UNION BANK OF THE PHILIPPINES, PETITIONER, VS. SECURITIES AND EXCHANGE COMMISSION, MABASA AND COMPANY, INC., AND SHERIFF NORBERTO MAGSAJO, JR. OF THE OFFICE OF THE EX-OFFICIO SH…

Union Bank of the Philippines versus Securities and Exchange Commission

The Case

This is a petition for review on certiorari brought by Union Bank of the Philippines against the Securities and Exchange Commission, Mabasa and Company, Incorporated, and Sheriff Norberto Magsajo, Junior. The dispute began as an intra-corporate controversy over the inspection of corporate books and the recording of a stock transfer, and it ripened into a question of administrative jurisdiction. The case matters because it fixes the boundary between adjudication and execution under the Securities Regulation Code: when the Commission retains a pending intra-corporate case for final resolution, does it also retain the power to enforce the judgment it renders? The Supreme Court answers yes, and the answer is a favorite of examiners on jurisdiction and the consequences of a transfer of jurisdiction by statute.

Procedural History

Mabasa first filed a complaint with the Prosecution and Enforcement Department of the Securities and Exchange Commission, which dismissed it without prejudice to the filing of a proper complaint with the Securities Investigation and Clearing Department. Mabasa then filed a petition with that department against Union Bank, as the surviving corporation in its merger with International Corporate Bank. The hearing officer decided in favor of Mabasa, and Union Bank appealed to the Commission en banc. The Commission en banc affirmed as to the 4,532 shares but reversed as to the 3,098 shares acquired from Vicente Tan. Two separate appeals went to the Court of Appeals: Union Bank's petition for review under Rule 43, which was dismissed with the award of attorney's fees reduced, and Mabasa's appeal on the 3,098 shares. The decision in Union Bank's appeal became final and executory and was entered in the book of judgment. Mabasa then moved for partial execution before the Commission, which granted the motion and issued a writ of execution. Union Bank assailed the order and writ before the Court of Appeals by certiorari, and that petition was dismissed for lack of merit, as was its motion for reconsideration. Union Bank then came to the Supreme Court by petition for review on certiorari.

Facts

In 1970, Mabasa and Company owned certificates of stock representing 4,532 shares in International Corporate Bank, and it also acquired from Vicente Tan certificates representing 3,098 shares. Mabasa repeatedly asked the bank to allow it to inspect the corporate books and to record the transfer of the 3,098 shares, but the bank failed to act. Mabasa sued to compel inspection and recording, and the case was eventually lodged with the Securities Investigation and Clearing Department.

Meanwhile, International Corporate Bank merged with Union Bank, with Union Bank as the surviving corporation. Under the terms of the merger, Union Bank assumed all the liabilities and obligations of the bank, so that accrued claims and pending actions against the bank could be prosecuted against Union Bank. Mabasa thus pursued its petition against Union Bank, praying for inspection of the corporate books, for recording of the transfer of the 3,098 shares, for replacement or reissuance of its shares and the dividends due, and, if that were not possible, for payment of their fair market value plus damages.

The hearing officer ruled for Mabasa, directing inspection, recording of the transfer, replacement or reissuance of the shares at the ratio of twenty five Union Bank shares for every one International Corporate Bank share, payment of fair market value if replacement were no longer possible, exemplary damages of 50,000 pesos, and attorney's fees of 500,000 pesos plus 2,000 pesos for every court appearance. The Commission en banc affirmed only as to the 4,532 shares and reversed as to the 3,098 shares, holding that the unrecorded transfer bound only the parties to it and that Mabasa's recourse was against Vicente Tan. After the decision in Union Bank's appeal became final, Mabasa moved for partial execution, and the Commission granted it and issued a writ of execution, requesting the designation of a sheriff from the Regional Trial Court of Makati City. Union Bank resisted, arguing that under the Securities Regulation Code the Commission had lost jurisdiction to act, and that the term resolve does not include execute.

Issues

• Whether or not the Court of Appeals correctly interpreted the law in ruling that the term resolve includes execution under the Securities Regulation Code.
• Whether or not the Court of Appeals correctly ruled that the Securities and Exchange Commission still has jurisdiction to order the execution of its decisions within or after the lapse of one year from the enactment of the Securities Regulation Code.
• Whether or not the Court of Appeals correctly ruled that the Securities and Exchange Commission may enlist the aid of a sheriff of the Regional Trial Court of Makati City to execute its decision.

Applicable Provisions

Section 5.2 of Republic Act Number 8799, the Securities Regulation Code, provides:

The Commission's jurisdiction over all cases enumerated under 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.

This is the provision on which the entire case turns, because it is the penultimate sentence that preserves the Commission's jurisdiction over the case and, as the Court holds, carries with it the power to execute.

Ruling

On the first issue, the Court held that the term resolve is not limited to decision-making. The directive that retained cases should be resolved within one year from the enactment of the Code is, in the Court's words, more of a directive to hasten resolution, and it cannot be stretched to strip the Commission of the power to carry out what it has decided. The Court quoted with approval the reasoning of the Court of Appeals that a contrary holding results in absurdity, for if the Commission lost jurisdiction after the one-year period, no court or body could resolve the cases, since jurisdiction over them was not transferred to the Regional Trial Court.

On the second issue, the Court held that the Commission retained jurisdiction over the case and therefore retained the power to execute its decision. Jurisdiction is the authority to hear and determine a cause, and the grant of adjudicatory power should normally and logically be deemed to include the authority to enforce or execute the judgments rendered, unless the law otherwise provides, because the authority to decide is useless unless accompanied by the authority to see that what has been decided is carried out. The Court rejected the argument that a decided case is no longer a pending case, noting that a case in which execution has been issued is still considered pending, and that the word pending defines the phrase cases submitted for final resolution at the time the law took effect. The Court also invoked the rule that a tribunal which rendered the decision has general supervisory control over the process of its execution, and warned that splitting jurisdiction between the Commission for decision and the Regional Trial Court for execution is obnoxious to the orderly administration of justice.

On the third issue, the Court held that since the Commission's power to execute its decision is clear, its enlistment of the aid of a sheriff to enforce a final and executory judgment has no leg to stand on as an objection. The petition therefore failed on all three grounds.

Doctrine

First, the grant of adjudicatory power to a tribunal or agency is deemed to include the authority to enforce or execute the judgments it renders, unless the law otherwise provides, because the authority to decide is useless without the authority to carry it out. Second, under Section 5.2 of the Securities Regulation Code, the Securities and Exchange Commission retains jurisdiction over pending intra-corporate cases submitted for final resolution as of the effectivity of the Code, and that retained jurisdiction includes the power to execute its final decisions; the one-year period is a directive to hasten resolution, not a deadline that divests the Commission of jurisdiction. Third, a case in which execution has been issued remains pending, and the reckoning point for retention is the date of effectivity of the Code. Fourth, the tribunal that rendered the decision has general supervisory control over the process of its execution, and splitting jurisdiction between the deciding body and the executing court is obnoxious to the orderly administration of justice.

Disposition

The petition was denied, and the decision and resolution of the Court of Appeals upholding the order and writ of execution issued by the Securities and Exchange Commission were affirmed, with costs against Union Bank.

Remember This

The line to memorize is that the power to decide includes the power to execute, so the Commission that retains a pending intra-corporate case under Section 5.2 of the Securities Regulation Code may also enforce its judgment. Examiners use this case to test the scope of retained jurisdiction after a statutory transfer, and the rule against splitting jurisdiction between the deciding body and the executing court.