G.R. No. 161338 ; April 27, 2007
LUZ GARCIA, JUSTO LUKBAN, ALICE ADEVA, MARCEL LUKBAN, WAVA ANN BAYLON, PAMELA ROSANNA APUYA, ALBERTO GARCIA, JR., AIDA FERRER and JANET VENIDA, Petitioners, vs. ROMULO M. ADEVA, CEZAR E. ECHANO and LIBRADO GUERRA, Respondents.

FACTS

The case involves an intra-corporate dispute within Mabini College, Inc. between the Garcia-Lukban group (petitioners) and the Adeva group (respondents). In 1999, the incumbent Board of Trustees authorized the sale of 106 treasury shares via public bidding. Petitioners filed a case with the Securities and Exchange Commission (SEC) to enjoin the sale, alleging violations of the Corporation Code, including infringement of preemptive rights and lack of proper authority, and also noting that the corporate stock and transfer book was still under reconstitution. The SEC Hearing Panel issued an order on September 27, 1999, granting a preliminary injunction against the sale, subject to petitioners posting an injunction bond.
The signed order was attempted to be served on respondents’ counsel on the morning of the scheduled bidding, September 28, 1999, but was refused due to a lack of signatures from the majority of the Hearing Panel. After rectification, a copy was faxed at 3:30 p.m. that day, but by then, the bidding had already commenced at 1:00 p.m. and concluded, with respondent Guerra as the winning bidder. Petitioners posted the required bond only on October 8, 1999. They subsequently filed an Omnibus Motion to nullify the sale and cite respondents for contempt.

ISSUE

The primary issue is whether the Court of Appeals erred in nullifying the SEC En Banc’s resolution that annulled the sale of the treasury shares and in reinstating the Hearing Panel’s order which upheld the sale.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The legal logic centers on the procedural requirements for a preliminary injunction and the proper scope of the SEC En Banc’s review. A writ of preliminary injunction cannot be issued unless the applicant files a bond, which is a condition sine qua non. Petitioners failed to post the bond prior to the scheduled sale on September 28, 1999; they did so only ten days later. Consequently, no effective injunction was in place at the time of the bidding, and respondents cannot be faulted for proceeding.
Furthermore, the Court agreed with the Court of Appeals that the SEC En Banc exceeded its authority. The appeal to the SEC En Banc was limited to reviewing the Hearing Panel’s denial of the Omnibus Motion, which was based on the lack of an injunction bond. The SEC En Banc improperly delved into the substantive issue of whether the Board of Trustees had authority to sell the shares, a matter not squarely before it. The Hearing Panel’s finding that the sale could not be enjoined due to the bond deficiency was correct. Thus, the sale was validly conducted, and the Court of Appeals rightly reinstated the Hearing Panel’s order denying petitioners’ motions.