G.R. No. L-80879. March 21, 1988.
HONORIO SAAVEDRA, JR., ESTER SAAVEDRA, CESAR SAAVEDRA, & ROEL BEJASA, petitioners, vs. SECURITIES & EXCHANGE COMMISSION, GREGORIO RAMOS, NAPOLEN RAMOS, CELSO TINGCUNGCO, ARMANDO DOMINGO & CAROLINA SEBASTIAN, respondents.

FACTS

Private respondents filed a complaint with the Securities and Exchange Commission (SEC) against petitioners. They alleged that on July 2, 1981, they sold all their stockholdings and interests in a corporation to petitioners for P12 million, payable in installments, as evidenced by a Memorandum of Agreement and a Deed of Assignment. The agreement stipulated automatic rescission upon petitioners’ failure to pay any installment. Petitioners allegedly defaulted on the final payment, prompting private respondents to execute a formal instrument of rescission. The complaint prayed for the declaration of the rescission as lawful and sought a temporary restraining order to prevent petitioners from disposing of corporate assets.
The SEC issued the requested restraining order on November 23, 1987. Petitioners filed a Motion to Dismiss, contesting the SEC’s jurisdiction over the case. They argued the dispute was not intra-corporate. The SEC denied this motion in an order dated December 11, 1987, prompting petitioners to elevate the matter to the Supreme Court via a special civil action, seeking to reverse the SEC orders and prohibit the commission from proceeding with the case.

ISSUE

Whether the Securities and Exchange Commission has primary and exclusive jurisdiction over the controversy between the parties.

RULING

Yes, the SEC has jurisdiction. The Supreme Court upheld the SEC’s finding that the dispute is intra-corporate. The controversy arose from a sale of corporate shares between principal stockholders and involves the validity of the rescission of that sale, which directly affects the parties’ rights and status as stockholders of the corporation. This falls squarely under the category of a “controversy arising out of intra-corporate relations between and among stockholders” as defined in Section 5(b) of Presidential Decree No. 902-A, as amended.
The Court, citing Abejo vs. De la Cruz, emphasized that the provision on intra-corporate controversies is broad and covers all kinds of disputes between stockholders and the corporation, without distinction. The expanded jurisdiction of the SEC is aligned with the state policy to encourage investments and ensure equitable wealth distribution by providing a specialized forum for corporate disputes. The doctrine of primary jurisdiction dictates that technical or intricate factual matters demanding administrative expertise, such as intra-corporate relations, should first be resolved by the competent administrative body—here, the SEC—to ensure uniformity and expeditious settlement. Judicial review remains available only in cases of grave abuse of discretion. Therefore, the SEC correctly assumed jurisdiction, and the petition was dismissed.