Philippine Stock Exchange, Inc. v. Court of Appeals [G.R. No. 125469 | October 27, 1997]

 CASE DIGEST

Philippine Stock Exchange, Inc. v. Court of Appeals

G.R. No. 125469 | October 27, 1997

SECOND DIVISION, TORRES, JR. J.

 

Business Judgement Rule 

 

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. 

 

Puerto Azul Land, Inc. (PALI), a domestic real estate corporation, sought to list its shares in the Philippine Stock Exchange (PSE) after obtaining a Securities and Exchange Commission (SEC) permit to sell shares to the public. The PSE’s Listing Committee initially recommended approval. However, the PSE Board of Governors denied the application, citing unresolved legal claims over PALI’s assets, including a claim by the Marcos family and sequestration by the Presidential Commission on Good Government (PCGG). 

PALI appealed to the SEC, which reversed the PSE’s decision, ordering the immediate listing of PALI’s shares. The PSE challenged this order before the Court of Appeals, arguing that the SEC had no authority to interfere with the PSE’s business discretion. The appellate court upheld the SEC’s ruling, prompting PSE to elevate the case to the Supreme Court.

 

Whether the SEC had the authority to overturn the PSE’s decision denying PALI’s listing application. 

YES. he Supreme Court ruled in favor of the PSE, holding that the SEC acted arbitrarily in reversing the PSE’s decision. The PSE, as a corporate entity, had the discretion to deny the listing of PALI based on legitimate concerns about the ownership and integrity of its assets. The Court recognized that while the SEC has regulatory power, it cannot override business decisions made in good faith and within the corporation’s legal authority. Thus, absent bad faith or clear abuse of discretion, regulatory authorities cannot interfere with the reasonable exercise of corporate management decisions.

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Montelibano V. Bacolod-Murcia Milling Co. [G.R. No. L-15092 | May 18, 1962]

 CASE DIGEST

MONTELIBANO V. BACOLOD-MURCIA MILLING CO.

G.R. No. L-15092 | May 18, 1962

EN BANC, REYES, J.B.L

 

Business Judgement Rule

 

It is a well-known rule of law that questions of policy or of management are left solely to the honest decision of officers and directors of a corporation, and the court is without authority to substitute its judgment for that 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.

  

Plaintiffs-appellants, including Alfredo and Alejandro Montelibano and Gonzaga & Co., were sugar planters with milling contracts with Bacolod-Murcia Milling Co., Inc. The original 1919 milling contract stipulated a 45%-55% division of sugar production (mill-planters). In 1936, an amended contract increased the planters' share to 60%, extending the contract for an additional 15 years. Additionally, the milling company’s Board of Directors passed a resolution (August 20, 1936) stating that if other sugar centrals in Negros Occidental granted better terms to their planters, Bacolod-Murcia would provide the same to its own planters. 

By 1951-1952, other sugar mills had increased planters’ shares beyond 60%. Plaintiffs demanded similar adjustments based on the 1936 resolution. The milling company refused, arguing that the resolution was ultra vires (beyond corporate powers) and amounted to an unenforceable donation. The trial court ruled in favor of the defendant, dismissing the complaint. Plaintiffs appealed.

 

Whether the resolution passed by Bacolod-Murcia Milling Co. increasing planters’ shares upon fulfilment of a condition was a valid corporate act and enforceable against the company. 

YES. The Supreme Court reversed the lower court’s ruling, holding that the resolution was a valid corporate act and binding upon Bacolod-Murcia Milling Co. The resolution was not a donation but an amendment to the milling contract meant to induce planters to agree to a longer contract term. The resolution was passed in good faith and was within the authority of the Board of Directors. 

Thus, since the Board of Directors acted within its discretion and in furtherance of corporate objectives, the resolution was enforceable, requiring the milling company to grant the increased sugar shares to the planters.

 

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Simon vs. Commission on Human Rights G.R. No. 100150 [January 5, 1994]

 CONSTITUTIONAL LAW

Simon vs. Commission on Human Rights

G.R. No. 100150 [January 5, 1994]

 EN BANC, VITUG, J.

 

Powers of Commission on Human Rights (CHR) to investigate civil and political rights violation of citizen; 

The Commission on Human Rights (CHR) is limited to investigating violations of civil and political rights, as defined by the Constitution. Economic rights and privileges, such as the right to engage in business, do not fall under the CHR’s jurisdiction unless they are directly linked to civil or political rights violations. Furthermore, the CHR’s contempt powers are confined to enforcing compliance with its investigative mandates and cannot be used to enforce orders in matters outside its constitutional authority.

 

In July 1990, the Quezon City government issued a demolition notice to vendors occupying stalls and shanties along North EDSA. The notice, signed by petitioner Carlos Quimpo, instructed the private respondents—members of the North EDSA Vendors Association—to vacate the premises within three days to make way for the development of a “People’s Park.” The respondents sought assistance from the Commission on Human Rights (CHR), filing a complaint to stop the demolition. 

The CHR issued several orders to halt the demolition and provide financial assistance to the affected vendors. It also cited the petitioners for contempt when the demolition proceeded despite its directives. The petitioners challenged the CHR’s jurisdiction, arguing that the issues raised did not fall under human rights violations involving civil or political rights as envisioned by the Constitution. They claimed that the respondents’ rights to engage in business were merely privileges, not enforceable human rights.

 

Whether or not the CHR have jurisdiction to investigate the demolition of vendors’ stalls and shanties as a human rights violation involving civil and political rights. 

NO. The Supreme Court ruled that the CHR’s jurisdiction is confined to investigating violations of civil and political rights and that it exceeded its authority in this case. The Court invalidated the CHR’s orders to stop the demolition and its imposition of contempt penalties. 

The Court explained that civil rights pertain to an individual’s entitlements as a citizen, such as property rights, equal protection under the law, and contractual freedom. Political rights relate to participation in governmental functions, such as suffrage and holding public office. Human rights violations, as contemplated by the Constitution, are those involving severe breaches of civil and political rights, such as torture, enforced disappearances, or political detention. 

The Court found that the demolition of stalls and shanties, planned for the construction of a public park, did not constitute a human rights violation involving civil or political rights. The claimed “right to engage in business” was a mere privilege and not among the inalienable rights protected under the CHR’s jurisdiction. 

On the CHR’s power to cite for contempt, the Court held that this authority is limited to enforcing its operational guidelines and rules of procedure necessary to carry out its investigative function. The CHR’s contempt powers do not extend to enforcing resolutions on matters beyond its jurisdiction, such as halting a demolition based on alleged economic rights violations.

 

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Philippine Blooming Mills vs. Philippine Blooming Mills G.R. No. L-31195 [June 5, 1973]

 CONSTITUTIONAL LAW

Philippine Blooming Mills vs. Philippine Blooming Mills

G.R. No. L-31195 [June 5, 1973]

EN BANC, MAKASIAR, J.

 

Bill of Rights; Freedom to Associate

Government agencies are strictly limited to the powers expressly conferred upon them by their enabling statutes. Any act or contract entered into beyond the scope of such powers is ultra vires and void.

 

The petitioner Philippine Blooming Mills Employees Organization (hereinafter referred to as PBMEO) is a legitimate labor union composed of the employees of the respondent Philippine Blooming Mills Co., Inc., and petitioners Nicanor Tolentino, Florencio Padrigano, Rufino Roxas, Mariano de Leon, Asencion Paciente, Bonifacio Vacuna, Benjamin Pagcu and Rodulfo Munsod are officers and members of the petitioner Union. PBMEO decided to stage a mass demonstration in front of Malacañang to express their grievances against the alleged abuses of the Pasig Police. 

Petitioners claim that on March 1, 1969, they decided to stage a mass demonstration at Malacañang on March 4, 1969, in protest against alleged abuses of the Pasig police, to be participated in by the workers in the first shift (from 6 A.M. to 2 P.M.) as well as those in the regular second and third shifts (from 7 A.M. to 4 P.M. and from 8 A.M. to 5 P.M., respectively); and that they informed the respondent Company of their proposed demonstration. The Philippine Blooming Mills Inc., called for a meeting with the leaders of the PBMEO after learning about the planned mass demonstration. During the meeting, the planned demonstration was confirmed by the union. But it was stressed out by the union that the demonstration was not a strike against the company but was in factual exercise of the laborers inalienable constitutional right to freedom of expression, freedom of speech and freedom for petition for redress of grievances. 

The company asked them to cancel the demonstration for it would interrupt the normal course of their business which may result in the loss of revenue. This was backed up with the threat of the possibility that the workers would lose their jobs if they pushed through with the rally. A second meeting took place where the company reiterated their appeal that while the workers may be allowed to participate, those from the 1st and regular shifts should not absent themselves to participate, otherwise, they would be dismissed. Since it was too late to cancel the plan, the rally took place and the officers of the PBMEO were eventually dismissed for a violation of the ‘No Strike and No Lockout’ clause of their Collective Bargaining Agreement. The lower court decided in favour of Philippine Blooming Mills Co., Inc., and the officers of the PBMEO were found guilty of bargaining in bad faith. The PBMEO’s motion for reconsideration was subsequently denied by the Court of Industrial Relations for being filed two days late.

 

Whether or not the workers who joined the strike violated the Collective Bargaining Agreement?

NO. While the Bill of Rights also protects property rights, the primacy of human rights over property rights is recognized. Because these freedoms are "delicate and vulnerable, as well as supremely precious in our society" and the "threat of sanctions may deter their exercise almost as potently as the actual application of sanctions," they "need breathing space to survive," permitting government regulation only "with narrow specificity." Property and property rights can be lost thru prescription; but human rights are imprescriptible. In the hierarchy of civil liberties, the rights of free expression, free assembly and petition, are not only civil rights but also political rights essential to man's enjoyment of his life, to his happiness and to his full and complete fulfillment. Thru these freedoms the citizens can participate not merely in the periodic establishment of the government through their suffrage but also in the administration of public affairs as well as in the discipline of abusive public officers. The citizen is accorded these rights so that he can appeal to the appropriate governmental officers or agencies for redress and protection as well as for the imposition of the lawful sanctions on erring public officers and employees.      

 

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Iron and Steel Authority (ISA) v. Court of Appeals G.R. No. 102976 [October 25, 1995]

 CONSTITUTIONAL LAW

Iron and Steel Authority (ISA) v. Court of Appeals

G.R. No. 102976 [October 25, 1995]

THIRD DIVISION, FELICIANO, J.

 

Ultra Vires Powers

 

Government agencies are strictly limited to the powers expressly conferred upon them by their enabling statutes. Any act or contract entered into beyond the scope of such powers is ultra vires and void.

 

The Iron and Steel Authority (ISA) entered into a loan agreement with Maria Cristina Fertilizer Corporation (MCFC), a private entity engaged in fertilizer production. Under the agreement, ISA provided a loan to MCFC to finance the purchase of equipment and other operational needs. MCFC failed to repay the loan upon maturity, prompting ISA to file a collection case against MCFC. 

MCFC, in its defense, argued that the loan agreement was void for being ultra vires, claiming that ISA, as a government agency, lacked the authority to grant loans. The trial court ruled in favor of MCFC, declaring the loan agreement void. ISA appealed to the Court of Appeals, which upheld the trial court’s decision. ISA then elevated the case to the Supreme Court.

 

Whether the loan agreement entered into by the Iron and Steel Authority with Maria Cristina Fertilizer Corporation is valid and binding. 

NO. The Supreme Court ruled in favor of the Court of Appeals and Maria Cristina Fertilizer Corporation, affirming the nullity of the loan agreement. The Court emphasized that government agencies like the Iron and Steel Authority must strictly adhere to their statutory mandates. ISA’s enabling law did not grant it the authority to engage in lending activities or act as a financial intermediary. Thus, the loan agreement was ultra vires and void. 

The Court noted that while ISA had the mandate to develop the iron and steel industry, lending money to private entities was not within the scope of its legal powers. Any act performed beyond the authority granted by law is considered ultra vires and has no legal effect. 

Furthermore, the Court stressed that contracts entered into by government agencies must conform to their statutory powers to avoid overreach and ensure accountability. In this case, the absence of explicit authority for ISA to grant loans rendered the agreement unenforceable.

 

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Didipio Earth Savers Multipurpose Association vs Gozun G.R. No. 157882 [March 30, 2006]

 CONSTITUTIONAL LAW

Didipio Earth Savers Multipurpose Association vs Gozun

G.R. No. 157882 [March 30, 2006]

FIRST DIVISION, CHICO-NAZARIO, J.

 

Police Power; Eminent Domain; Delegation of Legilative Power to Administrative Agencies

 

Republic Act No. 7942 (Philippine Mining Act of 1995) and the DENR’s implementing rules and regulations are valid and constitutional. Delegation of legislative authority to administrative agencies is permissible when it provides specificity and ensures effective implementation of the law.

 

In 1987, Cory rolled out EO 279 w/c empowered DENR to stipulate with foreign companies when it comes to either technical or financial large scale exploration or mining. In 1995, Ramos signed into law RA 7942 or the Philippine Mining Act. In 1994, Ramos already signed an FTAA with Arimco Mining Co, an Australian company. The FTAA authorized AMC (later CAMC) to explore 37,000 ha of land in Quirino and N. Vizcaya including Brgy Didipio.After the passage of the law, DENR rolled out its implementing RRs. Didipio petitioned to have the law and the RR to be annulled as it is unconstitutional and it constitutes unlawful taking of property. 

The Didipio Earth-Savers’ Multi-Purpose Association, Inc. (DESAMA) and several individuals petitioned to nullify a Financial or Technical Assistance Agreement (FTAA) granted by the Department of Environment and Natural Resources (DENR) to Climax-Arimco Mining Corporation (CAMC). They argued that Republic Act No. 7942, the Philippine Mining Act of 1995, and its implementing rules and regulations (IRRs) were unconstitutional. Specifically, they claimed the law violated the constitutional mandate to protect natural resources, failed to safeguard the rights of indigenous peoples, and infringed on the constitutional right to a balanced and healthful ecology. Additionally, the petitioners contended that RA 7942 improperly delegated legislative powers to the DENR by authorizing it to issue detailed regulations. 

The DENR and CAMC argued that the Mining Act and its IRRs were constitutional and consistent with the constitutional framework for the responsible utilization of natural resources. They emphasized that the law provided safeguards for environmental protection and indigenous peoples' rights and was designed to support national development.

 

Whether RA 7942 (Philippine Mining Act of 1995) and the DENR’s implementing rules and regulations (IRRs) are unconstitutional. 

NO. The Supreme Court ruled in favor of the DENR and CAMC, upholding the validity and constitutionality of RA 7942 and its implementing rules and regulations. The Court ruled that the Mining Act of 1995 was enacted to operationalize the constitutional mandate allowing the state to utilize natural resources for economic development. The law is consistent with Article XII of the 1987 Constitution, which recognizes both the state’s authority to manage natural resources and the need to protect the environment. 

The Court held that RA 7942 provided the necessary safeguards to ensure the responsible utilization of natural resources. It required environmental impact assessments, consultations with affected communities, and adherence to strict environmental standards. Furthermore, the law protected the rights of indigenous peoples through mechanisms such as free, prior, and informed consent (FPIC) for mining activities within ancestral domains, as mandated by the Indigenous Peoples’ Rights Act (IPRA). 

On the issue of delegation of legislative power, the Court ruled that the delegation of authority to the DENR to craft implementing regulations was valid. The delegation was specific and necessary to enable the DENR, as the agency with technical expertise, to execute the law effectively. The regulations issued by the DENR were deemed consistent with the policy objectives of RA 7942. 

The Court also emphasized the need to balance the constitutional right to a balanced and healthful ecology with the state's duty to promote economic development. RA 7942 and its IRRs embody this balance by allowing mining operations under strict environmental controls and community protections. Petitioners failed to show any concrete violations of constitutional or statutory rights.

 

 

 

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City Government of Quezon vs. Judge Ericta GR No. L-34915 [June 24, 1983]

 CONSTITUTIONAL LAW

City Government of Quezon vs. Judge Ericta

GR No. L-34915 [June 24, 1983]

FIRST DIVISION, GUTIERREZ, JR., J

 

Misuse of Police Power; Lawful Means; Unconstitutional Taking of Property

 

The exercise of police power cannot be used as a substitute for eminent domain when the state or local government seeks to take private property for public use. Such an act requires the payment of just compensation and adherence to due process. Ordinances that compel private property owners to donate land for public purposes, without compensation, constitute an unconstitutional taking of property.

 

An ordinance was promulgated in Quezon city which approved the the regulation of establishment of private cemeteries in the said city. According to the ordinance, 6% of the total area of the private memorial park shall be set aside for charity burial of deceased persons who are paupers and have been residents of QC. Himlayang Pilipino, a private memorial park, contends that the taking or confiscation of property restricts the use of property such that it cannot be used for any reasonable purpose and deprives the owner of all beneficial use of his property. It also contends that the taking is not a valid exercise of police power, since the properties taken in the exercise of police power are destroyed and not for the benefit of the public.

 

Whether or not the ordinance requiring private cemeteries to allocate 6% of their area for pauper burials constitute a valid exercise of police power.

 

NO. The ordinance made by Quezon City is not a valid way of taking private property. The ordinance amounted to a confiscation of private property without just compensation, violating the constitutional guarantee against deprivation of property without due process. Police power is intended to regulate the use or enjoyment of property for the public good, not to outright take or confiscate private property for public use. The ordinance crossed this boundary by compelling private cemeteries to donate land without compensation. 

The ordinance is actually a taking without compensation of a certain area from a private cemetery to benefit paupers who are charges of the municipal corporation; instead of building or maintaining public cemeteries. If the city wished to use private property for public purposes, such as paupers' burials, it should have exercised its power of eminent domain, which requires payment of just compensation, rather than relying on the general welfare clause. State's exercise of the power of expropriation requires payment of just compensation. The ordinance could not be justified under the general welfare clause, as there was no reasonable connection between the requirement to set aside private land and the promotion of public health, safety, or welfare. The provision merely shifted the city’s responsibility to provide public cemeteries onto private operators. Passing the ordinance without benefiting the owner of the property with just compensation or due process, would amount to unjust taking of a real property.

 

 

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