Philippine Stock Exchange v.

CA

G.R. No. 125469

1 of 2

G.R. No. 125469 October 27, 1997

PHILIPPINE STOCK EXCHANGE, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and
PUERTO AZUL LAND, INC., respondents.
Facts:
The Securities and Exchange Commission is the government agency, under the direct general supervision of the
Office of the President, with the immense task of enforcing the Revised Securities Act, and all other duties
assigned to it by pertinent laws. Among its inumerable functions, and one of the most important, is the supervision
of all corporations, partnerships or associations, who are grantees of primary franchise and/or a license or permit
issued by the government to operate in the Philippines.

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 to 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. SC affirms that 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. This is in line with the SEC's mission to ensure
proper compliance with the laws, such as the Revised Securities Act and to regulate the sale and disposition of
securities in the country. The role of the SEC in our national economy cannot be minimized. The legislature,
through the Revised Securities Act, Presidential Decree No. 902-A, and other pertinent laws, has entrusted to it the
serious responsibility of enforcing all laws affecting corporations and other forms of associations not otherwise
vested in some other government office. This is not to say, however, that the PSE's management prerogatives are
under the absolute control of the SEC. The PSE is, after all, a corporation authorized by its corporate franchise to
engage in its proposed and duly approved business. One of the PSE's main concerns, as such, is still the generation
of profit for its stockholders. Moreover, the PSE has all the rights pertaining to corporations, including the right to
sue and be sued, to hold property in its own name, to enter (or not to enter) into contracts with third persons, and to
perform all other legal acts within its allocated express or implied powers.
A corporation is but an association of individuals, allowed to transact under an assumed corporate name, and with a
distinct legal personality. In organizing itself as a collective body, it waives no constitutional immunities and

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G.R. No. 125469

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perquisites appropriate to such a body. As to its corporate and management decisions, therefore, the state will
generally not interfere with the same. Questions of policy and of management are left to the honest decision of the
officers and directors of a corporation, and the courts are without authority to substitute their judgment for the
judgment of the board of directors. The board is the business manager of the corporation, and so long as it acts in
good faith, its orders are not reviewable by the courts.
Thus, notwithstanding the regulatory power of the SEC over the PSE, and the resultant authority to reverse the
PSE's decision in matters of application for listing in the market, the SEC may exercise such power only if the
PSE's judgment is attended by bad faith. In reaching its decision to deny the application for listing of PALI, the
PSE considered important facts, which, in the general scheme, brings to serious question the qualification of PALI
to sell its shares to the public through the stock exchange. Based on the multiple adverse claims against the assets
of PALI, PSE was in the right position when it refused application of PALI, for a contrary ruling was not to the best
interest of the general public. The purpose of the Revised Securities Act, after all, is to give adequate and effective
protection to the investing public against fraudulent representations, or false promises, and the imposition of
worthless ventures. Also, as the primary market for securities, the PSE has established its name and goodwill, and
it has the right to protect such goodwill by maintaining a reasonable standard of propriety in the entities who
choose to transact through its facilities. It was reasonable for the PSE, therefore, 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.