Cemco v. NLIC

CEMCO HOLDINGS, INC. v. NATIONAL LIFE INSURANCE COMPANY OF THE PHILIPPINES, INC.,
G.R. No. 171815, August 7, 2007

FACTS:

• Union Cement Corporation (UCC) has two principal stockholders UCHC with shares amounting to 60.51%, and petitioner Cemco with 17.03%. Majority of UCHCs stocks were owned by BCI with 21.31% and ACC with 29.69%. Cemco, on the other hand, owned 9% of UCHC stocks. BCI informed the Philippine Stock Exchange (PSE) that it and its subsidiary ACC had passed resolutions to sell to Cemco the BCIs stocks in UCHC equivalent to 21.31% and ACCs stocks in UCHC equivalent to 29.69%. as a result of petitioner Cemcos acquisition of BCI and ACCs shares in UCHC, petitioners total beneficial ownership, direct and indirect, in UCC has increased by 36% and amounted to at least 53% of the shares of UCC.
• As a consequence the PSE, inquired to SEC as to whether the Tender Offer Rule under Rule 19 of the Implementing Rules of the Securities Regulation Code is not applicable to the purchase by petitioner of the majority of shares of UCC.The SECs Corporate Finance Department responded to the query of the PSE that while it was the stance of the department that the tender offer rule was not applicable, the matter must still have to be confirmed by the SEC en banc. Thereafter, SEC confirmed that the SEC en banc had resolved that the Cemco transaction was not covered by the tender offer rule.
• Feeling aggrieved by the transaction, respondent National Life Insurance Company of the Philippines, Inc., a minority stockholder of UCC, sent a letter to Cemco demanding the latter to comply with the rule on mandatory tender offer. Cemco, however, refused. Respondent filed a complaint with the SEC asking it to reverse its Resolution and to declare the purchase agreement of Cemco void and praying that the mandatory tender offer rule be applied to its UCC shares.
• In a Decision the SEC ruled in favor of the respondent by reversing and setting aside its Resolution and directed petitioner Cemco to make a tender offer for UCC shares to respondent and other holders of UCC shares similar to the class held by UCHC in accordance with Section 9(E), Rule 19 of the Securities Regulation Code.
• Petitioner filed a petition with the Court of Appeals challenging the SECs jurisdiction to take cognizance of respondents complaint and its authority to require Cemco to make a tender offer for UCC shares, and arguing that the tender offer rule does not apply. The Court of Appeals rendered a decision affirming the ruling of the SEC.

ISSUE:

• Whether or not, the SEC has jurisdiction over respondent’s complaint.

HELD:

• Yes, The Court affirmed the decision of the CA. SEC was acting pursuant to Rule 19(13) of the Amended Implementing Rules and Regulations of the Securities Regulation Code
• Another provision of the statute, which provides the basis of Rule 19(13) of the Amended Implementing Rules and Regulations of the Securities Regulation Code, is Section 5.1(n), viz:
• [T]he Commission shall have, among others, the following powers and functions: x x x (n) Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws.
• The foregoing provision bestows upon the SEC the general adjudicative power which is implied from the express powers of the Commission or which is incidental to, or reasonably necessary to carry out, the performance of the administrative duties entrusted to it. As a regulatory agency, it has the incidental power to conduct hearings and render decisions fixing the rights and obligations of the parties.
• And as held by the Court of Appeals:
• We must bear in mind in interpreting the powers and functions of the SEC that the law has made the SEC primarily a regulatory body with the incidental power to conduct administrative hearings and make decisions. A regulatory body like the SEC may conduct hearings in the exercise of its regulatory powers, and if the case involves violations or conflicts in connection with the performance of its regulatory functions, it will have the duty and authority to resolve the dispute for the best interests of the public