UBS Marketing Corp. vs. CA

G.R. No. 130328 (May 31, 2000)

Facts:

The case involves a family dispute among the Uy family of Bacolod City, specifically between petitioner Johnny K.H. Uy and private respondents Ban Hua Uy-Flores and Ban Ha Uy-Chua, who are siblings. The family owns several corporations, including UBS Marketing Corporation and Soon Kee Commercial, Inc. The siblings were interlocking stockholders and officers of these corporations, with the private respondents serving as managing directors and having custody of the corporate accounting and tax records, as well as the funds of the corporations.

Due to serious disagreements, the Uy family held conciliation meetings and agreed to divide their business interests. As a result, UBS Marketing Corporation was assigned to Johnny K.H. Uy, while Soon Kee Commercial, Inc. was assigned to the other family members, including the private respondents. On June 5, 1987, several deeds of assignment were executed to formalize this division.

On April 6, 1988, Johnny K.H. Uy and UBS Marketing Corporation filed a complaint with the Securities and Exchange Commission (SEC) against the private respondents and their accountant, Roland King, seeking the recovery of corporate books and an accounting of funds and properties belonging to UBS Marketing Corporation. The complaint alleged that the respondents refused to turn over the records and account for the funds, despite demands.

The respondents filed a motion to dismiss the complaint, claiming that the SEC lacked jurisdiction over the matter, arguing that there was no intra-corporate relationship. The SEC Hearing Officer denied the motion, but the Court of Appeals (CA) later reversed this decision, ruling that the SEC did not have jurisdiction over the controversy.

The SEC and petitioners subsequently filed a petition for review with the Supreme Court, which ruled that the controversy was indeed intra-corporate and fell under the SEC's jurisdiction. After the Supreme Court's decision became final, the SEC conducted hearings and rendered a judgment by default in favor of the petitioners, ordering the respondents to produce corporate records and account for various assets and funds.

The respondents appealed the SEC's decision to the SEC en banc, which set aside most of the Hearing Officer's judgment but ordered the respondents to render a full accounting of the assets and properties of both corporations. The respondents then appealed to the CA, which reversed the SEC en banc's order, leading to the current petition for review by the petitioners.

Legal Issues:

1. Whether the CA erred in ruling that the SEC lacked jurisdiction over the intra-corporate controversy.
2. Whether the CA correctly determined that the SEC en banc's order for a full accounting was beyond the scope of the relief sought in the original complaint.
3. Whether the CA's characterization of the SEC's order as one for specific performance was appropriate.

Arguments:

• Petitioners' Arguments:

  • The CA erred in asserting that the SEC lacked jurisdiction over the case, as the Supreme Court had already ruled that the controversy was intra-corporate.
  • The SEC en banc's order for a full accounting was warranted based on the allegations in the original complaint and the evidence presented, even if not explicitly prayed for.
  • The CA incorrectly classified the SEC's order as one for specific performance, which is outside the SEC's jurisdiction.

• Respondents' Arguments:

  • The SEC did not have jurisdiction over the matter as there was no intra-corporate relationship.
  • The relief sought by the petitioners was not properly prayed for in the original complaint, and thus the SEC exceeded its authority in granting such relief.
  • The SEC's order constituted an action for specific performance, which should have been filed in the Regional Trial Court.

Court's Decision and Legal Reasoning:

The Supreme Court granted the petition, reversing the CA's decision and reinstating the SEC en banc's order. The Court held that:

1. The CA erred in ruling that the SEC lacked jurisdiction over the intra-corporate controversy, as this had already been established by the Supreme Court in a prior ruling.
2. The SEC en banc did not commit reversible error in ordering a full accounting, as the relief was warranted by the allegations in the petition and the facts proven during the hearings. The Court emphasized that the SEC's rules allowed for relief that was not explicitly prayed for, as long as it was supported by the evidence.
3. The characterization of the SEC's order as one for specific performance was incorrect. The order for an accounting was within the SEC's jurisdiction and was a necessary step to ensure compliance with the obligations of the corporate officers to account for the corporations' finances.

Significant Legal Principles Established:

• The Supreme Court reaffirmed the SEC's jurisdiction over intra-corporate controversies, emphasizing that the SEC has the authority to grant relief based on the facts presented, even if not specifically requested in the complaint.
• The ruling clarified that the SEC's procedural rules differ from the Rules of Court, particularly regarding default judgments and the extent of relief that can be granted.
• The decision highlighted the obligation of corporate officers to account for the finances of the corporations they manage, reinforcing the principle of fiduciary duty within corporate governance.