G.R. No. L-56655 July 25, 1983
DATU TAGORANAO BENITO, petitioner, vs. SECURITIES AND EXCHANGE COMMISSION and JAMIATUL PHILIPPINE-AL ISLAMIA, INC., respondents.

FACTS

The case involves Jamiatul Philippine-Al Islamia, Inc., a corporation with an authorized capital stock of P200,000. Petitioner Datu Tagoranao Benito was a stockholder, having subscribed to 460 shares. In 1975, the corporation filed a certificate increasing its capital stock to P1,000,000. A stockholders’ meeting was allegedly held on November 25, 1975, approving the increase. Subsequently, the corporation issued P110,980 worth of shares from the unissued portion of the original authorized capital and issued new shares from the increased capital. Petitioner filed a petition with the Securities and Exchange Commission (SEC), alleging the additional issuance of the P110,980 worth of shares violated his pre-emptive right and that the increase in authorized capital was illegal due to lack of proper notice of the meeting. He sought cancellation of the share issuances, registration of shares he acquired from other stockholders, and an accounting.
The SEC Hearing Officer ruled, and the Commission En Banc affirmed, that the issuance of the unissued shares was valid and not subject to pre-emptive rights, as the power to issue shares is lodged in the board of directors. It also upheld the capital increase, finding sufficient evidence that a stockholders’ meeting was held, though it noted petitioner was not notified as he was abroad. Consequently, the SEC ordered the corporation to allow petitioner to subscribe to the increased capital proportionate to his holdings, to register the shares he acquired, and to call a new stockholders’ meeting for electing trustees, as the 1976 election was declared irregular.

ISSUE

The primary issues are: (1) whether the issuance of the corporation’s unissued shares and the increase in authorized capital stock were valid; and (2) whether the SEC committed grave abuse of discretion in its factual findings and rulings.

RULING

The Supreme Court dismissed the petition, upholding the SEC’s decision. On the first issue, the Court affirmed the SEC’s legal reasoning. The power to issue shares of stock from the unissued portion of the authorized capital is vested in the board of directors, not requiring stockholder approval or a meeting. Thus, the issuance of the P110,980 worth of shares was valid and not subject to the petitioner’s pre-emptive right, as pre-emptive rights generally apply only to new issues of stock, not to the original authorized capital. Regarding the capital increase, the SEC’s factual finding that a stockholders’ meeting was held on November 25, 1975, was sustained. The Court emphasized the well-settled rule that factual findings of administrative agencies like the SEC, supported by substantial evidence, are binding and not subject to judicial review absent grave abuse of discretion. The petitioner failed to prove such abuse. The SEC correctly allowed petitioner to subscribe to the increased capital due to his lack of waiver, balancing equity. The Court found no merit in petitioner’s claims for attorney’s fees and damages, as the SEC’s resolution was in accordance with law.