G.R. No. L-64013 November 28, 1983
Union Glass & Container Corporation and Carlos Palanca, Jr., in his capacity as President of Union Glass & Container Corporation, petitioners, vs. The Securities and Exchange Commission and Carolina Hofileña, respondents.

FACTS

Carolina Hofileña, a stockholder of Pioneer Glass Manufacturing Corporation, filed a complaint with the Securities and Exchange Commission (SEC) against the Development Bank of the Philippines (DBP), Union Glass & Container Corporation, and Pioneer Glass. The complaint stemmed from a dacion en pago agreement where Pioneer Glass, facing liquidity problems, ceded its assets, including a glass plant, to DBP to settle its loans. DBP subsequently leased and sold the glass plant to petitioner Union Glass. Hofileña’s complaint alleged the dacion en pago was illegal due to self-dealing by DBP (which was both a major creditor and a controlling stockholder/director of Pioneer Glass), gross undervaluation of assets, and undue preference given to Union Glass over another buyer. She sought to nullify the dacion en pago and recover the assets for Pioneer Glass.
The SEC Hearing Officer initially dismissed the case for lack of jurisdiction but, upon Hofileña’s motion for reconsideration, reversed himself and upheld SEC jurisdiction. The Hearing Officer characterized the action as a derivative suit by a stockholder against another stockholder (DBP) for alleged illegal acts arising from their intra-corporate relationship. Petitioners Union Glass moved for reconsideration, arguing jurisdiction lay with the regular courts, but their motion was denied. They then filed this petition for certiorari and prohibition to annul the SEC order asserting jurisdiction.

ISSUE

Whether the Securities and Exchange Commission has jurisdiction over SEC Case No. 2035, which involves a challenge to a dacion en pago agreement and impleads a non-stockholder transferee (Union Glass) of corporate assets.

RULING

The Supreme Court dismissed the petition, upholding the SEC’s jurisdiction. The legal logic is anchored on the nature of the dispute as intra-corporate and the necessity of joinder of indispensable parties. The Court clarified that the core of Hofileña’s complaint is a derivative suit, an action intrinsically within the SEC’s jurisdiction under Presidential Decree No. 902-A, as it involves controversies between stockholders and the corporation arising from intra-corporate relations. The primary allegation is that DBP, as a controlling stockholder/director, committed acts in gross bad faith to the detriment of Pioneer Glass and its minority stockholders through the questioned dacion en pago.
The joinder of Union Glass, a non-stockholder, does not divest the SEC of jurisdiction. Union Glass was impleaded as an indispensable party because it is the transferee in possession of the very assets (the glass plant) whose conveyance is being challenged. Its defenses are inextricably tied to the defenses of DBP in the intra-corporate dispute. To split the cause of action and require separate proceedings—one against DBP before the SEC and another against Union Glass in the regular courts—would be contrary to judicial economy and could lead to conflicting rulings. The SEC, as the specialized agency administering corporate laws, is in the best position to resolve the entire controversy, including determining the validity of the transfer to Union Glass as a necessary consequence of adjudicating the intra-corporate dispute between the stockholders. The determination of the SEC that it has jurisdiction is thus accorded persuasive weight.