GR 131715; (December, 1999) (Digest)
G.R. No. 131715 December 8, 1999
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs. ERNESTO PABION and LOUELLA RAMIRO, respondents.
FACTS
On September 16, 1994, stockholders Ernesto Pabion and Louella Ramiro filed a petition with the Securities and Exchange Commission (SEC). They alleged that the Philippine National Construction Corporation (PNCC) had not held a stockholders’ meeting to elect its board of directors since 1982, violating its By-Laws and the Corporation Code. They prayed for an SEC order compelling PNCC to call such a meeting. PNCC opposed, asserting it was a government-owned and/or controlled corporation (GOCC) governed by Administrative Order No. 59. It argued that its board members were appointed by the President of the Philippines, not elected by shareholders, and that the SEC lacked jurisdiction over it.
The SEC Hearing Officer initially deferred proceedings, directing the parties to first secure a ruling from a competent authority on whether PNCC was a government corporation. Dissatisfied, Pabion and Ramiro elevated the matter to the SEC en banc, which subsequently granted their petition. The SEC ordered PNCC to call a special stockholders’ meeting within thirty days to elect the board. The Court of Appeals affirmed this SEC Order. PNCC then elevated the case to the Supreme Court via a Petition for Review on Certiorari.
ISSUE
The primary issue is whether the SEC has jurisdiction to order PNCC, a corporation with government shareholding, to hold a stockholders’ meeting for the election of its board of directors.
RULING
The Supreme Court denied the petition and affirmed the assailed Court of Appeals Decision. The Court held that the SEC retains jurisdiction over corporations organized under the Corporation Code, even if the government owns a majority or controlling interest. Jurisdiction is determined by the manner of creation, not ownership. The SEC’s jurisdiction is excluded only over government corporations created by special law or with original charters.
The Court examined PNCC’s status, noting it was originally a private corporation organized under the Corporation Code. While the government acquired its assets and a significant portion of its stock, it remained a corporation under the Code. Administrative Order No. 59, which provides for presidential appointment of boards for GOCCs, was found inapplicable. The Court ruled that AO 59 applies to GOCCs attached to government departments, not to “acquired asset corporations” like PNCC, which were placed under an Asset Privatization Trust for eventual privatization. For such corporations, the governing law remains the Corporation Code. Consequently, PNCC’s directors must be elected by its shareholders in accordance with its By-Laws and the Corporation Code. The SEC, therefore, acted within its jurisdiction in ordering the holding of a stockholders’ meeting.