of its rules on proxy solicitation is unquestioned when proxies are obtained to vote on matters unrelated to the cases enumerated under Section 5 of 5(c) of Presidential Decree No: 902-A." (emphasis supplied)24 even if it ostensibly raised the violation of the SEc rules on proxy solicitation, should be properly seen as 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

2o it is aiso worth noting that in the Verification and'Certification Against Forum Shopping attached to the Memorandum of Appeal, it is stated:

"3. There is a similar pending case in the Regional 'Triat Court Branch 53 of Bacolod City entitied Lilibeth D. Anglo v. Francisco Domingo lit, et al. with Commercial Case No. 09-075 on Intra-Corporate Dispute and Eiection Contest filed on 26 November 2009." (p.8)

22 Par. 23, Memorandum on Appeal, p. 7. 23 G.R. No. 132684, September 11, 2002. 24 GSIS vs. CA, G.R. No. 183905, April 16, 2009. 2' Par. 21, Memorandum on Appeal, p.7.

"Lilibeth D. Anglo vs. Howard M. Calleja Page 5 of 5 SEC En Banc Case No. O1-Y0-198

of penalties for a violation of the Commission's rules and reguiations when Appellee accepted the unauthenticated proxy of Violeta Domingo, the inescapable conclusion is that the resolution. of the instant controversy lies with the proper regional trial court and not this Commission. Therefore, even if Appellant tried to present the issue as solely about the imposition

lack of jurisdiction. Let a copy of this DECISION be furnished to the Enforcement and Prosecution Department for information. WHEREFORE, premises considered, the instant appeai is hereby DISMISSED for

So ordered.

Mandaluyong City, 17 June 2010

te B. Barin Chairperson K $.

Ma. Juanita e. cueto* Commissioner RAUL J. PALABRICA Commissioner

MANUEL HU Commissioner UBerTO B. GAItE ELAdIO M JALA Commissioner

*on leave of absence