1 Belen,Liddy Jane C.

GSIS versus Rosete et al The annual stockholders meeting (annual meeting) of the Manila Electric Company (Meralco) was scheduled on 27 May 2008.1 In connection with the annual meeting, proxies2 were required to be submitted on or before 17 May 2008, and the proxy validation was slated for five days later, or 22 May.3 In view of the resignation of Camilo Quiason,4 the position of corporate secretary of Meralco became vacant.5 On 15 May 2008, the board of directors of Meralco designated Jose Vitug6 to act as corporate secretary for the annual meeting.7However, when the proxy validation began on 22 May, the proceedings were presided over by respondent Anthony Rosete (Rosete), assistant corporate secretary and in-house chief legal counsel of Meralco.8 Private respondents nonetheless argue that Rosete was the acting corporate secretary of Meralco. 9 Petitioner Government Service Insurance System (GSIS), a major shareholder in Meralco, was distressed over the proxy validation proceedings, and the resulting certification of proxies in favor of the Meralco management.10 On 23 May 2008, GSIS filed a complaint with the Regional Trial Court (RTC) of Pasay City, docketed as R-PSY-08-05777-C4 seeking the declaration of certain proxies as invalid.11 Three days later, on 26 May, GSIS filed a Notice with the RTC manifesting the dismissal of the complaint.12 On the same day, GSIS filed an Urgent Petition13 with the Securities and Exchange Commission (SEC) seeking to restrain Rosete from "recognizing, counting and tabulating, directly or indirectly, notionally or actually or in whatever way, form, manner or means, or otherwise honoring the shares covered by" the proxies in favor of respondents Manuel Lopez,14 Felipe Alfonso,15 Jesus Francisco,16 Oscar Lopez, Christian Monsod,17 Elpidio Ibaez,18 Francisco Giles-Puno19 "or any officer representing MERALCO Management," and to annul and declare invalid said proxies.20 GSIS also prayed for the issuance of a Cease and Desist Order (CDO) to restrain the use of said proxies during the annual meeting scheduled for the following day.21 A CDO22 to that effect signed by SEC Commissioner Jesus Martinez was issued on 26 May 2008, the same day the complaint was filed. During the annual meeting held on the following day, Rosete announced that the meeting would push through, expressing the opinion that the CDO is null and void. 23 On 28 May 2008, the SEC issued a Show Cause Order (SCO) 24 against private respondents, ordering them to appear before the Commission on 30 May 2008 and explain why they should not be cited in contempt. On 29 May 2008, respondents filed a petition for certiorari with prohibition25 with the Court of Appeals, praying that the CDO and the SCO be annulled. The petition was docketed as CA-G.R. SP No. 103692. Contention of GSIS: Issues SEC. 20. Proxy Solicitations. 20.1. Proxies must be issued and proxy solicitation must be made in accordance with rules and regulations to be issued by the Commission;\ SEC. 53. Investigations, Injunctions and Prosecution of Offenses . - 53.1. The Commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of this Code, any rule, regulation or order thereunder, or any rule of an Exchange, registered securities association, clearing agency, other selfregulatory organization, and may require or permit any person to file with it a statement in writing, under oath or otherwise, as the Commission shall determine, as to all facts and circumstances concerning the matter to be investigated. The Commission may publish information concerning any such violations, and to investigate any fact, condition, practice or matter which it may deem necessary or proper to aid in the enforcement of the provisions of this Code, in the prescribing of rules and regulations thereunder, or in securing information to serve as a basis for recommending further legislation concerning the matters to which this Code relates Contention of Rosete et al: On the other hand, private respondents argue before us that under Section 5.2 of the SRC, the SECs jurisdiction over all cases enumerated in Section 5 of Presidential Decree No. 902-A was transferred to the courts of general jurisdiction or the appropriate regional trial court. The two particular classes of cases in the enumeration under Section 5 of Presidential Decree No. 902-A which private respondents especially refer to are as follows: xxx(2) Controversies arising out of intra-corporate, partnership, or association relations, between and among stockholders, members, or associates; or association of which they are stockholders, members, or associates, respectively; 3) Controversies in the election or appointment of directors, trustees, officers or managers of corporations, partnerships, or associations; In addition, private respondents cite the Interim Rules on Intra-Corporate Controversies (Interim Rules) promulgated by this Court in 2001, most pertinently, Section 2 of Rule 6 (on Election Contests), which defines "election contests" as follows: SEC. 2. Definition. An election contest refers to any controversy or dispute involving title or claim to any elective office in a stock or nonstock corporation, the validation of proxies, the manner and validity of elections and the qualifications of candidates, including the proclamation of winners, to the office of director, trustee or other officer directly elected by the stockholders in a close

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(1) whether the SEC has jurisdiction over the petition filed by GSIS against private respondents; and (2) whether the CDO and SCO issued by the SEC are valid. No Jurisdiction. The terms solicit and solicitation include: A. any request for a proxy whether or not accompanied by or included in a form of proxy B. any request to execute or not to execute, or to revoke, a proxy; or C. the furnishing of a form of proxy or other communication to security holders under circumstance reasonably calculated to result in the procurement, withholding or revocation of a proxy. It is plain that proxy solicitation is a procedure that antecedes proxy validation. The former involves the securing and submission of proxies, while the latter concerns the validation of such secured and submitted proxies. GSIS raises the sensible point that there was no election yet at the time it filed its petition with the SEC, hence no proper election contest or controversy yet over which the regular courts may have jurisdiction. And the point ties its cause of action to alleged irregularities in the proxy solicitation procedure, a process that precedes either the validation of proxies or the annual meeting itself. The conferment of original and exclusive jurisdiction on the regular courts over such controversies in the election of corporate directors must be seen as intended to confine to one body the adjudication of all related claims and controversy arising from the election of such directors. For that reason, the aforequoted Section 2, Rule 6 of the Interim Rules broadly defines the term "election contest" as encompassing all plausible incidents arising from the election of corporate directors, including: 1) any controversy or dispute involving title or claim to any elective office in a stock or nonstock corporation, ( 2)the validation of proxies, II. No it is not valid. There are three distinct bases for the issuance by the SEC of the CDO: .The lack of jurisdiction of the SEC over the subject matter of GSISs petition necessarily invalidates the CDO and SDO issued by that body. However, especially with respect to the CDO, there is need for this Court to squarely rule on the question pertaining to its validity, if only for jurisprudential value and for the guidance of the SEC. To make matters worse for the SEC, the fact that the CDO was signed, much less apparently deliberated upon, by only by one commissioner likewise renders the order fatally infirm. The SEC is a collegial body composed of a Chairperson and four (4) Commissioners.58 In order to constitute a quorum to conduct business, the presence of at least three (3) Commissioners is required.

I.

This qualification allows for a useful distinction that gives due effect to the statutory right of the SEC to regulate proxy solicitation, and the statutory jurisdiction of regular courts over election contests or controversies. The power of the SEC to investigate violations of its rules on proxy solicitation is unquestioned when proxies are obtained to vote on matters unrelated to the cases enumerated under Section 5 of Presidential Decree No. 902-A. However, when proxies are solicited in relation to the election of corporate directors, the resulting controversy, even if it ostensibly raised the violation of the SEC rules on proxy solicitation, should be properly seen as an election controversy within the original and exclusive jurisdiction of the trial courts by virtue of Section 5.2 of the SRC in relation to Section 5(c) of Presidential Decree No. 902-A.

b. the error of the SEC in granting the CDO without stating which kind of CDO it was issuing is more unpardonable, as it is an act that contravenes due process of law. There are three distinct bases for the issuance by the SEC of the CDO: 1. by Section 5(i), is predicated on a necessity "to prevent fraud or injury to the investing public". No other requisite or detail is tied to this CDO authorized under Section 5(i).

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2. Section 53.3, involves a determination by the SEC that "any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this Code, any rule, regulation or order thereunder, or any rule of an Exchange, registered securities association, clearing agency or other self-regulatory organization." The provision additionally requires a finding that "there is a reasonable likelihood of continuing [or engaging in] further or future violations by such person." The maximum duration of the CDO issued under Section 53.3 is ten (10) days Petitioner sought a reconsideration of the aforesaid order but the SEC denied the same in a letter dated March 9, 1998. On March 30, 1998, respondents wrote petitioner demanding their right and option to cancel their Contract, as it appears that Laguna de Boracay is selling said shares without license or authority from the SEC. For failure to get an answer to the said letter, respondents this time, through counsel, reiterated their demand through another letter dated June 29, 1998. But despite repeated demands, petitioner failed and refused to refund or pay respondents.5 Respondents directly filed with SEC En Banc6 a Complaint7 against petitioner and the Members of its Board of Directors - Julius S. Strachan, Angel G. Vivar, Jr. and Cecilia R. Palma - for violation of Section 4 of Batas Pambansa Bilang (B.P. Blg.) 178.8 Petitioner filed an Answer9 to the Complaint but the SEC En Banc, in an Order10 dated April 25, 2000, expunged the Answer from the records due to tardiness. On March 25, 2002, the SEC En Banc rendered a Decision in favor of respondents, ordering petitioner, together with Julius S. Strachan, Angel G. Vivar, Jr., and Cecilia R. Palma, to pay respondents the amount of US$7,500.00.11 Petitioner filed a Motion for Reconsideration12 which the SEC En Banc denied in an Order13 dated June 24, 2002. The CDO actually refers and cites all three provisions, yet it is apparent that a singular CDO could not be founded on Section 5.1, Section 53.3 and Section 64 collectively. At the very least, the CDO under Section 53.3 and under Section 64 have their respective requisites and terms ______________________________________________________ Petitioner received a copy of the June 24, 2002 SEC En Banc Order on July 4, 200214 and had 15 days or until July 19, 2002 within which to appeal. However, on July 10, 2002, petitioner sought from the CA an extension of 30 days, counted from July 19, 2002, or until August 19, 2002, within which to appeal. 15 The CA partly granted the motion in an Order dated July 24, 2002, to wit: As prayed for, but conditioned on the timeliness of its filing, the Motion for Extension to File Petition for Review dated 09 July 2002 and filed before this Court on 10 July 2002 is GRANTED and petitioners are given a nonextendible period of fifteen (15) days from 10 July 2002 or until 25 July 2002 within which to file the desired petition, otherwise, the above-entitled case will be dismissed. (Emphasis supplied.) 16 Petitioner purportedly received the July 24, 2002 CA Order on July 29, 2002,17 but filed a Petition for Review with the CA on August 19, 2002.18 In the assailed October 30, 2002 Resolution, the CA dismissed the Petition for Review, Petitioner filed the present petition, urging us to look beyond the procedural lapse in its appeal, and resolve the following substantive issues:

3.

Section 64. This CDO is founded on a determination of an act or practice, which 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". Section 64.1 plainly provides three segregate instances upon which the SEC may issue the CDO under this provision: (1) after proper investigation or verification, (2) motu proprio, or (3) upon verified complaint by any aggrieved party. While no lifetime is expressly specified for the CDO under Section 64, the respondent to the CDO may file a formal request for the lifting thereof, which the SEC must hear within fifteen (15) days from filing and decide within ten (10) days from the hearing

TIMESHARE REALTY CORPORATION, petitioner, vs. CESAR LAO and CYNTHIA V. CORTEZ, respondents. On October 6, 1996, herein petitioner sold to Ceasar M. Lao and Cynthia V. Cortez (respondents), one timeshare of Laguna de Boracay for US$7,500.00 under Contract No. 135000998 payable in eight months and fully paid by the respondents. Sometime in February 1998, the SEC issued a resolution to the effect that petitioner was without authority to sell securities, like timeshares, prior to February 11, 1998. It further stated in the resolution/order that the Registration Statement of petitioner became effective only on February 11, 1998. It also held that the 30 days within which a purchaser may exercise the option to unilaterally rescind the purchase agreement and receive the refund of money paid applies to all purchase agreements entered into by petitioner prior to the effectivity of the Registration Statement.

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diligence by filing the proper petition within the allowable period, 29 or at the very least, ascertaining from the CA whether its motion for extension had been acted upon.30 As it were, petitioners counsel left the country, unmindful of the possibility that his clients period to appeal was about to lapse - as it indeed lapsed on July 25, 1999, after the CA allowed them a 15-day extension only, in view of the restriction under Section 4, Rule 43. Thus, petitioner has only itself to blame that the Petition for Review it filed on August 19, 1999 was late by 25 days. The CA cannot be faulted for dismissing it. The Court notes that the CA reckoned the 15-day extension it granted to petitioner from July 10, 1999, the date petitioner filed its Motion for Extension, rather than from July 19, 1999, the date of expiration of petitioners original period to appeal. While such computation of the CA appears to be erroneous, petitioner did not question it in the present petition. But even if we do reckon the 15-day extension period from July 19, 1999, the same would have ended on August 3, 1999, making petitioners appeal still inexcusably tardy by 16 days. Either way we reckon it, therefore, petitioners appeal was not perfected within the period prescribed under Rule 43. Nevertheless, the Court opts to resolve the substantive issues raised by petitioner in its appeal so as to determine the lawful rights of the parties and put an end to the litigation. Petitioner claims that at the time it entered into a timeshare purchase agreement with respondents on October 6, 1996, it already possessed the requisite license and marketing agreement to engage in such transactions,31 as evidenced by its registration with the SEC as a corporation.32 Petitioner argues that when it was registered and authorized by the SEC as broker of securities33 - such as the Laguna de Boracay timeshares - this had the effect of ratifying its October 6, 1996 purchase agreement with respondents, and removing any cause for the latter to rescind it. The Court is not persuaded. As cited by the SEC En Banc in its March 25, 2002 Decision, as early as February 13, 1998, the SEC, through Director Linda A. Daoang, already rendered a ruling on the effectivity of the registration statement of petitioner, viz: This has reference to your registration statement which was rendered effective 11 February 1998. The 30 days within which a purchaser may exercise the option to unilaterally rescind the purchase agreement and receive the refund of money paid, applies to all purchase agreements entered into by the registrant prior to the effectivity of the registration statement. The 30-day rescission period for contracts signed before the Registration Statement was rendered effective shall commence on 11 February 1998. The rescission period for contracts after 11 February 1998 shall commence on the date of purchase agreement. (Emphasis supplied.)34

Issue: Whether or not the eventual approval or issuance of license has retroactive effect and therefore ratifies all earlier transactions; Whether or not a party in a contract could withdraw or rescind unilaterally without valid reason.21 Held: A judgment must become final at the time appointed by law22 -- this is a fundamental principle upon which rests the efficacy of our courts whose processes and decrees command obedience only when these are perceived to have some degree of permanence and predictability. Thus, an appeal from such judgment, not being a natural right but a mere statutory privilege, must be perfected according to the mode and within the period prescribed by the law and the rules; otherwise, the appeal is forever barred, and the judgment becomes binding.23 Section 70 of Republic Act No. 879924 which was enacted on July 19, 2000, is the law which governs petitioners appeal from the orders of the SEC En Banc. It prescribes that such appeal be taken to the CA "by petition for review in accordance with the pertinent provisions of the Rules of Court," specifically Rule 43. 25 Section 4 of Rule 43 is restrictive in its treatment of the period within which a petition may be filed: Section 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of the award, judgment, final order or resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of the denial of petitioners motion for new trial or reconsideration duly filed in accordance with the governing law of the court or agency a quo. Only one (1) motion for reconsideration shall be allowed. Upon proper motion and the payment of the full amount of the docket fee before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. (Emphasis supplied.) Petitioners Motion for Extension of Time to File Petition for Review flouted the foregoing restriction: it sought, not a 15-day, but a 30-day extension of the appeal period;26 and it did not even bother to cite a compelling reason for such extension, other than its counsels caseload which, as we have repeatedly ruled, hardly qualifies as an imperative cause for moderation of the rules.27 Its motion for extension being inherently flawed, petitioner should not have presumed that the CA would fully grant the same.28 Instead, it should have exercised due

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Petitioner sought a reconsideration of said ruling but the same was denied by Director Daoang in an Order dated March 9, 1998.35 However, petitioner did not resort to any other administrative remedy against said ruling, such as by questioning the same before the SEC En Banc. Having failed to exhaust the administrative remedies available to it, petitioner is already bound by said ruling and can no longer question the same through a direct and belated recourse to us.36 Finally, the provisions of B.P. Blg. 178 do not support the contention of petitioner that its mere registration as a corporation already authorizes it to deal with unregistered timeshares. Corporate registration is just one of several requirements before it may deal with timeshares: Section 8. Procedure for registration. - (a) All securities required to be registered under subsection (a) of Section four of this Act shall be registered through the filing by the issuer or by any dealer or underwriter interested in the sale thereof, in the office of the Commission, of a sworn registration statement with respect to such securities, containing or having attached thereto, the following: xxxx (36) Unless previously filed and registered with the Commission and brought up to date: (a) A copy of its articles of incorporation with all amendments thereof and its existing by-laws or instruments corresponding thereto, whatever the name, if the issuer be a corporation. Prior to fulfillment of all the other requirements of Section 8, petitioner is absolutely proscribed under Section 4 from dealing with unregistered timeshares, thus: Section 4. Requirement of registration of securities. - (a) No securities, except of a class exempt under any of the provisions of Section five hereof or unless sold in any transaction exempt under any of the provisions of Section six hereof, shall be sold or offered for sale or distribution to the public within the Philippines unless such securities shall have been registered and permitted to be sold as hereinafter provided. (Emphasis supplied.) WHEREFORE, the petition is DENIED for lack of merit. G.R. No. 164197 January 25, 2012 SECURITIES AND EXCHANGE COMMISSION, Petitioner, vs. PROSPERITY.COM, INC., Respondent. DECISION ABAD, J.: This case involves the application of the Howey test in order to determine if a particular transaction is an investment contract. The Facts and the Case Prosperity.Com, Inc. (PCI) sold computer software and hosted websites without providing internet service. To make a profit, PCI devised a scheme in which, for the price of US$234.00 (subsequently increased to US$294), a buyer could acquire from it an internet website of a 15-Mega Byte (MB) capacity. At the same time, by referring to PCI his own down-line buyers, a first-time buyer could earn commissions, interest in real estate in the Philippines and in the United States, and insurance coverage worth P50,000.00. To benefit from this scheme, a PCI buyer must enlist and sponsor at least two other buyers as his own down-lines. These second tier of buyers could in turn build up their own down-lines. For each pair of down-lines, the buyer-sponsor received a US$92.00 commission. But referrals in a day by the buyer-sponsor should not exceed 16 since the commissions due from excess referrals inure to PCI, not to the buyer-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,

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February 1, 2001, PCI moved to withdraw its petition before the CA to avoid possible forum shopping violation. During the pendency of PCIs action before the SEC, however, the CA issued a TRO, enjoining the enforcement of the CDO.3 In response, the SEC filed with the CA a motion to dismiss the petition on ground of forum shopping. In a Resolution,4 the CA initially dismissed the petition, finding PCI guilty of forum shopping. But on PCIs motion, the CA reversed itself and reinstated the petition.5 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 rendered a decision, granting PCIs petition and setting aside the SEC-issued CDO.7 The CA ruled that, following the Howey test, PCIs scheme did not constitute an investment contract that needs registration pursuant to R.A. 8799, hence, this petition. The Issue Presented The sole issue presented before the Court is whether or not PCIs scheme constitutes an investment contract that requires registration 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 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 contracts. That courts rulings, while not binding in the Philippines, enjoy some degree of persuasiveness insofar as they are logical and consistent with the countrys best interests.9 The United States Supreme Court held in Securities and Exchange Commission v. W.J. Howey Co.10 that, for an investment contract to exist, the following elements, referred to as the Howey test must concur: (1) a contract, transaction, or scheme; (2) an investment of money; (3) investment is made in a common enterprise; (4) expectation of profits; and (5) profits arising primarily from the efforts of others. 11 Thus, to sustain the SEC position in this case, PCIs scheme or contract with its buyers must have all these elements. An example that comes to mind would be the long-term commercial papers that large companies, like San Miguel Corporation (SMC), offer to the public for raising funds that it needs for expansion. When an investor buys these papers or securities, he invests his money, together with others, in SMC with an expectation of profits arising from the efforts of those who manage and operate that company. SMC has to register these commercial papers with the SEC before offering them to investors.1wphi1 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 PCI that expects profit from the network marketing of its products. PCI is correct in saying that the US$234 it gets from its clients is merely a consideration for the sale of the websites that it provides. WHEREFORE, the Court DENIES the petition and AFFIRMS the decision dated July 31, 2003 and the resolution dated June 18, 2004 of the Court of Appeals in CA-G.R. SP 62890. SO ORDERED.

FIRST DIVISION

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G.R. No. 168639 January 29, 2007 Subsequently, respondents filed an Amended Complaint dated September 2, 2004 further praying for the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction to enjoin petitioners from discharging their functions as directors and officers of STRADEC. On September 22, 2004, they filed a Supplemental Complaint praying that the court (1) direct Export Industry Bank, Cezar T. Quiambao and Bonifacio G. Sumbilla to surrender to them the original and reconstituted Stock and Transfer Book and other corporate documents of STRADEC; and (2) nullify the reconstituted Stock and Transfer Book and all transactions of the corporation. Both pleadings were admitted by the trial court. As the controversy involves an intra-corporate dispute, the trial court, on October 4, 2004, issued an Order transferring Civil Case No. SCC-2874 to RTC, Branch 48, Urdaneta City, being a designated Special Commercial Court. 5 The case was then redocketed as Civil (SEC) Case No. U-14. Since Branch 48 of RTC, Urdaneta City had no presiding judge then, Judge Meliton G. Emuslan acted as pairing judge of that branch to take cognizance of the cases therein until the appointment and assumption to duty of a regular judge.6 On November 2, 2004, petitioners filed their Answer with Counterclaim 7 in Civil (SEC) Case No. U-14. They prayed for the dismissal of the complaint on the following grounds, among others: (a) the complaint does not state a cause of action; (b) the action is barred by prescription for it was filed beyond the 15-day prescriptive period provided by Section 2, Rule 6 of the Interim Rules and Procedure Governing IntraCorporate Controversies under Republic Act (R.A.) No. 8799; (c) respondents prayer that a special stockholders meeting be held in Bayambang, Pangasinan "is premature pending the establishment of a principal office of STRADEC in said municipality;" and (d) respondents waived their right to object to the venue as they attended and participated in the said March 1, 2004 meeting and election without any protest."8 Petitioners likewise opposed the application for a writ of preliminary injunction as respondents have no right that was violated, hence, are not entitled to be protected by law. They further prayed for damages by way of counterclaim. Meanwhile, Judge Aurelio R. Ralar, Jr. was appointed presiding judge of RTC, Branch 48, Urdaneta City. Significantly, on November 9, 2004, he took his oath of office before Associate Justice Diosdado M. Peralta of the Sandiganbayan, and on November 12, 2004, he assumed his duties.9 Subsequently, or on November 25, 2004, pairing Judge Meliton Emuslan still issued an Order10 granting respondents application for preliminary injunction ordering (1) the holding of a special stockholders meeting of STRADEC on December 10, 2004 "in the principal office of the corporation in Bayambang, Pangasinan;" and (2) the turn-over by petitioner Bonifacio Sumbilla to the court of the duplicate key of the safety deposit box in Export Industry Bank, Shaw Boulevard, Pasig City where the original Stock and Transfer Book of STRADEC was deposited. The pertinent portions of the Order read: ORDER

ALDERITO Z. YUJUICO, BONIFACIO C. SUMBILLA, and DOLNEY S. SUMBILLA, Petitioners, vs. CEZAR T. QUIAMBAO, JOSE M. MAGNO III, MA. CHRISTINA F. FERREROS, ANTHONY K. QUIAMBAO, SIMPLICIO T. QUIAMBAO, JR., ERIC C. PILAPIL, ALBERT M. RASALAN, and REGIONAL TRIAL COURT, BRANCH 48, URDANETA CITY, Respondents. DECISION SANDOVAL-GUTIERREZ, J.: Before us for resolution is the Petition for Review on Certiorari1 challenging the Decision dated March 31, 2005 rendered by the Court of Appeals in CA-G.R. SP No. 87785, as well as its Resolution dated June 29, 2006. The facts are: Strategic Alliance Development Corporation (STRADEC) is a domestic corporation engaged in the business of providing financial and investment advisory services and investing in projects through consortium or joint venture information.2 From its inception, STRADECs principal place of business was located at the 24th Floor, One Magnificent Mile-Citra Building, San Miguel Avenue, Ortigas Center, Pasig City. On July 27, 1998, the Securities and Exchange Commission (SEC) approved the amendment of STRADECs Articles of Incorporation authorizing the change of its principal office from Pasig City to Bayambang, Pangasinan. 3 On March 1, 2004, STRADEC held its annual stockholders meeting in its Pasig City office as indicated in the notices sent to the stockholders. 4 At the said meeting, the following were elected members of the Board of Directors: Alderito Z. Yujuico, Bonifacio C. Sumbilla, Dolney S. Sumbilla (petitioners herein), Cesar T. Quiambao, Jose M. Magno III and Ma. Christina Ferreros (respondents herein). Petitioners Alderito Yujuico was elected Chairman and President, while Bonifacio Sumbilla was elected Treasurer. All of them then discharged the duties of their office. After five (5) months, or on August 16, 2004, respondents filed with the Regional Trial Court (RTC), San Carlos City, Pangasinan a Complaint against STRADEC (represented by herein petitioners as members of its Board of Directors), docketed as Civil Case No. SCC-2874 and raffled off to Branch 56. The complaint prays that: (1) the March 1, 2004 election be nullified on the ground of improper venue, pursuant to Section 51 of the Corporation Code; (2) all ensuing transactions conducted by the elected directors be likewise nullified; and (3) a special stockholders meeting be held anew.

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This resolves the application of plaintiffs for the issuance of writ of preliminary prohibitory injunction. During the hearing on the application for Temporary Restraining Order/Injunction on October 20, 2004, plaintiffs presented as witnesses: Cezar T. Quiambao, Jose M. Magno III and Eric Gene Pilapil who testified in support of the material averments of the plaintiffs in their Amended Complaint and Supplemental Complaint. Specifically, plaintiff Quiambao testified, among other things, on the fact of the unlawful denial by defendant Yujuico of his request for the holding of a special stockholders meeting, the location of the principal place of office of the corporation, the deposit by him and defendant Sumbilla of the Stock and Transfer Book of the corporation in the Export Industry Bank in Pasig City, the illegal and unjustified reconstitution of said stock and transfer book, and the damages which he and the corporation sustained as a result of defendants unlawful acts including the unauthorized sale of corporate shares of stock. Plaintiff Magno III testified that he did not attend the Annual Stockholders meeting held last March 1, 2004 and that he did not authorize anybody to appear for and in his behalf. Lastly, witness Pilapil testified on the principal place of business of defendant corporation, the holding of the Annual Stockholders Meeting in a place outside the principal place of business of the corporation, and the fact that two (2) other stockholders, namely, Jose Magno III and Angel Umali were neither present nor represented in said meeting, contrary to what was alleged in defendants Answer with Counterclaim (see par. 50, Answer with Counterclaim). xxx After a careful evaluation of the records and all the pleadings extant in this case as well as the testimonies of the witnesses for the plaintiffs, this court is inclined to grant the plaintiffs application for the writs of preliminary prohibitory injunction in order to restrain the defendants from acting as officers of the corporation and committing further acts inimical to the corporation and to the rest of the stockholders thereof. It is also evident from the pleadings that defendants would not yield to the demand of plaintiffs for the maintenance of the status quo until after the resolution of the merits of the instant controversy. xxx The effect of the issuance of this Order would create a hiatus in the action of the board of directors of STRADEC, pending the determination of the merits of the case and after trial on the merits. It would thus be for the best interest of the corporation as well as its stockholders that an election be undertaken of the members of the board and officers pursuant to A. Only the SEC, not the RTC, has jurisdiction to order the holding of a special stockholders meeting involving an intra-corporate controversy; B. Judge Meliton Emuslan had no authority to issue the assailed Order dated November 25, 2004 as Judge Aurelio Ralar, Jr. was already the presiding judge of RTC, Branch 48, Urdaneta City;12 and STRADECS Articles of the corporation (sic) and the Corporation Code of the Philippines, under the supervision of the court. This is to avoid discontinuity of the operations of the corporation, which may result to its damage and prejudice. WHEREFORE, premises considered, let the Writ of Preliminary Injunction issue, upon posting of the requisite bond in the amount of Five Hundred Thousand Pesos (P500,000.00) to answer for whatever damages that the defendants would suffer on account of the issuance of the injunction writ, restraining defendants from acting as officers of the Corporation and committing further acts inimical to the corporation. It is likewise ordered that a special stockholders meeting in the principal place of office of the corporation in Bayambang, Pangasinan on December 10, 2004 be held. The Branch Clerk of this court shall attend the said meeting to observe the proceedings and report his observations to this court. For this purpose, the defendant Bonifacio Sumbilla is ordered to surrender to the court, not later than December 3, 2004, the duplicate key given to him by Export Industry Bank, Shaw Blvd., Pasig City, of the safety deposit box where he and plaintiff Cezar T. Quiambao deposited the Original Stock and Transfer Book of STRADEC which shall be the basis in the determination of the corporate stockholding during the meeting scheduled on the above-mentioned date. SO ORDERED. In compliance with the above Order, the court sheriff (and respondent Cezar Quiambao, as claimed by petitioners) caused the opening of the safety deposit box of STRADEC in the Export Industry Bank, Shaw Boulevard Branch, Pasig City and took custody of its contents. On December 10, 2004, petitioners, claiming that a motion for reconsideration is a prohibited pleading under Section 8(3), Rule 1 of the Interim Rules of Procedure Governing Intra-Corporate Controversies under R.A. No. 8799, filed with the Court of Appeals a Petition for Certiorari with Prayer for the Issuance of a TRO and/or Preliminary Injunction,11 assailing Judge Emuslans November 25, 2004 Order. The petition was docketed as CA-G.R. SP No. 87785. In the proceedings before the appellate court, petitioners raised the following issues:

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C. Assuming Judge Emuslan had authority to issue the assailed Order, he nonetheless acted with grave abuse of discretion amounting to lack or excess of jurisdiction. Meanwhile, on the same day (December 10), as directed in the November 25, 2004 Order of Judge Emuslan, a special stockholders meeting of STRADEC was held in Bayambang, Pangasinan wherein a new set of directors were elected for the term 2004-2005, namely: Cezar T. Quiambao, Anthony K. Quiambao, and Simplicio T. Quiambao, Jr. Immediately thereafter, the new directors elected the following officers: Cezar T. Quiambao as Chairman and President; Eric C. Pilapil as Corporate Secretary; Anthony K. Quiambao as Corporate Treasurer; and Albert M. Rasalan as Assistant Corporate Secretary. On March 31, 2005, the Court of Appeals rendered a Decision13 in CA-G.R. SP No. 87785, dismissing the Petition for Certiorari. It upheld the jurisdiction of the RTC over the controversy and sustained the validity of Judge Emuslans Order of November 25, 2004. Petitioners motion for reconsideration was denied in a Resolution dated June 29, 2005.14 Hence, the instant Petition for Review on Certiorari. FIRST, petitioners contend that the Court of Appeals erred in ruling that the RTC has the power to call a special stockholders meeting involving an intra -corporate controversy. They maintain that it is only the SEC that may do so to be held under its supervision. The respondents, in their comment, counter that the appellate court correctly ruled that the power to hear and decide controversies involving intra-corporate disputes, as well as to act on matters incidental and necessary thereto, have been transferred from the SEC to the RTCs designated as Special Commercial Courts. It would be the height of absurdity, they argue, to require the filing of a separate case with the SEC for the sole purpose of asking the said agency to order the holding of a special stockholders meeting where there is already a pending case invol ving the same matter before the proper court. We agree with respondents. An intra-corporate controversy is one which "pertains to any of the following relationships: (1) between the corporation, partnership or association and the public; (2) between the corporation, partnership or association and the State in so far as its franchise, permit or license to operate is concerned; (3) between the corporation, partnership or association and its stockholders, partners, members or officers; and (4) among the stockholders, partners or associates themselves."15There is thus no dispute that respondents complaint in Civil (SEC) Case No. U-14 before the RTC, Branch 48, Urdaneta City involves an intra-corporate controversy, the contending parties being stockholders and officers of a corporation. Originally, Section 5 of Presidential Decree (P.D.) No. 902-A bestowed the SEC original and exclusive jurisdiction over cases involving the following: (a) Devices or schemes employed by, or any act of, the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of associations registered with the Commission; (b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association and the State insofar as it concerns their individual franchise or right as such entity; (c) Controversies in the election or appointment of directors, trustees, officers or managers of such corporations, partnership or associations; (d) Petitioners of corporations, partnerships or associations to be declared in the state of suspension of payment in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities but is under the management of a rehabilitation receiver or management committee created pursuant to this Decree.16 (Underscoring supplied) Upon the enactment of R.A. No. 8799, otherwise known as "The Securities Regulation Code" which took effect on August 8, 2000,17 the jurisdiction of the SEC over intracorporate controversies and other cases enumerated in Section 5 of P.D. No. 902-A has been transferred to the courts of general jurisdiction, or the appropriate RTC. Section 5.2 of R.A. No. 8799 provides: 5.2. The Commissions jurisdiction over all cases enumerated in Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court, Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed. (Underscoring supplied) Pursuant to R.A. No. 8799, the Court issued a Resolution dated November 21, 2000 in A.M. No. 00-11-03-SC designating certain branches of the RTC to try and decide cases enumerated in Section 5 of P.D. No. 902-A. Branch 48 of RTC, Urdaneta City, the court a quo, is among those designated as a Special Commercial Court. On March

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13, 2001, the Court approved the Interim Rules of Procedure Governing IntraCorporate Controversies under R.A. No. 8799 which took effect on April 1, 2001.18 Sections 1 and 2, Rule 6 of the said Rules provide: SEC. 1. Cases covered. The provisions of this rule shall apply to election contests in stock and non-stock corporations. SEC. 2. Definition. An election contest refers to any controversy or dispute involving title or claim to any elective office in a stock or non-stock corporation, the validation of proxies, the manner and validity of elections, and the qualifications of candidates, including the proclamation of winners, to the office of director, trustee or other officer directly elected by the stockholders in a close corporation or by members of a nonstock corporation where the articles of incorporation or by-laws so provide. (Underscoring supplied) In Morato v. Court of Appeals,19 we held that pursuant to R.A. No. 8799 and the Interim Rules of Procedure Governing Intra-Corporate Controversies, "among the powers and functions of the SEC which were transferred to the RTC include the following: (a) jurisdiction and supervision over all corporations, partnerships or associations which are the grantees of primary franchises and/or a license or permit issued by the Government; (b) the approval, rejection, suspension, revocation or requirement for registration statements, and registration and licensing applications; (c) the regulation, investigation, or supervision of the activities of persons to ensure compliance; (d) the supervision, monitoring, suspension or take over the activities of exchanges, clearing agencies, and other SROs; (e) the imposition of sanctions for the violation of laws and the rules, regulations and orders issued pursuant thereto; (f) the issuance of cease-and-desist orders to prevent fraud or injury to the investing public; (g) the compulsion of the officers of any registered corporation or association to call meetings of stockholders or members thereof under its supervision; and (h) the exercise of such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws." Clearly, the RTC has the power to hear and decide the intra-corporate controversy of the parties herein. Concomitant to said power is the authority to issue orders necessary or incidental to the carrying out of the powers expressly granted to it. Thus, the RTC may, in appropriate cases, order the holding of a special meeting of stockholders or members of a corporation involving an intra-corporate dispute under its supervision. SECOND, petitioners assert that Judge Emuslan did not have the authority to issue the assailed Order of November 25, 2004 upon the appointment and assumption on "November 2, 2004" (should be November 12) by Judge Aurelio R. Ralar, Jr. as the regular presiding judge of RTC, Branch 48, Urdaneta City. Significantly, respondents never refuted petitioners assertion. The Court of Appeals, for its part, dismissed petitioners allegation by merely ruling that "this is the first time they are raising this issue which is much too late in the day. In any event, one cannot question the authority of the court when it does not suit him and accepts such authority when it favors him."20 The ruling suggests that petitioners are barred by laches and/or estoppel from raising that issue. The appellate court likewise denied petitioners motion to set the case for oral arguments. The Court of Appeals should have resolved the issue of whether Judge Emuslan had the authority to issue the assailed Order, a jurisdictional question crucial to the resolution of the petition. It is elementary that a jurisdictional controversy may be raised at any time.21 Indeed, as early as November 12, 2004, Judge Aurelio Ralar, Jr. assumed his duties as presiding judge of RTC, Branch 48, Urdaneta City. Evidently, Judge Emuslans authority, as pairing judge of Branch 48, to act on Civil (SEC) Case No. U-14 automatically ceased on that date. Therefore, he no longer had the authority to issue the Order of November 25, 2004, or thirteen (13) days after Judge Ralar, Jr. had assumed office. This is clear from this Courts Circular No. 19-98 dated February 18, 1998 which mandates: TO : ALL JUDGES OF THE REGIONAL TRIAL COURTS, METROPOLITAN TRIAL COURTS, MUNICIPAL TRIAL COURTS IN CITIES, MUNICIPAL TRIAL COURTS, AND MUNICIPAL CIRCUIT TRIAL COURTS SUBJECT : EXPANDED AUTHORITY OF PAIRING COURTS In the interest of efficient administration of justice, the authority of the pairing judge under Circular No. 7 dated September 23, 1974 (Pairing System for Multiple Sala Stations) to act on incidental or interlocutory matters and those urgent matters requiring immediate action on cases pertaining to the paired court shall henceforth be expanded to include all other matters. Thus, whenever a vacancy occurs by reason of resignation, dismissal, suspension, retirement, death, or prolonged absence of the presiding judge in a multi-sala station, the judge of the paired court shall take cognizance of all cases thereat as acting judge therein UNTIL the APPOINTMENT and ASSUMPTION TO DUTY OF THE REGULAR JUDGE or the designation of an acting presiding judge or the return of the regular incumbent judge, or until further orders from this Court. For this purpose, the provisions of Circular No.7, dated September 23, 1974, inconsistent with this Circular are hereby amended. x x x. (Underscoring supplied) Thus, although the RTC, Branch 48, Urdaneta City is clothed with power to take cognizance of Civil (SEC) Case No. U-14, the exercise of such power is entirely a

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different matter. Verily, in Tolentino v. Leviste,22 this Court, speaking through Justice (now Chief Justice) Reynato S. Puno, held: x x x. Jurisdiction is not the same as the exercise of jurisdiction. As distinguished from the exercise of jurisdiction, jurisdiction is the authority to decide a cause, not the decision rendered therein. Where there is jurisdiction over the person and the subject matter, the decision on all other questions arising in the case is but an exercise of the jurisdiction. x x x. (Underscoring supplied) There are instances where a judge may commit errors. He may issue an order without authority. And if clothed with power, he may exercise it in excess of his authority or with grave abuse of discretion amounting to lack or excess of jurisdiction. Any of these acts may be struck down as a nullity through a petition for certiorari, 23 as what petitioners did before the Court of Appeals. It bears stressing that any act or order rendered by a judge without authority, such as the questioned November 25, 2004 Order, is no order at all. It is void. As such, it cannot be the source of any right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal force and effect.24 THIRD, petitioners further contend that even if Judge Emuslan had the authority to issue the challenged Order, still he issued it with grave abuse of discretion amounting to lack or excess of jurisdiction. They lament that the Order effectively disposed of the merits of the main case [Civil (SEC) Case No. U-14]. Unfortunately, despite the significance of this issue, the Court of Appeals totally ignored it by failing to render a ruling thereon. Respondents, for their part, merely aver that Judge Emuslan "only had the best interest of STRADEC in mind" when he issued the questioned Order. 25 We find for petitioners. The duty of the court taking cognizance of an application for a writ of preliminary injunction is to determine whether the requisites necessary for the grant of such writ are present. The requisites for the issuance of a writ of preliminary injunction are: (1) the applicant for such writ must show that he has a clear and unmistakable right that must be protected; and (2) there exists an urgent and paramount necessity for the writ to prevent serious damage.26 In this case, Judge Emuslans November 25, 2004 Order, quoted earlier, is hazy and too unsubstantial to justify the issuance of a writ of preliminary injunction. The Order does not contain specific findings of fact and conclusion of law showing that the requirements for the grant of the injunctive writ are present. It merely mentions the names of witnesses presented by respondents during the hearing on the application for the issuance of the writ, but there is no specific and substantial narration of the witnesses testimonies to establish the existence of a clear and unmistakable right on their part that must be protected, as well as the serious damage or irreparable loss that they would suffer if the writ is not granted. It does not also disclose the specific evidence formally offered by the applicants. Obviously, the basis of the judges conclusion is too uncertain. Thus, in issuing the questioned November 25, 2004 Order granting a writ of preliminary injunction, he committed grave abuse of discretion. In Manila International Airport Authority v. Court of Appeals,27 we held: In the instant case, however, the trial courts order of January 20, 1993 was, on its face, bereft of basis for the issuance of a writ of preliminary injunction. There were no findings of fact or law in the assailed order indicating that any of the elements essential for the grant of a preliminary injunction existed. The trial court alluded to hearings during which the parties marked their respective exhibits and the trial court heard the oral arguments of opposing counsels. However, it cannot be ascertained what evidence was formally offered and presented by the parties and given weight and credence by the trial court. The basis for the trial courts conclusion that K Services was entitled to a writ of preliminary injunction is unclear. In its order of August 5, 1993, the trial court stated that it issued the injunction to prevent irreparable loss that might be caused to K Services. Once more, however, the trial court neglected to mention what right in esse of K Services, if any, was in danger of being violated and required the protection of a preliminary injunction. x x x. x x x the possibility of irreparable damage without proof of actual existing right is not a ground for an injunction (Heirs of Asuncion v. Gervacio, Jr., 304 SCRA 322 [1999]). Where the complainants right is doubtful or disputed, injunction is not proper. Absent a clear legal right, the issuance of the injunctive relief constitutes grave abuse of discretion (Id.).28 Furthermore, Judge Emuslans November 25, 2004 Order goes against the concept and objective of a writ of preliminary injunction. A writ of preliminary injunction is a provisional remedy, an adjunct to a main suit. It is also a preservative remedy, issued to preserve the status quo of the things subject of the action or the relations between the parties during the pendency of the suit. In Selegna Management and Development Corporation v. United Coconut Planters Bank,29 we held: x x x. Injunction is not designed to protect contingent or future rights. It is not proper when the complainants right is doubtful or disputed. x x x, courts should avoid issuing this writ which in effect disposes of the main case without trial (F. Regalado, Remedial Law Compendium, Vol. I, 639 (7th revised ed., 1999). x x x. (Underscoring supplied) In the same case of Manila International Airport Authority v. Court of Appeals, 30 we urged the courts to exercise extreme caution in issuing the writ, thus:

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x x x. We remind trial courts that while generally the grant of a writ of preliminary injunction rests on the sound discretion of the court taking cognizance of the case, extreme caution must be observed in the exercise of such discretion. The discretion of the court a quo to grant an injunctive writ must be exercised based on the grounds and in the manner provided by law. Thus, the Court declared in Garcia v. Burgos: It has been consistently held that there is no power the exercise of which is more delicate, which requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should never be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages. Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or precipitately. It should be granted only when the court is fully satisfied that the law permits it and the emergency demands it [citations omitted]. (Underscoring supplied) To repeat, the purpose of the writ of preliminary injunction is to preserve the status quo until the court could hear the merits of the case.31 The status quo is the last actual peaceable uncontested status that preceded the controversy32 which, in the instant case, is the holding of the annual stockholders meeting on March 1, 2004 and the ensuing election of the directors and officers of STRADEC. But instead of preserving the status quo, Judge Emuslans Order messed it up when, in compliance therewith, a special stockholders meeting was held anew and a new set of directors and officers of STRADEC was elected. That effectively resolved respondents principal action without even a full-blown trial on the merits since the Order impliedly ruled that the March 1, 2004 annual stockholders meeting and election are void. Verily, the issuance of the questioned Order violates the established principle that courts should avoid granting a writ of preliminary injunction that would in effect dispose of the main case without trial.33 Equally important is the fact that the Order was issued even though respondents right to an injunctive relief is doubtful or has been vehemently disputed. We note that petitioners, in their answer with counterclaim, raised serious and valid defenses, among which is that the action is premature since the principal office of STRADEC in Bayambang, Pangasinan is yet to be established, as authorized by the SEC.34 Obviously, pending the establishment of a principal office in Bayambang, Pangasinan, all the stockholders meetings of STRADEC have been properly held in their principal office in Pasig City. Another weighty defense raised by petitioners is that the action has prescribed. One of the reliefs sought by respondents in the complaint is the nullification of the election of the Board of Directors and corporate officers held during the March 1, 2004 annual stockholders meeting on the ground of improper venue, in violation of the Corporation Code. Hence, the action involves an election contest, falling squarely under the Interim Rules of Procedure Governing Intra-Corporate Controversies under R.A. No. 8799. Sections 1 and 2, Rule 6 of the Interim Rules provide: SEC. 1. Cases covered. The provisions of this rule shall apply to election contests in stock and non-stock corporations. SEC. 2. Definition. An election contest refers to any controversy or dispute involving title or claim to any elective office in a stock or non-stock corporation, the validation of proxies, the manner and validity of elections, and the qualifications of candidates, including the proclamation of winners, to the office of director, trustee or other officer directly elected by the stockholders in a close corporation or by members of a nonstock corporation where the articles of incorporation or by-laws so provide. (Underscoring supplied)1avvphi1.net It is important to note that the Court of Appeals itself ruled that respondents action before the RTC, Branch 48, Urdaneta City is an election contest, thus: Likewise, as clearly provided in Section 1, Rule 1 of the Interim Rules of Procedure Governing Intra-Corporate Controversies under R.A. No. 8799, among the intracorporate controversies transferred to the special courts are: xxx (3) Controversies in the election or appointment of directors, trustees, officers, or managers of corporation, partnerships or associations; xxx Undoubtedly, therefore, the instant case is an intra-corporate controversy among the stockholders themselves relative to the election of directors or officers of STRADEC, specifically between respondents x x x on one hand and petitioners x x x on the other. x x x. If there is still any doubt that the Special Corporate Court can call for a stockholders meeting, Rule 6 (citing Sections 1 and 2) of the Interim Rules completely puts to rest said issue. xxx Clearly, therefore, said Rule empowers the special corporate courts to decide election cases x x x.35 (Underscoring supplied) As pointed out by petitioners in their answer with counterclaim, under Section 3, Rule 6 of the Interim Rules of Procedure Governing Intra-Corporate Controversies under R.A. No. 8799, an election contest must be "filed within 15 days from the date of the election."36 It was only on August 16, 2004 that respondents instituted an action questioning the validity of the March 1, 2004 stockholders election, clearly beyond the 15-day prescriptive period.

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In sum, Judge Emuslan, in granting the writ of preliminary injunction, acted with grave abuse of discretion amounting to lack or excess of jurisdiction. WHEREFORE, we GRANT the instant petition and reverse the assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 87785. The Order dated November 25, 2004 of Judge Meliton G. Emuslan, RTC, Branch 48, Urdaneta City in Civil (SEC) Case No. U-14 and the special stockholders meeting and election held on December 10, 2004 in Bayambang, Pangasinan are SET ASIDE. The last actual peaceable uncontested status of the parties prior to the filing by respondents herein of Civil (SEC) Case No. U-14 is RESTORED. This case is REMANDED to the RTC, Branch 48, Urdaneta City for further proceedings with dispatch. securities and a fair administration of exchanges in the PSE, the SEC has the authority to look into the rulings issued by the PSE. The SEC is the entity with the primary say as to whether or not securities, including shares of stock of a corporation, may be traded or not in the stock exchange. HOWEVER, in the case at bar, the Supreme Court emphasized that the SEC may only reverse decisions issued by the PSE if such are tainted with bad faith. In this case, there was no showing that PSE acted with bad faith when it denied the application of PALI. Based on the multiple adverse claims against the assets of PALI, PSE deemed that granting PALIs application will only be contrary to the best interest of the general public. It was reasonable for the PSE to exercise its judgment in the manner it deems appropriate for its business identity, as long as no rights are trampled upon, and public welfare is safeguarded. The Puerto Azul Land, Inc. (PALI), a domestic real estate corporation, had sought to offer its shares to the public in order to raise funds allegedly to develop its properties and pay its loans with several banking institutions. In January, 1995, PALI was issued a Permit to Sell its shares to the public by the Securities and Exchange Commission (SEC). To facilitate the trading of its shares among investors, PALI sought to course the trading of its shares through the Philippine Stock Exchange, Inc. (PSE), for which purpose it filed with the said stock exchange an application to list its shares, with supporting documents attached. On February 8, 1996, the Listing Committee of the PSE, upon a perusal of PALI's application, recommended to the PSE's Board of Governors the approval of PALI's listing application. On February 14, 1996, before it could act upon PALI's application, the Board of Governors of the PSE received a letter from the heirs of Ferdinand E. Marcos, claiming that the late President Marcos was the legal and beneficial owner of certain properties forming part of the Puerto Azul Beach Hotel and Resort Complex which PALI claims to be among its assets and that the Ternate Development Corporation, which is among the stockholders of PALI, likewise appears to have been held and continue to be held in trust by one Rebecco Panlilio for then President Marcos and now, effectively for his estate, and requested PALI's application to be deferred. PALI was requested to comment upon the said letter. PALI's answer stated that the properties forming part of the Puerto Azul Beach Hotel and Resort Complex were not claimed by PALI as its assets. On the contrary, the resort is actually owned by Fantasia Filipina Resort, Inc. and the Puerto Azul Country Club, entities distinct from PALI. Furthermore, the Ternate Development Corporation owns only 1.20% of PALI. The Marcoses responded that their claim is not confined to the facilities forming part of the Puerto Azul Hotel and Resort Complex, thereby

Facts: Puerto Azul Land, Inc. (PALI) is a corporation engaged in the real estate business. PALI was granted permission by the Securities and Exchange Commission (SEC) to sell its shares to the public in order for PALI to develop its properties. PALI then asked the Philippine Stock Exchange (PSE) to list PALIs stocks/shares to facilitate exchange. The PSE Board of Governors denied PALIs application on the ground that there were multiple claims on the assets of PALI. Apparently, the Marcoses, Rebecco Panlilio (trustee of the Marcoses), and some other corporations were claiming assets if not ownership over PALI. PALI then wrote a letter to the SEC asking the latter to review PSEs decision. The SEC reversed PSEs decisions and ordered the latter t o cause the listing of PALI shares in the Exchange. ISSUE: Whether or not it is within the power of the SEC to reverse actions done by the PSE. HELD: Yes. The SEC has both jurisdiction and authority to look into the decision of PSE pursuant to the Revised Securities Act and for the purpose of ensuring fair administration of the exchange. PSE, as a corporation itself and as a stock exchange is subject to SECs jurisdiction, regulation, and control. In order to insure fair dealing of

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implying that they are also asserting legal and beneficial ownership of other properties titled under the name of PALI. On February 20, 1996, the PSE wrote Chairman Magtanggol Gunigundo of the Presidential Commission on Good Government (PCGG) requesting for comments on the letters of the PALI and the Marcoses. On March 4, 1996, the PSE was informed that the Marcoses received a Temporary Restraining Order on the same date, enjoining the Marcoses from, among others, "further impeding, obstructing, delaying or interfering in any manner by or any means with the consideration, processing and approval by the PSE of the initial public offering of PALI." The TRO was issued by Judge Martin S. Villarama, Executive Judge of the RTC of Pasig City in Civil Case No. 65561, pending in Branch 69 thereof. In its regular meeting held on March 27, 1996, the Board of Governors of the PSE reached its decision to reject PALI's application, citing the existence of serious claims, issues and circumstances surrounding PALI's ownership over its assets that adversely affect the suitability of listing PALI's shares in the stock exchange. On April 11, 1996, PALI wrote a letter to the SEC addressed to the then Acting Chairman, Perfecto R. Yasay, Jr., bringing to the SEC's attention the action taken by the PSE in the application of PALI for the listing of its shares with the PSE, and requesting that the SEC, in the exercise of its supervisory and regulatory powers over stock exchanges under Section 6(j) of P.D. No. 902-A, review the PSE's action on PALI's listing application and institute such measures as are just and proper under the circumstances. On the same date, or on April 11, 1996, the SEC wrote to the PSE, attaching thereto the letter of PALI and directing the PSE to file its comments thereto within five days from its receipt and for its authorized representative to appear for an "inquiry" on the matter. On April 22, 1996, the PSE submitted a letter to the SEC containing its comments to the April 11, 1996 letter of PALI.