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G.R. No.

164197

January 25, 2012

SECURITIES AND EXCHANGE COMMISSION, Petitioner, vs. PROSPERITY.COM, INC., Respondent. DECISION

distributed and sold. An investment contract is a contract, transaction, or scheme where a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others. 8

Apart from the definition, which the Implementing Rules and Regulations provide, Philippine jurisprudence has so far not done more to add to the same. Of course, the United States Supreme Court, grappling with the problem, has on several occasions discussed the nature of investment ABAD, J.: contracts. That courts rulings, while not binding in the Philippines, enjoy as they are logical and This case involves the application of the Howey test in order to some degree of persuasiveness insofar consistent with the countrys best interests.9 determine if a particular transaction is an investment contract. The United States Supreme Court held in Securities and Exchange Commission v. W.J. Howey Co.10 that, for an investment contract to Prosperity.Com, Inc. (PCI) sold computer software and hosted websites exist, the following elements, referred to as the Howey test must concur: without providing internet service. To make a profit, PCI devised a (1) a contract, transaction, or scheme; (2) an investment of money; (3) of profits; scheme in which, for the price of US$234.00 (subsequently increased to investment is made in a common enterprise; (4) expectation 11 Thus, to US$294), a buyer could acquire from it an internet website of a 15-Mega and (5) profits arising primarily from the efforts of others. Byte (MB) capacity. At the same time, by referring to PCI his own down- sustain the SEC position in this case, PCIs scheme or contract with its line buyers, a first-time buyer could earn commissions, interest in real buyers must have all these elements. estate in the Philippines and in the United States, and insurance An example that comes to mind would be the long-term commercial coverage worth P50,000.00. papers that large companies, like San Miguel Corporation (SMC), offer To benefit from this scheme, a PCI buyer must enlist and sponsor at to the public for raising funds that it needs for expansion. When an least two other buyers as his own down-lines. These second tier of investor buys these papers or securities, he invests his money, together buyers could in turn build up their own down-lines. For each pair of with others, in SMC with an expectation of profits arising from the efforts down-lines, the buyer-sponsor received a US$92.00 commission. But of those who manage and operate that company. SMC has to register referrals in a day by the buyer-sponsor should not exceed 16 since the these commercial papers with the SEC before offering them to commissions due from excess referrals inure to PCI, not to the buyer- investors.1wphi1 The Facts and the Case sponsor. Apparently, PCI patterned its scheme from that of Golconda Ventures, Inc. (GVI), which company stopped operations after the Securities and Exchange Commission (SEC) issued a cease and desist order (CDO) against it. As it later on turned out, the same persons who ran the affairs of GVI directed PCIs actual operations. In 2001, disgruntled elements of GVI filed a complaint with the SEC against PCI, alleging that the latter had taken over GVIs operations. After hearing,1 the SEC, through its Compliance and Enforcement unit, issued a CDO against PCI. The SEC ruled that PCIs scheme constitutes an Investment contract and, following the Securities Regulations Code,2 it should have first registered such contract or securities with the SEC. Instead of asking the SEC to lift its CDO in accordance with Section 64.3 of Republic Act (R.A.) 8799, PCI filed with the Court of Appeals (CA) a petition for certiorari against the SEC with an application for a temporary restraining order (TRO) and preliminary injunction in CA-G.R. SP 62890. Because the CA did not act promptly on this application for TRO, on January 31, 2001 PCI returned to the SEC and filed with it before the lapse of the five-day period a request to lift the CDO. On the following day, February 1, 2001, PCI moved to withdraw its petition before the CA to avoid possible forum shopping violation. Here, PCIs clients do not make such investments. They buy a product of some value to them: an Internet website of a 15-MB capacity. The client can use this website to enable people to have internet access to what he has to offer to them, say, some skin cream. The buyers of the website do not invest money in PCI that it could use for running some business that would generate profits for the investors. The price of US$234.00 is what the buyer pays for the use of the website, a tangible asset that PCI creates, using its computer facilities and technical skills. Actually, PCI appears to be engaged in network marketing, a scheme adopted by companies for getting people to buy their products outside the usual retail system where products are bought from the stores shelf. Under this scheme, adopted by most health product distributors, the buyer can become a down-line seller. The latter earns commissions from purchases made by new buyers whom he refers to the person who sold the product to him. The network goes down the line where the orders to buy come. The commissions, interest in real estate, and insurance coverage worth P50,000.00 are incentives to down-line sellers to bring in other customers. These can hardly be regarded as profits from investment of money under the Howey test.

The CA is right in ruling that the last requisite in the Howey test is lacking in the marketing scheme that PCI has adopted. Evidently, it is During the pendency of PCIs action before the SEC, however, the CA PCI that expects profit from the network marketing of its products. PCI is issued a TRO, enjoining the enforcement of the CDO. 3 In response, the correct in saying that the US$234 it gets from its clients is merely a SEC filed with the CA a motion to dismiss the petition on ground of consideration for the sale of the websites that it provides. forum shopping. In a Resolution,4 the CA initially dismissed the petition, finding PCI guilty of forum shopping. But on PCIs motion, the CA WHEREFORE, the Court DENIES the petition and AFFIRMS the decision dated July 31, 2003 and the resolution dated June 18, 2004 of reversed itself and reinstated the petition.5 the Court of Appeals in CA-G.R. SP 62890. In a joint resolution,6 CA-G.R. SP 62890 was consolidated with CA-G.R. SP 64487 that raised the same issues. On July 31, 2003 the CA SO ORDERED. rendered a decision, granting PCIs petition and setting aside the SECFebruary 26, 2008 issued CDO.7 The CA ruled that, following the Howey test, PCIs scheme G.R. No. 164182 did not constitute an investment contract that needs registration POWER HOMES UNLIMITED CORPORATION, petitioner, pursuant to R.A. 8799, hence, this petition. vs. SECURITIES AND EXCHANGE COMMISSION AND NOEL MANERO, respondents. The Issue Presented The sole issue presented before the Court is whether or not PCIs scheme constitutes an investment contract that requires registration PUNO, C.J.: under R.A. 8799. The Ruling of the Court The Securities Regulation Code treats investment contracts as "securities" that have to be registered with the SEC before they can be DECISION

This petition for review seeks the reversal and setting aside of the July 31, 2003 Decision1 of the Court of Appeals that affirmed the January 26, 2001 Cease and Desist Order (CDO)2 of public respondent Securities and Exchange Commission (SEC) enjoining petitioner Power Homes

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Unlimited Corporations (petitioner) officers, directors, agents, representatives and any and all persons claiming and acting under their authority, from further engaging in the sale, offer for sale or distribution of securities; and its June 18, 2004 Resolution3 which denied petitioners motion for reconsideration. The facts: Petitioner is a domestic corporation duly registered with public respondent SEC on October 13, 2000 under SEC Reg. No. A200016113. Its primary purpose is: To engage in the transaction of promoting, acquiring, managing, leasing, obtaining options on, development, and improvement of real estate properties for subdivision and allied purposes, and in the purchase, sale and/or exchange of said subdivision and properties through network marketing.4 On October 27, 2000, respondent Noel Manero requested public respondent SEC to investigate petitioners business. He claimed that he attended a seminar conducted by petitioner where the latter claimed to sell properties that were inexistent and without any brokers license.

motion, thus: Considering that the Temporary Restraining Order will expire tomorrow or on July 14, 2001, and it appearing that this Court cannot resolve the petition immediately because of the issues involved which require a further study on the matter, and considering further that with the continuous implementation of the CDO by the SEC would eventually result to the sudden demise of the petitioners business to their prejudice and an irreparable damage that may possibly arise, we hereby resolve to grant the preliminary injunction. WHEREFORE, let a writ of preliminary injunction be issued in favor of petitioner, after posting a bond in the amount of P500,000.00 to answer whatever damages the respondents may suffer should petitioner be adjudged not entitled to the injunctive relief herein granted.8 On August 8, 2001, public respondent SEC moved for reconsideration, which was not resolved by the Court of Appeals. On July 31, 2003, the Court of Appeals issued its Consolidated Decision. The disposition pertinent to petitioner reads:9

On November 21, 2000, one Romulo E. Munsayac, Jr. inquired from public respondent SEC whether petitioners business involves "legit imate WHEREFORE, x x x x the petition for certiorari and prohibition filed by network marketing." the other petitioner Powerhomes Unlimited Corporation is hereby DENIED for lack of merit and the questioned Cease and Desist Order On the bases of the letters of respondent Manero and Munsayac, public issued by public respondent against it is accordingly AFFIRMED IN respondent SEC held a conference on December 13, 2000 that was TOTO. attended by petitioners incorporators John Lim, Paul Nicolas and Leonito Nicolas. The attendees were requested to submit copies of On June 18, 2004, the Court of Appeals denied petitioners motion for petitioners marketing scheme and list of its members with addresses. reconsideration;10 hence, this petition for review. The following day or on December 14, 2000, petitioner submitted to public respondent SEC copies of its marketing course module and letters of accreditation/authority or confirmation from Crown Asia, FilEstate Network and Pioneer 29 Realty Corporation. On January 26, 2001, public respondent SEC visited the business premises of petitioner wherein it gathered documents such as certificates of accreditation to several real estate companies, list of members with web sites, sample of member mail box, webpages of two (2) members, and lists of Business Center Owners who are qualified to acquire real estate properties and materials on computer tutorials. The issues for determination are: (1) whether public respondent SEC followed due process in the issuance of the assailed CDO; and (2) whether petitioners business constitutes an investment contract which should be registered with public respondent SEC before its sale or offer for sale or distribution to the public. On the first issue, Sec. 64 of R.A. No. 8799 provides: Sec. 64. Cease and Desist Order. 64.1. The Commission, after proper investigation or verification, motu proprio or upon verified complaint by any aggrieved party, may issue a cease and desist order without the necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public.

On the same day, after finding petitioner to be engaged in the sale or offer for sale or distribution of investment contracts, which are considered securities under Sec. 3.1 (b) of Republic Act (R.A.) No. 8799 (The Securities Regulation Code),5 but failed to register them in violation We hold that petitioner was not denied due process. The records reveal of Sec. 8.1 of the same Act,6 public respondent SEC issued a CDO that that public respondent SEC properly examined petitioners business reads: operations when it (1) called into conference three of petitioners incorporators, (2) requested information from the incorporators regarding WHEREFORE, pursuant to the authority vested in the Commission, the nature of petitioners business operations, (3) asked them to submit POWER HOMES UNLIMITED, CORP., its officers, directors, agents, documents pertinent thereto, and (4) visited petitioners business representatives and any and all persons claiming and acting under their premises and gathered information thereat. All these were done before authority, are hereby ordered to immediately CEASE AND DESIST from the CDO was issued by the public respondent SEC. Trite to state, a further engaging in the sale, offer or distribution of the securities upon formal trial or hearing is not necessary to comply with the requirements the receipt of this order. of due process. Its essence is simply the opportunity to explain ones position. Public respondent SEC abundantly allowed petitioner to prove In accordance with the provisions of Section 64.3 of Republic Act No. its side. 8799, otherwise known as the Securities Regulation Code, the parties subject of this Cease and Desist Order may file a request for the lifting The second issue is whether the business of petitioner involves an thereof within five (5) days from receipt.7 investment contract that is considered security11 and thus, must be registered prior to sale or offer for sale or distribution to the public On February 5, 2001, petitioner moved for the lifting of the CDO, which pursuant to Section 8.1 of R.A. No. 8799, viz: public respondent SEC denied for lack of merit on February 22, 2001. Section 8. Requirement of Registration of Securities. 8.1. Securities Aggrieved, petitioner went to the Court of Appeals imputing grave abuse shall not be sold or offered for sale or distribution within the Philippines, of discretion amounting to lack or excess of jurisdiction on public without a registration statement duly filed with and approved by the respondent SEC for issuing the order. It also applied for a temporary Commission. Prior to such sale, information on the securities, in such restraining order, which the appellate court granted. form and with such substance as the Commission may prescribe, shall be made available to each prospective purchaser. On May 23, 2001, the Court of Appeals consolidated petitioners case with CA-G.R. [SP] No. 62890 entitled Prosperity.Com, Incorporated v. Public respondent SEC found the petitioner "as a marketing company Securities and Exchange Commission (Compliance and that promotes and facilitates sales of real properties and other related Enforcement Department), Cristina T. De La Cruz, et al. products of real estate developers through effective leverage marketing." It also described the conduct of petitioners business as follows: On June 19, 2001, petitioner filed in the Court of Appeals a Motion for the Issuance of a Writ of Preliminary Injunction. On July 6, 2001, the The scheme of the [petitioner] corporation requires an investor to motion was heard. On July 12, 2001, public respondent SEC filed its become a Business Center Owner (BCO) who must fill-up and sign its opposition. On July 13, 2001, the appellate court granted petitioners application form. The Terms and Conditions printed at the back of the

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application form indicate that the BCO shall mean an independent representative of Power Homes, who is enrolled in the companys referral program and who will ultimately purchase real property from any accredited real estate developers and as such he is entitled to a referral bonus/commission. Paragraph 5 of the same indicates that there exists no employer/employee relationship between the BCO and the Power Homes Unlimited, Corp. The BCO is required to pay US$234 as his enrollment fee. His enrollment entitles him to recruit two investors who should pay US$234 each and out of which amount he shall receive US$92. In case the two referrals/enrollees would recruit a minimum of four (4) persons each recruiting two (2) persons who become his/her own down lines, the BCO will receive a total amount of US$147.20 after deducting the amount of US$36.80 as property fund from the gross amount of US$184. After recruiting 128 persons in a period of eight (8) months for each Left and Right business groups or a total of 256 enrollees whether directly referred by the BCO or through his down lines, the BCO who receives a total amount of US$11,412.80 after deducting the amount of US$363.20 as property fund from the gross amount of US$11,776, has now an accumulated amount of US$2,700 constituting as his Property Fund placed in a Property Fund account with the Chinabank. This accumulated amount of US$2,700 is used as partial/full down payment for the real property chosen by the BCO from any of [petitioners] accredited real estate developers.12

characterized as self-improvement courses. On appeal from a grant of preliminary injunction, the US Court of Appeals of the 9th Circuit held that self-improvement contracts which primarily offered the buyer the opportunity of earning commissions on the sale of contracts to others were "investment contracts" and thus were "securities" within the meaning of the federal securities laws. This is regardless of the fact that buyers, in addition to investing money needed to purchase the contract, were obliged to contribute their own efforts in finding prospects and bringing them to sales meetings. The appellate court held: It is apparent from the record that what is sold is not of the usual "business motivation" type of courses. Rather, the purchaser is really buying the possibility of deriving money from the sale of the plans by Dare to individuals whom the purchaser has brought to Dare. The promotional aspects of the plan, such as seminars, films, and records, are aimed at interesting others in the Plans. Their value for any other purpose is, to put it mildly, minimal. Once an individual has purchased a Plan, he turns his efforts toward bringing others into the organization, for which he will receive a part of what they pay. His task is to bring prospective purchasers to "Adventure Meetings." The business scheme of petitioner in the case at bar is essentially similar. An investor enrolls in petitioners program by paying US$234. This entitles him to recruit two (2) investors who pay US$234 each and out of which amount he receives US$92. A minimum recruitment of four (4) investors by these two (2) recruits, who then recruit at least two (2) each, entitles the principal investor to US$184 and the pyramid goes on.

An investment contract is defined in the Amended Implementing Rules and Regulations of R.A. No. 8799 as a "contract, transaction or scheme (collectively contract) whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others."13 We reject petitioners claim that the payment of US$234 is for the seminars on leverage marketing and not for any product. Clearly, the It behooves us to trace the history of the concept of an investment trainings or seminars are merely designed to enhance petitioners contract under R.A. No. 8799. Our definition of an investment contract business of teaching its investors the know-how of its multi-level traces its roots from the 1946 United States (US) case of SEC v. W.J. marketing business. An investor enrolls under the scheme of petitioner Howey Co.14 In this case, the US Supreme Court was confronted with to be entitled to recruit other investors and to receive commissions from the issue of whether the Howey transaction constituted an "investment the investments of those directly recruited by him. Under the scheme, contract" under the Securities Acts definition of "security." 15 The US the accumulated amount received by the investor comes primarily from Supreme Court, recognizing that the term "investment contract" was not the efforts of his recruits. defined by the Act or illumined by any legislative report,16 held that "Congress was using a term whose meaning had been crystallized" 17 We therefore rule that the business operation or the scheme of petitioner under the states "blue sky" laws18 in existence prior to the adoption of constitutes an investment contract that is a security under R.A. No. the Securities Act.19 Thus, it ruled that the use of the catch-all term 8799. Thus, it must be registered with public respondent SEC before its "investment contract" indicated a congressional intent to cover a wide sale or offer for sale or distribution to the public. As petitioner failed to range of investment transactions.20 It established a test to determine register the same, its offering to the public was rightfully enjoined by whether a transaction falls within the scope of an "investment contract." 21 public respondent SEC. The CDO was proper even without a finding of Known as the Howey Test, it requires a transaction, contract, or scheme fraud. As an investment contract that is security under R.A. No. 8799, it whereby a person (1) makes an investment of money, (2) in a common must be registered with public respondent SEC, otherwise the SEC enterprise, (3) with the expectation of profits, (4) to be derived solely cannot protect the investing public from fraudulent securities. The strict from the efforts of others.22 Although the proponents must establish all regulation of securities is founded on the premise that the capital four elements, the US Supreme Court stressed that the Howey Test markets depend on the investing publics level of confidence in the "embodies a flexible rather than a static principle, one that is capable of system. adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of IN VIEW WHEREOF, the petition is DENIED. The July 31, 2003 profits."23 Needless to state, any investment contract covered by the Decision of the Court of Appeals, affirming the January 26, 2001 Cease Howey Test must be registered under the Securities Act, regardless of and Desist Order issued by public respondent Securities and Exchange whether its issuer was engaged in fraudulent practices. Commission against petitioner Power Homes Unlimited Corporation, and its June 18, 2004 Resolution denying petitioners Motion for After Howey came the 1973 US case of SEC v. Glenn W. Turner Reconsideration are AFFIRMED. No costs. 24 th Enterprises, Inc. et al. In this case, the 9 Circuit of the US Court of Appeals ruled that the element that profits must come "solely" from the SO ORDERED. efforts of others should not be given a strict interpretation. It held that a literal reading of the requirement "solely" would lead to unrealistic G.R. No. 191995 August 3, 2011 results. It reasoned out that its flexible reading is in accord with the statutory policy of affording broad protection to the public. Our R.A. No. PHILIPPINE VETERANS BANK, Petitioner, vs. JUSTINA 8799 appears to follow this flexible concept for it defines an investment CALLANGAN, in her capacity as Director of the Corporation contract as a contract, transaction or scheme (collectively "contract") Finance Department of the Securities and Exchange Commission whereby a person invests his money in a common enterprise and is led and/or the SECURITIES AND EXCHANGE COMMISSION, to expect profits not solely but primarily from the efforts of others. Respondent. Thus, to be a security subject to regulation by the SEC, an investment contract in our jurisdiction must be proved to be: (1) an investment of RESOLUTION money, (2) in a common enterprise, (3) with expectation of profits, (4) primarily from efforts of others. BRION, J.: Prescinding from these premises, we affirm the ruling of the public respondent SEC and the Court of Appeals that the petitioner was engaged in the sale or distribution of an investment contract. Interestingly, the facts of SEC v. Turner25 are similar to the case at bar. In Turner, the SEC brought a suit to enjoin the violation of federal securities laws by a company offering to sell to the public contracts We resolve the motion for reconsideration1 filed by petitioner Philippine Veterans Bank (the Bank) dated August 5, 2010, addressing our June 16, 2010 Resolution that denied the Banks petition for review on certiorari.

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Factual Antecedents On March 17, 2004, respondent Justina F. Callangan, the Director of the Corporation Finance Department of the Securities and Exchange Commission (SEC), sent the Bank a letter, informing it that it qualifies as a "public company" under Section 17.2 of the Securities Regulation Code (SRC) in relation with Rule 3(1)(m) of the Amended Implementing Rules and Regulations of the SRC. The Bank is thus required to comply with the reportorial requirements set forth in Section 17.1 of the SRC.2 The Bank responded by explaining that it should not be considered a "public company" because it is a private company whose shares of stock are available only to a limited class or sector, i.e., to World War II veterans, and not to the general public.3 In a letter dated April 20, 2004, Director Callangan rejected the Banks explanation and assessed it a total penalty of One Million Nine Hundred Thirty-Seven Thousand Two Hundred Sixty-Two and 80/100 Pesos (P1,937,262.80) for failing to comply with the SRC reportorial requirements from 2001 to 2003. The Bank moved for the reconsideration of the assessment, but Director Callangan denied the motion in SEC-CFD Order No. 085, Series of 2005 dated July 26, 2005.4 When the SEC En Banc also dismissed the Banks appeal for lack of merit in its Order dated August 31, 2006, prompting the Bank to file a petition for review with the Court of Appeals (CA). 5

c) An issuer with assets of at least Fifty million pesos (P50,000,000.00) or such other amount as the Commission shall prescribe, and having two hundred (200) or more holders each holding at least one hundred (100) shares of a class of its equity securities: Provided, however, That the obligation of such issuer to file reports shall be terminated ninety (90) days after notification to the Commission by the issuer that the number of its holders holding at least one hundred (100) shares is reduced to less than one hundred (100). (emphases supplied) We also cite Rule 3(1)(m) of the Amended Implementing Rules and Regulations of the SRC, which defines a "public company" as "any corporation with a class of equity securities listed on an Exchange or with assets in excess of Fifty Million Pesos (P50,000,000.00) and having two hundred (200) or more holders, at least two hundred (200) of which are holding at least one hundred (100) shares of a class of its equity securities." From these provisions, it is clear that a "public company," as contemplated by the SRC, is not limited to a company whose shares of stock are publicly listed; even companies like the Bank, whose shares are offered only to a specific group of people, are considered a public company, provided they meet the requirements enumerated above.

The records establish, and the Bank does not dispute, that the Bank has assets exceeding P50,000,000.00 and has 395,998 shareholders.10 It is On March 6, 2008, the CA dismissed the petition and affirmed the thus considered a public company that must comply with the reportorial assailed SEC ruling, with the modification that the assessment of the requirements set forth in Section 17.1 of the SRC. penalty be recomputed from May 31, 2004.6 The Bank also argues that even assuming it is considered a "public The CA also denied the Banks motion for reconsideration, 7 opening the company" pursuant to Section 17 of the SRC, the Court should interpret the pertinent SRC provisions in such a way that no financial prejudice is way for the Banks petition for review on certiorari filed with this Court.8 done to the thousands of veterans who are stockholders of the Bank. On June 16, 2010, the Court denied the Banks petition for failure to Given that the legislature intended the SRC to apply only to publicly traded companies, the Court should exempt the Bank from complying show any reversible error in the assailed CA decision and resolution.9 with the reportorial requirements. The Motion for Reconsideration On this point, the Bank is apparently referring to the obligation set forth The Bank reiterates that it is not a "public company" subject to the in Subsections 17.5 and 17.6 of the SRC, which provide: reportorial requirements under Section 17.1 of the SRC because its shares can be owned only by a specific group of people, namely, World Section 17.5. Every issuer which has a class of equity securities War II veterans and their widows, orphans and compulsory heirs, and is satisfying any of the requirements in Subsection 17.2 shall furnish to not open to the investing public in general. The Bank also asks the Court each holder of such equity security an annual report in such form to take into consideration the financial impact to the cause of and containing such information as the Commission shall prescribe. "veteranism"; compliance with the reportorial requirements under the SRC, if the Bank would be considered a "public company," would Section 17.6. Within such period as the Commission may prescribe compel the Bank to spend approximately P40 million just to reproduce preceding the annual meeting of the holders of any equity security of a and mail the "Information Statement" to its 400,000 shareholders class entitled to vote at such meeting, the issuer shall transmit to such holders an annual report in conformity with Subsection 17.5. (emphases nationwide. supplied) The Courts Ruling In making this argument, the Bank ignores the fact that the first and fundamental duty of the Court is to apply the law.11 Construction and We DENY the motion for reconsideration for lack of merit. interpretation come only after a demonstration that the application of the 12 To determine whether the Bank is a "public company" burdened with the law is impossible or inadequate unless interpretation is resorted to. In this case, we see the law to be very clear and free from any doubt or reportorial requirements ordered by the SEC, we look to Subsections ambiguity; thus, no room exists for construction or interpretation. 17.1 and 17.2 of the SRC, which provide: Section 17. Periodic and Other Reports of Issuers. 17.1. Every issuer satisfying the requirements in Subsection 17.2 hereof shall file with the Commission: a) Within one hundred thirty-five (135) days, after the end of the issuers fiscal year, or such other time as the Commission may prescribe, an annual report which shall include, among others, a balance sheet, profit and loss statement and statement of cash flows, for such last fiscal year, certified by an independent certified public accountant, and a management discussion and analysis of results of operations; and b) Such other periodical reports for interim fiscal periods and current reports on significant developments of the issuer as the Commission may prescribe as necessary to keep current information on the operation of the business and financial condition of the issuer. 17.2. The reportorial requirements of Subsection 17.1 shall apply to the following: xxxx Additionally, and contrary to the Banks claim, the Banks obligation to provide its stockholders with copies of its annual report is actually for the benefit of the veterans-stockholders, as it gives these stockholders access to information on the Banks financial status and operations, resulting in greater transparency on the part of the Bank. While compliance with this requirement will undoubtedly cost the Bank money, the benefit provided to the shareholders clearly outweighs the expense. For many stockholders, these annual reports are the only means of keeping in touch with the state of health of their investments; to them, these are invaluable and continuing links with the Bank that immeasurably contribute to the transparency in public companies that the law envisions. WHEREFORE, premises considered, petitioner Philippine Veterans Banks motion for reconsideration is hereby DENIED with finality. SO ORDERED. G.R. No. L-17185 February 28, 1964

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,

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vs. GSIS EMPLOYEES' ASSOCIATION and COURT OF INDUSTRIAL RELATIONS, respondents. Monasterial and Baizas for petitioner. Alfonso C. Roldan for respondent GSIS Employees' Association. Legal Division of CIR for respondent Court of Industrial Relations. PADILLA, J.:

Papers). On 26 July 1960, petitioner GSIS filed its petition for review predicated on three grounds, namely: (1) lack of jurisdiction of the respondent Court over the subject matter of the case, (2) the filing of a motion for clarification of the respondent Court's judgment suspends the time for filing a motion for reconsideration or appeal, and (3) error of the respondent Court in granting salary increase to the employees of the GSIS.

On 27 July 1960, respondent GSIS Employees' Association moved for the dismissal of the petition for review on the ground that this Court This appeal by certiorari under Rule 44 seeks after review the reversal of already had upheld the jurisdiction of the Court of Industrial Relations in a judgment rendered and resolution en banc promulgated by the Court Case No. G.R. No. L-7175, entitled "GSIS vs. Hon. Castillo, etc., et al.," of Industrial Relations on 29 June 1959 and 14 March 1960, 27 April 1956 (Annex B to Supplemental Pleading), and that the respectively, in "GSIS Employees' Association vs. Government Service respondent Court's order of clarification entered on 13 August 1959 and Insurance System," Case No. 896-V, holding that it has jurisdiction of the its resolution promulgated on 14 March 1960 (Annexes D and F) already case concerning 21 demands of the respondent association which led to have become final, since no motion for reconsideration had been filed a strike on 17 June 1953 and the case was certified to by the Acting with the Court en banc, nor an appeal to the Supreme Court had been Secretary of Labor; that the judgment sought to be clarified already had taken by the aggrieved party within five (5) days or ten (10) days, become final, and denying the motion for reconsideration on the grant of respectively, from receipt of a copy of the order under Secs. 45-17 of the Rules of the Court of Industrial Relations, as amended; or, if filed within family allowance to GSIS employees. the reglementary periods, the petition for review is not in accordance with Sec. 2, Rule 44 of the Rules of Court, for questions of law have not On 6 July 1959, the petitioner, filed respondent filed a motion for been distinctly set forth in the petition. clarification and reconsideration of the judgment thus rendered praying the respondent Court to clarify (1) whether the right of collective bargaining of the GSIS Employees' Association (GSISEA) "means that On 10 August 1960, petitioner filed its "Supplemental Pleading to the the GSIS management is bound to bargain on some matters with the Petition for Review" alleging and claiming (1) that the respondent Court petitioner-union," the petitioner contending that the rates of pay and the has no jurisdiction over the subject matter of the case (2) that the terms and conditions of employment of its employees are governed by respondent Court erred in holding that a motion for clarification of its law and may not therefore be the subject of collective bargaining; judgment does not suspend the time for filing a motion for whether the order allowing employees receiving salary ranging from reconsideration, for a party cannot move for reconsideration of or appeal P120.00 to P190.00 a month to receive an increase of P10.00 a month, from an order or judgment until it is clarified; and (3) that the respondent and those in the bracket from P200.00 to P245.00 a month to receive Court erred in granting salary increases to GSIS employees. P500.00 raise per month from July 1, 1953, until the implementation of the job classification made by the WAPCO, applies to all employees On 24 August 1960, this Court gave due course to the petition. regardless of whether or not they received promotions after 1953; (2) to reconsider its order granting family allowance to GSIS employee "who were employed, got married and had children between 1 July 1952 and On 21 September 1960, respondent GSIS Employees' Association filed the date said allowance was absorbed in the basic pay;" and (3) "to its answer and, after refuting petitioner's three grounds for review, asked delete the observation on pages 27 & 28 of the decision quoted herein for the dismissal of the case on the ground that the judgment sought to on the deceptions about the financial conditions of the GSIS" (Annex C). be reviewed already had become final and, therefore, the issue of jurisdiction could no longer be raised. On 10 October 1960, the respondent Court filed a motion praying that it be allowed to adopt as its On 13 August 1959, the Court of Industrial Relations entered an order own the answer of its co-respondent, GSIS Employees' Association. (Annex D to Supplemental Pleading) holding that recognition of the right of a labor union for the purpose of collective bargaining does not carry with it the duty to accept by the other party terms and conditions of In its brief, petitioner contends that as the controversy in the case does employment offered if the same cannot be the subject of a collective not involve the Minimum Wage Law, the Eight-Hour Labor Law, an bargaining agreement; that salary increase granted by the GSIS during industry indispensable to the national interest duly certified to the Court the pendency of the case in court are not substitutes for the increases of Industrial Relations by the President, nor is, an unfair labor practice granted in the judgment since said increases are separate and case under R.A. No. 875, the controversy does not come within the independent of each other; and denying the prayer of the GSIS to delete jurisdiction of the respondent Court. It argues that on the day R.A. No. part of the judgment. The parties were directed to inform the respondent 875 took effect (17 June 1953), the respondent Court was deprived of Court whether their motions for reconsideration would be withdrawn or jurisdiction of cases, other than those mentioned above, because a law submitted to the respondent Court en banc (Annex D). passed or approved is deemed to be effective from the first moment of the date of its approval or passage. Petitioner also maintains that even if it had made partial payments of the monetary awards granted in the On 16 October 1959, petitioner, then respondent, filed a motion to set for judgment, such payments do not preclude it from raising the hearing its motion for clarification and reconsideration dated 6 July 1959 jurisdictional question for jurisdiction is conferred only by law, and that before the respondent Court en banc (Annex E). A motion for lack of jurisdiction of a Court over the subject matter involved in a case reconsideration of the judgment was also filed by the GSIS Employees' may be raised at any stage of the proceedings. Association. On 14 March 1960, the respondent Court en banc denied the petitioner's motion for clarification and reconsideration (Annex F) holding that the Court has jurisdiction over the case, and that only the second point (family allowance) in the motion for reconsideration, together with the arguments advanced in support thereof, was deemed submitted to the respondent Court en banc for resolution, the respondent Court being of the opinion that a motion for clarification does not suspend the period within which a motion for reconsideration or an appeal may be filed and taken to the Court en banc or to the Supreme Court, respectively, and that, as there was already a judgment, a motion for reconsideration or an appeal to the respondent Court en banc or the Supreme Court should have been filed or taken. On 22 July 1960, petitioner GSIS filed its notice of appeal from the respondent Court's judgment rendered on 29 June 1959 and its resolution en banc promulgated on 14 March 1960 (Annex A to Petition for Extension of Time to file Supplemental Pleadings and Supporting Petitioner's contention that the respondent Court has no jurisdiction because GSIS employees are governed by the Civil Service Law is untenable. In the case of GSIS vs. Hon. Modesto Castillo, etc., et al., G.R. No. L-7175. 27 April 1956, this Court held that the Court of Industrial Relations has jurisdiction over labor disputes affecting government-owned or controlled corporations, and that C.A. No. 103 does not exclude civil service employees from the Court's jurisdiction. Even under section 11 of Rep. Act No. 875, which provides that The terms and conditions of employment in the Government, including any political subdivision or instrumentality thereof, are governed by law and it is declared to be the policy of this Act that employees therein shall not strike for the purpose of securing changes or modification in their terms and conditions of employment. Such employees may belong to any labor organization which does not impose the obligation to strike or to join in strike; Provided, however, That this section shall apply only to employees employed in governmental functions and not to those employed in proprietary functions of the Government including but not

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limited to governmental corporation. the jurisdiction of the respondent Court over employees in governmentowned or controlled corporations performing proprietary functions is provided, admitted and recognized. It appears from the pleadings and annexes thereto attached that on 6 July 1959 a motion for clarification and reconsideration of the judgment rendered on 29 June 1959 was filed by the petitioner, then respondent (Annex C). On 13 August 1959, this motion was acted upon by the respondent Court (Annex D). On 16 October 1959, the petitioner moved to have its motion for clarification and reconsideration set for hearing before the respondent Court en banc (Annex E). A motion for reconsideration of the judgment was also filed by the then petitioner, now respondent association. On 14 March 1960, the respondent Court promulgated a resolution denying the motion for clarification and reconsideration and holding that the motion for clarification did not suspend the period within which a motion for reconsideration with the respondent Court could be filed or an appeal to the Supreme Court could be taken, and that only the second point on family allowance together with the arguments in support thereof was deemed submitted to it en banc (Annex F). On 22 July 1960, petitioner filed its notice of appeal from the judgment rendered on 29 June 1959 and resolution promulgated on 14 March 1960 (Annex A to Petition for Extension of Time to file Supplemental Pleadings and Supporting Papers). On 26 July 1960, the instant petition or appeal by certiorari was filed in this Court. From 14 March 1960, the date when the resolution was promulgated denying the motion for clarification and reconsideration, to 22 July 1960, the date when notice of appeal was filed by the petitioner, and 26 July 1960, the date of the filing of the instant petition, more than four months had elapsed. Therefore, the appeal was not taken within the period, as provide for in section 1, Rule 44, section 14 of Com. Act No. 103, and section 6 of Rep. Act No. 875.1wph1.t The petition or appeal by certiorari is dismissed, without pronouncement as to costs. Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur

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