Securities and Exchange Commission vs.

Subic bay Gold and country Club, Inc and universal

international Group Development Corporation
GR no, 179047, March 11, 2015 | Second Divition, Leonon J.

Intra-corporate controversies, previously under SEC’s jurisdiction, are now under the jurisdiction of the
RTC designated as commercial courts. However, the transfer of jurisdiction to the trial courts does not
oust the SEC of its jurisdiction to determine if administrative rules and regulations were violated.

On April 25, 1996, Subic Bay Golf and Country club, Inc (SBGCCI) and Universal International Group
Development Corporation (UIGDC) entered into a Development Agreement. UIGDC agreed to “finance,
construct and develop the golf course, for an in consideration of the payment by SBGCCI of it’s 1, 530
shares of stock.”

Upon, SBGCCI’s application, SEC issued an order for the registration of 3,000 no par value shares of
SBGCCI on July 8, 1996. SBGCCI was also issued a certificate of permit to offer securities for sale to the
public of its 1, 530 no par value proprietary shares on August 9, 1996 the shares were sold at P425,000
per share and the same were used to pay UIGDC for the development of the golf course.

Complainants Filart and Villareal informed SEC that they had been asking UIGDC for the refund of their
payment for their SGGBCCI shares. UIGDC did not act on their requests. They alleged that they
purchased shares in the same promise of SBGCCI and UIGDC to deliver the ff: 1) swimming pool and
tennis court;2) 18 hole golf course; 3) 9 hole exclusive course and etc. However, these promises were not
delivered. And despite the undelivered promises, they started to charged monthly dues They were even
threated that their shares would be auctioned off if their back dues would remain unpaid.

SBGCCI and UIGDC in a petition of review questioned the order and jurisdiction of the Corporation
Finance Department’s order before the SEC since the same involved and intra-corporate dispute. SEC
ruled that the proceedings were administrative in nature. It was only conducted to determining if SEC’s
rules and regulations were violated. SEC has power to investigate possible violations and impose
appropriate administrative sanctions. CA, however, declared SEC’s decision as null and void since it
found the case as an intra-corporate controversy not under SEC’s jurisdiction.
Who between the SEC and the RTC has jurisdiction over this case

HELD:

Before solving the issue, we have to determine whether SEC has the authority to order the return of
purchase price of securities upon finding that there were fraudulent representation of the prospectus.

The court rules for SBGCCI and UIGDC.

Under PD No. 902-A, SEC has jurisdiction over acts amounting to fraud and misrepresentation by a
corporation’s board of directors, business association and officers, even intra-corporate disputes.
However, jurisdiction over intra-corporate disputes and all other cases enumerated in SEC 5 had already
been transferred to designated RTC under RA no. 8799. For a dispute to be intra-corporate, it must
satisfy the relationship and nature of controversy tests.

Relationship test – requires that the dispute between a:

o Corporation/ partnership/ association and the public;
o A corporation/ partnership/ association and the state of regarding the entity’s franchise, permit or
license to operate;