Securities and Exchange Commission

v.
Court of Appeals, Omico Corp., et al.
G.R. No. 187702
October 22, 2014
Facts:

Omico Corporation, a publicly listed company was about to hold its Annual Stockholder’s
meeting where an election for the members of the Board of Directors was to be held. In line with
the meeting, it started accepting proxies for validation when one of its stockholders, Astra
Securities Corporation (Astra) objected to the inclusion of certain proxies for being issued in
violation with the SEC rules and regulations. Despite the objections, Omico Corporation validated
the proxies leading Astra to file with SEC a case invalidating the proxies, and the issuance of a
Cease and Desist Order (CDO) to enjoin the upcoming meeting. SEC issued the CDO which did not
prevent Omico Corporation from proceeding with the scheduled meeting. Upon appeal, CA
declared the CDO null and void on the ground that SEC had no jurisdiction over the case since
any dispute involving the validation of proxies is an election contest, which is under RTC’s
jurisdiction. Hence, this appeal.

Issue: Whether SEC has jurisdiction over controversies arising from the validation of proxies for
the election of the directors of a corporation.

Ruling: No.

The power of the SEC to investigate violations of its rules on proxy solicitation is
unquestioned when proxies are obtained to vote on matters unrelated to the cases enumerated
under Section 5 of Presidential Decree No. 902-A. However, when proxies are solicited in relation
to the election of corporate directors, the resulting controversy, even if it ostensibly raised the
violation of the SEC rules on proxy solicitation, should be properly seen as an election controversy
within the original and exclusive jurisdiction of the trial courts by virtue of Section 5.2 of the SRC
in relation to Section 5 (c) of Presidential Decree No. 902-A. In this case, the validation of proxies
relates to the determination of the existence of a quorum for the election of the directors which
requires the presence – in person or by proxy – of the owners of the majority of the outstanding
capital stock of respondent Omico. The fact that there was no actual voting did not make the
election any less so, especially since (private) petitioner Astra had never denied that an election
of directors took place.