G.R. No. 129521 , September 7, 1999
SECURITIES AND EXCHANGE COMMISSION CHAIRMAN PERFECTO R. YASAY, JR., ASSOCIATE COMMISSIONERS FE ELOISA C. GLORIA, EDIJER MARTINEZ and ROSALINDA U. CASIGURAN, petitioners, vs. MANUEL D. RECTO, PELAGIO T. RICALDE and CESAR P. MANALAYSAY, respondents.

FACTS

On June 28, 1996, the Securities and Exchange Commission (SEC) issued a temporary restraining order (TRO) enjoining Interport Resources Corporation from holding its scheduled annual stockholders’ meeting on July 9, 1996. Despite this TRO, the stockholders proceeded with the meeting on July 9, 1996, presided over by respondent Cesar P. Manalaysay. On July 10, 1996, the SEC declared the meeting null and void and directed respondents to show cause why they should not be cited for contempt. After a hearing on July 15, 1996, the SEC issued an order declaring respondents Manuel D. Recto, Pelagio T. Ricalde, and Cesar P. Manalaysay guilty of contempt. They were each fined P10,000. Manalaysay was barred from practicing law before the SEC for sixty days, and Recto and Ricalde were prohibited from acting as President/Chairman and Secretary of Interport Resources, Inc., respectively, for the same period. Respondents appealed to the Court of Appeals, which reversed and set aside the SEC’s contempt order. The SEC petitioners then appealed to the Supreme Court.

ISSUE

Whether the Court of Appeals erred, as a matter of law, in setting aside the order of the SEC finding respondents guilty of contempt for disobeying its temporary restraining order.

RULING

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The charge of contempt partakes of the nature of a criminal offense, and the exoneration of the contemner amounts to an acquittal from which an appeal would not lie. The contempt in this case was criminal, not civil, as it was initiated by the SEC sua sponte to vindicate its dignity and power, not to enforce a right for the benefit of a private party. Furthermore, the SEC’s contempt order was improper because the Court of Appeals had issued its own TRO on July 8, 1996, restraining the SEC from enforcing its TRO. The effect of the Court of Appeals’ TRO was to allow the stockholders’ meeting to proceed as scheduled. Since there was no willful disobedience to a lawful order, respondents were not guilty of contempt. Additionally, the penalty imposed by the SEC exceeded its authority, particularly the suspension of Manalaysay from practicing law before the SEC, a power vested exclusively in the Supreme Court.