G.R. No. 136978 ; May 8, 2009
GD EXPRESS WORLDWIDE N.V. and AMIHAN MANAGEMENT SERVICES, INC., Petitioners, vs. HON. COURT OF APPEALS (FOURTH DIVISION), HON. SECURITIES AND EXCHANGE COMMISSION (en banc), HON. ROSITA R. GUERRERO, in her capacity as Hearing Officer, and FILCHART AIRWAYS, INC., Respondents.

FACTS

Petitioner GD Express Worldwide N.V. (GD Express) and the Philippine Aerospace Development Corporation (PADC) were parties to a joint venture agreement to operate an air freight carrier through a corporate vehicle, Pacific East Asia Cargo Airlines, Inc. (PEAC). PADC owned 80% and GD Express owned 20%. When the government mandated the privatization of PADC’s shares, respondent Filchart Airways, Inc. emerged as the highest bidder. GD Express, alleging Filchart intended to renege on its obligations under the bidding rules, filed a civil case for specific performance in the Regional Trial Court (RTC) to compel compliance with the joint venture agreements and to nullify the share transfer to Filchart.
During the pendency of the RTC case, Filchart filed a petition before the Securities and Exchange Commission (SEC) seeking the appointment of a management committee for PEAC and the declaration of nullity of certain provisions in the joint venture agreement and corporate documents. Petitioners moved to dismiss the SEC case, arguing forum shopping and that Filchart had no cause of action pending a determination of its stockholder status. The SEC Hearing Officer denied the motion, asserting jurisdiction over the intra-corporate dispute.

ISSUE

Whether the SEC properly assumed jurisdiction over SEC Case No. 08-97-5746 filed by Filchart.

RULING

No. The Supreme Court ruled that the SEC did not have jurisdiction. The pivotal issue was the validity of the transfer of PADC’s shares to Filchart, which was the core subject of the pending RTC case for specific performance and annulment of sale. This dispute arose from the privatization process and the terms of the bidding, involving the parties’ rights and obligations under the Asset Specific Bidding Rules and Terms of Reference. These are matters of ordinary civil law, not intra-corporate relations.
The legal logic is that for a case to be considered intra-corporate and fall under the SEC’s jurisdiction (now with the RTC under specialized commercial courts), the controversy must arise from intra-corporate or partnership relations between and among stockholders, members, or associates; between them and the corporation; or between the corporation and the state concerning its franchise. Here, the fundamental controversy preceded and was independent of any corporate relation; it pertained to the validity of the sale of shares by a government agency to an outside bidder. Since Filchart’s status as a legitimate stockholder was precisely in question before the RTC, it could not yet invoke intra-corporate rights. The SEC case was merely a collateral attack on the RTC case’s subject matter. Therefore, the SEC should have dismissed the petition for lack of jurisdiction.