THIRDDIVISION

MAKATI STOCK EXCHANGE, G.R.No.138814

INC., MA. VIVIAN
YUCHENGCO, ADOLFO M.
DUARTE, MYRON C. PAPA, Present:
NORBERTO C. NAZARENO,
GEORGEUYTIOCO,ANTONIO
A. LOPA, RAMON B. ARNAIZ, YNARESSANTIAGO,J.,
LUIS J.L. VIRATA, and Chairperson,
ANTONIOGARCIA,JR. AUSTRIAMARTINEZ,
Petitioners, CHICONAZARIO,
NACHURA,and
PERALTA,JJ.
versus


MIGUEL V. CAMPOS,
substituted by JULIA ORTIGAS Promulgated:
[1]
VDA.DECAMPOS, April16,2009
Respondent.
xx

DECISION

CHICONAZARIO,J.:

ThisisaPetitionforReviewonCertiorariunderRule 45 seeking the reversal of the
[2]
Decision dated 11 February 1997 and Resolution dated 18 May 1999 of the Court of
AppealsinCAG.R.SPNo.38455.

Thefactsofthecaseareasfollows:

SECCaseNo.02944678wasinstitutedon10 February 1994 by respondent Miguel
V.Campos,whofiledwiththeSecurities,InvestigationandClearingDepartment(SICD)of
theSecuritiesandExchangeCommission(SEC),aPetitionagainsthereinpetitionersMakati
Stock Exchange, Inc. (MKSE) and MKSE directors, Ma. Vivian Yuchengco, Adolfo M.
Duarte,MyronC.Papa,NorbertoC.Nazareno,GeorgeUyTioco,AntonioA,Lopa,Ramon
B.Arnaiz,LuisJ.L.Virata,andAntonioGarcia,Jr.Respondent,insaidPetition,sought:(1)
thenullificationoftheResolutiondated3June1993oftheMKSEBoardofDirectors,which
allegedly deprived him of his right to participate equally in the allocation of Initial Public
Offerings(IPO)ofcorporationsregisteredwithMKSE(2)thedeliveryoftheIPOshareshe
was allegedly deprived of, for which he would pay IPO prices and (3) the payment of P2
millionasmoraldamages,P1millionasexemplarydamages,andP500,000.00asattorneys
feesandlitigationexpenses.

On14February1994, the SICD issued an Order granting respondents prayer for the
issuance of a Temporary Restraining Order to enjoin petitioners from implementing or
enforcingthe3June1993ResolutionoftheMKSEBoardofDirectors.

TheSICDsubsequentlyissuedanotherOrderon10March1994grantingrespondents
applicationforaWritofPreliminaryInjunction,tocontinuouslyenjoin,duringthependency
of SEC Case No. 02944678, the implementation or enforcement of the MKSE Board
Resolution in question. Petitioners assailed this SICD Order dated 10 March 1994 in a
PetitionforCertiorarifiledwiththeSECenbanc,docketedasSECEBNo.393.

On11March1994,petitionersfiledaMotiontoDismissrespondentsPetitioninSEC
CaseNo.02944678,basedonthefollowinggrounds:(1)thePetitionbecamemootdueto
thecancellationofthelicenseofMKSE(2)theSICDhadnojurisdictionoverthePetition
and(3)thePetitionfailedtostateacauseofaction.

The SICD denied petitioners Motion to Dismiss in an Order dated 4 May 1994.
Petitionersagainchallengedthe4May1994OrderofSICDbeforetheSECenbancthrough
anotherPetitionforCertiorari,docketedasSECEBNo.403.

InanOrderdated31May1995inSECEBNo.393,theSECenbancnullifiedthe10
March 1994 Order of SICD in SEC Case No. 02944678 granting a Writ of Preliminary
Injunctioninfavorofrespondent.Likewise,inanOrderdated14August1995inSECEB
No.403,theSECenbancannulledthe4May1994OrderofSICDinSECCaseNo.0294
4678 denying petitioners Motion to Dismiss, and accordingly ordered the dismissal of
respondentsPetitionbeforetheSICD.

Respondent filed a Petition for Certiorari with the Court of Appeals assailing the
OrdersoftheSECenbancdated31May1995and14August1995inSECEBNo.393and
SECEB No. 403, respectively. Respondents Petition before the appellate court was
docketedasCAG.R.SPNo.38455.

On11February1997, the Court of Appeals promulgated its Decision in CAG.R. SP
No.38455,grantingrespondentsPetitionforCertiorari,thus:

WHEREFORE,thepetitioninsofarasitpraysforannulmentoftheOrdersdatedMay
31,1995andAugust14,1995inSECEBCaseNos. 393 and 403isGRANTED. The said
ordersareherebyrenderednullandvoidandsetaside.


Petitioners filed a Motion for Reconsideration of the foregoing Decision but it was
deniedbytheCourtofAppealsinaResolutiondated18May1999.

Hence,thepresentPetitionforReviewraisingthefollowingarguments:

I.

THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DISMISSED THE
PETITIONFILEDBYRESPONDENTBECAUSEONITSFACE,ITFAILEDTOSTATE
ACAUSEOFACTION.

II.

THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OF RESPONDENT WAS A
MERE ACCOMMODATION GIVEN TO HIM BY THE BOARD OF [DIRECTORS] OF
THEMAKATISTOCKEXCHANGE,INC.

III.

THE COURT OF APPEALS ERRED IN HOLDING THAT THE SEC EN BANC
COMMITTEDGRAVEABUSEOFDISCRETIONAMOUNTINGTOLACKOREXCESS
OFJURISDICTIONWHENITMADEANEXTENDEDINQUIRYANDPROCEEDEDTO
MAKEADETERMINATIONASTOTHETRUTHOFRESPONDENTSALLEGATIONS
IN HIS PETITION AND USED AS BASIS THE EVIDENCE ADDUCED DURING THE
HEARINGONTHEAPPLICATIONFORTHEWRITOFPRELIMINARYINJUNCTION
TODETERMINETHEEXISTENCEORVALIDITYOFASTATEDCAUSEOFACTION.

IV.

IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT TO BE BOUGHT BY THE
BROKERSFORTHEMSELVESBUTARETOBEDISTRIBUTEDTOTHEINVESTING
PUBLIC.HENCE, RESPONDENTS CLAIM FOR DAMAGES IS ILLUSORY AND HIS
[3]
PETITIONANUISANCESUIT.

On18September2001, counsel for respondent manifested to this Court that his client
died on 7 May 2001. In a Resolution dated 24 October 2001, the Court directed the
substitutionofrespondentbyhissurvivingspouse,JuliaOrtigasvda.deCampos.

PetitionerswantthisCourttoaffirmthedismissalbytheSECenbancofrespondents
PetitioninSECCaseNo.02944678forfailuretostateacauseofaction.Ontheotherhand,
respondent insists on the sufficiency of his Petition and seeks the continuation of the
proceedingsbeforetheSICD.

[4]
Acauseofactionistheactoromissionbywhichapartyviolatesarightofanother.
Acomplaintstatesacauseofactionwhereitcontainsthreeessentialelementsofacauseof
action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the
defendant,and(3)theactoromissionofthedefendantinviolationofsaidlegalright.Ifthese
elementsareabsent,thecomplaintbecomesvulnerabletodismissalonthegroundoffailureto
stateacauseofaction.

Ifadefendantmovestodismissthecomplaintonthegroundoflackofcauseofaction,
he is regarded as having hypothetically admitted all the averments thereof. The test of
sufficiencyofthefactsfoundinacomplaintasconstitutingacauseofactioniswhetherornot
admittingthefactsalleged,thecourtcanrenderavalidjudgmentuponthesameinaccordance
withtheprayerthereof.Thehypotheticaladmissionextendstotherelevantandmaterialfacts
well pleaded in the complaint and inferences fairly deducible therefrom. Hence, if the
allegations in the complaint furnish sufficient basis by which the complaint can be
maintained,thesameshouldnotbedismissedregardlessofthedefensethatmaybeassessed
[5]
bythedefendant.
Giventheforegoing,theissueofwhetherrespondentsPetitioninSECCaseNo.0294
4678 sufficiently states a cause of action may be alternatively stated as whether,
hypotheticallyadmittingtobetruetheallegationsinrespondentsPetitioninSECCaseNo.
02944678, the SICD may render a valid judgment in accordance with the prayer of said
Petition.

A reading of the exact text of respondents Petition in SEC Case No. 02944678 is,
therefore,unavoidable.PertinentportionsofthesaidPetitionreads:

7. In recognition of petitioners invaluable services, the general membership of
respondentcorporation[MKSE]passedaresolutionsometimein1989amendingitsArticlesof
Incorporation,toincludethefollowingprovisiontherein:

ELEVENTHWHEREAS,Mr.MiguelCamposistheonlysurviving
incorporator of the Makati Stock Exchange, Inc. who has maintained his
membership

WHEREAS, he has unselfishly served the Exchange in various
capacities,asgovernorfrom1977tothepresentandasPresidentfrom1972to
1976andagainasPresidentfrom1988tothepresent

WHEREAS, such dedicated service and leadership which has
contributedtotheadvancementandwellbeingnotonlyoftheExchangeandits
members but also to the Securities industry, needs to be recognized and
appreciated

WHEREAS, as such, the Board of Governors in its meeting held on
February 09, 1989 has correspondingly adopted a resolution recognizing his
valuable service to the Exchange, reward the same, and preserve for posterity
such recognition by proposing a resolution to the membership body which
would make him as Chairman Emeritus for life and install in the Exchange
premisesacommemorativebronzeplaqueinhishonor

NOW,THEREFORE,forandinconsiderationoftheabovepremises,
thepositionoftheChairmanEmeritustobeoccupiedbyMr.MiguelCampos
during his lifetime and irregardless of his continued membership in the
Exchange with the Privilege to attend all membership meetings as well as the
meetingsoftheBoardofGovernorsoftheExchange,isherebycreated.

8. Hence, to this day, petitioner is not only an active member of the respondent
corporation,butitsChairmanEmeritusaswell.

9. Correspondingly, at all times material to this petition, as an active member and
ChairmanEmeritusofrespondentcorporation,petitionerhasalwaysenjoyedtherightgivento
alltheothermemberstoparticipateequallyintheInitialPublicOfferings(IPOsforbrevity)of
corporations.

10.IPOsaresharesofcorporationsofferedforsaletothepublic,priortothelistingin
thetradingfloorofthecountrystwostockexchanges.Normally,TwentyFivePercent(25%)
ofthesesharesaredividedequallybetweenthetwostockexchangeswhichinturndividethese
equallyamongtheirmembers,whopaythereforattheofferingprice.

11. However, on June 3, 1993, during a meeting of the Board of Directors of
respondentcorporation,individualrespondentspassedaresolutiontostopgivingpetitionerthe
IPOsheisentitledto,basedonthegroundthattheseshareswereallegedlybenefitingGerardo
O.Lanuza,Jr.,whotheseindividualrespondentswantedtogetevenwith,forhavingfiledcases
beforetheSecuritiesandExchange(SEC)fortheirdisqualificationasmemberoftheBoardof
Directorsofrespondentcorporation.

12.Hence,fromJune3,1993uptothepresenttime,petitionerhasbeendeprivedofhis
righttosubscribetotheIPOsofcorporationslistinginthestockmarketattheirofferingprices.

13.Thecollectiveactoftheindividualrespondentsindeprivingpetitionerofhisright
toashareintheIPOsfortheaforementionedreason,isunjust,dishonestanddoneinbadfaith,
[6]
causingpetitionersubstantialfinancialdamage.

There is no question that the Petition in SEC Case No. 02944678 asserts a right in
favor of respondent, particularly, respondents alleged right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices and stipulates the correlative
obligation of petitioners to respect respondents right, specifically, by continuing to allow
respondenttosubscribetotheIPOsofcorporationslistedinthestockmarketattheiroffering
prices.

However,thetermsrightandobligationinrespondentsPetitionarenotmagicwords
thatwouldautomaticallyleadtotheconclusionthatsuchPetitionsufficientlystatesacauseof
action.Rightandobligationarelegaltermswithspecificlegalmeaning.Arightisaclaimor
[7]
title to an interest in anything whatsoever that is enforceable by law. An obligation is
[8]
definedintheCivilCodeasajuridicalnecessitytogive,todoornottodo. Foreveryright
enjoyed by any person, there is a corresponding obligation on the part of another person to
[9]
respectsuchright.Thus,JusticeJ.B.L.Reyesoffers thedefinitiongivenbyAriasRamos
asamorecompletedefinition:

An obligation is a juridical relation whereby a person (called the creditor) may
demand from another (called the debtor) the observance of a determinative conduct (the
giving,doingornotdoing),andincaseofbreach,maydemandsatisfactionfromtheassetsof
thelatter.

TheCivilCodeenumeratesthesourcesofobligations:

Art.1157.Obligationsarisefrom:
 (1)Law
(2)Contracts
(3)Quasicontracts
(4)Actsoromissionspunishedbylawand
(5)Quasidelicts.

Therefore, an obligation imposed on a person, and the corresponding right granted to
another,mustberootedinatleastoneofthesefivesources.Themereassertionofarightand
claim of an obligation in an initiatory pleading, whether a Complaint or Petition, without
identifying the basis or source thereof, is merely a conclusion of fact and law. A pleading
should state the ultimate facts essential to the rights of action or defense asserted, as
[10]
distinguishedfrommereconclusionsoffactorconclusionsoflaw. Thus,aComplaintor
PetitionfiledbyapersonclaimingarighttotheOfficeofthePresidentofthisRepublic,but
withoutstatingthesourceofhispurportedright,cannotbesaidtohavesufficientlystateda
causeofaction.Also,apersonclaimingtobetheownerofaparceloflandcannotmerely
statethathehasarighttotheownershipthereof,butmustlikewiseassertintheComplaint
eitheramodeofacquisitionofownershiporatleastacertificateoftitleinhisname.

In the case at bar, although the Petition in SEC Case No. 02944678 does allege
respondentsrighttosubscribetotheIPOsofcorporationslistedinthestockmarketattheir
offeringprices,andpetitionersobligationtocontinuerespectingandobservingsuchright,the
Petitionutterlyfailedtolaydownthesourceorbasisofrespondentsrightand/orpetitioners
obligation.

Respondent merely quoted in his Petition the MKSE Board Resolution, passed
sometime in 1989, granting him the position of Chairman Emeritus of MKSE for life.
However, there is nothing in the said Petition from which the Court can deduce that
respondent, by virtue of his position as Chairman Emeritus of MKSE, was granted by law,
contract,oranyotherlegalsource,therighttosubscribetotheIPOsofcorporationslistedin
thestockmarketattheirofferingprices.

A meticulous review of the Petition reveals that the allocation of IPO shares was
merely alleged to have been done in accord with a practice normally observed by the
membersofthestockexchange,towit:

 IPOsaresharesofcorporationsofferedforsaletothepublic,priortotheirlistinginthetrading
floorofthecountrystwostockexchanges.Normally,TwentyFivePercent(25%)ofthese
shares are divided equally between the two stock exchanges which in turn divide these
[11]
equally among their members, who pay therefor at the offering price. (Emphasis
supplied)

A practice or custom is, as a general rule, not a source of a legally demandable or
[12]
enforceable right. Indeed, in labor cases, benefits which were voluntarily given by the
employer,andwhichhaveripenedintocompanypractice,areconsideredasrightsthatcannot
[13]
be diminished by the employer. Nevertheless, even in such cases, the source of the
employeesrightisnotcustom,butultimately,thelaw,sinceArticle100oftheLaborCode
explicitlyprohibitseliminationordiminutionofbenefits.

ThereisnosuchlawinthiscasethatconvertsthepracticeofallocatingIPOsharesto
MKSEmembers,forsubscriptionattheirofferingprices,intoanenforceableordemandable
right.Thus,evenifitishypotheticallyadmittedthatnormally,twentyfivepercent(25%)of
theIPOsaredividedequallybetweenthetwostockexchangeswhich,inturn,dividetheir
respective allocation equally among their members, including the Chairman Emeritus, who
pay for IPO shares at the offering price the Court cannot grant respondents prayer for
damages which allegedly resulted from the MKSE Board Resolution dated 3 June 1993
deviatingfromsaidpracticebynolongerallocatinganysharestorespondent.

Accordingly,theinstantPetitionshouldbegranted.ThePetitioninSECCaseNo.02
944678shouldbedismissedforfailuretostateacauseofaction.Itdoesnotmatterthatthe
SECenbanc,initsOrderdated14August1995inSECEBNo.403,oversteppeditsbounds
bynotlimitingitselftotheissueofwhetherrespondentsPetitionbeforetheSICDsufficiently
statedacauseofaction.TheSECenbancmayhavebeenmistakeninconsideringextraneous
evidence in granting petitioners Motion to Dismiss, but its discussion thereof are merely
superfluous and obiter dictum. In the main, the SEC en banc did correctly dismiss the
PetitioninSECCaseNo.02944678foritsfailuretostatethebasisforrespondentsalleged
right,towit:

PrivaterespondentCamposhasfailedtoestablishthebasisorauthorityforhisalleged
righttoparticipateequallyintheIPOallocationsoftheExchange.Hecitedparagraph11of
theamendedarticlesofincorporationoftheExchangeinsupportofhispositionbutacareful
 reading of the said provision shows nothing therein that would bear out his claim. The
provisionmerelycreatedthepositionofchairmanemeritusoftheExchangebutitmentioned
[14]
nothingaboutconferringupontheoccupantthereoftherighttoreceiveIPOallocations.

With the dismissal of respondents Petition in SEC Case No. 02944678, there is no
more need for this Court to resolve the propriety of the issuance by SCID of a writ of
preliminaryinjunctioninsaidcase.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals
dated11February1997anditsResolutiondated18May1999inCAG.R.SPNo.38455are
REVERSEDandSETASIDE.TheOrdersdated31May1995and14August1995ofthe
Securities and Exchange Commission en banc in SECEB Case No. 393 and No. 403,
respectively,areherebyreinstated.Nopronouncementastocosts.

SOORDERED.

MINITAV.CHICONAZARIO
AssociateJustice

WECONCUR:

CONSUELOYNARESSANTIAGO
AssociateJustice
Chairperson




MA. ALICIA AUSTRIA
MARTINEZANTONIO EDUARDO B.
NACHURA
AssociateJusticeAssociateJustice



 DIOSDADOM.PERALTA

AssociateJustice


ATTESTATION

IattestthattheconclusionsintheaboveDecisionwerereachedinconsultationbefore
thecasewasassignedtothewriteroftheopinionoftheCourtsDivision.

CONSUELOYNARESSANTIAGO
AssociateJustice
Chairperson,ThirdDivision


CERTIFICATION

PursuanttoSection13,ArticleVIIIoftheConstitution,andtheDivisionChairpersons
Attestation,itisherebycertifiedthattheconclusionsintheaboveDecisionwerereachedin
consultationbeforethecasewasassignedtothewriteroftheopinionoftheCourtsDivision.

REYNATOS.PUNO
ChiefJustice

[1]
PerResolutionof24October2001.
[2]
PennedbyAssociateJusticeEubuloG.VerzolawithAssociateJusticesJesusM.ElbiniasandHilarionL.Aquino,
concurringrollo,pp.3036.
[3]
Rollo,p.144.
[4]
RevisedRulesofCourt,Rule2,Section2.
[5]
FilEstateGolfandDevelopment,Inc.v.CourtofAppeals,333Phil.465,490491(1996).
[6]
Rollo,pp.5052.
[7]
Baileyv.Miller,91N.E.24,25,Ind.App.475,citedin37A[120VAC,Immersionheater,4.6kW]Wordsand
Phrases363.
[8]
CivilCode,Article1156.
[9]
LawyersJournal,31January1951,p.47.
[10]
Abadv.CourtofFirstInstanceofPangasinan,G.R.Nos.5850708,26February1992,206SCRA567,579580.
[11]
Rollo,pp.5152.
[12]
Adistinction,however,shouldbemadebetweenMunicipalLawandPublicInternationalLaw.Customisoneofthe
primarysourcesofInternationalLaw,andisthusasourceoflegalrightswithinsuchsphere.
[13]
ArcoMetalProductsCo.,Inc.v.SamahanngmgaManggagawasaArcoMetalNAFLU,G.R.No.170734,14May
2008,554SCRA110,118.
[14]
Rollo,p.95.