THIRD DIVISION [G.R. No. 131715. December 8, 1999] PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner, v. ERNESTO PABION and LOUELLA RAMIRO, Respondents.

The Securities and Exchange Commission (SEC) has jurisdiction over corporations organized pursuant to the Corporation Code, even if the majority or controlling shares are owned by the government. Hence, it can competently order the holding of a shareholders meeting for the purpose of electing the corporate board of directors. While the SEC may not have authority over government corporations with original charters or those created by special law, it does have jurisdiction over acquired asset corporations as defined in AO 59. Specifically, the Philippine National Construction Company (PNCC) may be ordered by SEC to hold a shareholders meeting to elect its board of directors in accordance with its Articles of Incorporation and By-Laws as well as with the Corporation Code. The chairman and the members of the PNCC Board of Directors hold office by virtue of their election by the shareholders, not by their appointment thereto by the President of the Republic.

FACTS:
Ernesto Pabion and Louella Ramiro, claiming to be stockholders of the PNCC, filed with the SEC a verified petition, therein alleging that since 1982 or for a period of twelve (12) years, there has been no stockholders meeting of the PNCC to elect the corporation’s board of directors, thus enabling the incumbent directors to hold on to their position beyond their 1-year term, in violation of PNCCs By-Laws and the Corporation Code. Pabion and Ramiro, therefore, prayed the SEC to issue an order ordering the officers of PNCC or, in the alternative, authorizing petitioners, to call and hold a meeting of the stockholders for the purpose of electing new directors.

PNCC claimed that SEC has no jurisdiction over the petition because PNCC is a government-owned corporation whose organizational and functional management, administration, and supervision are governed by Administrative Order (AO) No. 59. PNCC asserts that its board of directors does not hold office by virtue of a stockholder’s election but by appointment of the President of the Philippines.

Issue1) Can SEC determine the corporate status of PNCC?

1) Yes. It is certainly absurd to say that SEC is without jurisdiction to determine if PNCC is a GOCC simply because the latter claims to be one. The President does not “determine” whether a corporation is a GOCC or not. It is the law that does. PNCC’s status as a GOCC can be ruled upon by SEC based on law.

Issue2: 2) Does SEC have jurisdiction over GOCC’s? Does it have the authority to compel PNCC to hold a stockholders’ meeting for the purpose of electing members of a BOD?

Held: 2) Yes. GOCCs may either be (1) with original charter or created by special law; or (2) incorporated under general law, via either the Old Corporation Code or the New Corporation Code. SEC has no jurisdiction over corporations of the first type primarily because they are governed by their charters. But even this is not absolute, since the corporation Code may apply suppletorily, either by operation of law or through express provision in the charter. On the other hand, over GOCCs established or organized under Corporation Code, the SEC can exercise jurisdiction. These GOCCs are regarded as private corporations despite common misconception. That the government may own the controlling shares in the corporation does not diminish the fact that the latter owes its existence to the Corporation Code. Prescinding from such premises, it necessarily follows that SEC can compel PNCC to hold a stockholders’ meeting for the purpose of electing members of the latter’s BOD as clearly provided for by Section 50 of the Corporation Code.

Issue3: 3) Is PNCC an acquired-asset corporation?

Held: 3) Yes. PNCC is indeed an acquired asset corporation as defined in Section 2 (a) of A.O. 59, to wit: a corporation “under private ownership, the voting or outstanding share of which (i) were conveyed to the government financial institutions in satisfaction of debts”. Moreover, there is no inconsistency between AO 59 and EO 292 otherwise known as Revised Administrative Code. AO 59 does not purport to have established a new kind of corporation that supersedes EO 292. Neither does the former seek to revise the definition of GOCC given in the latter. What AO 59 in fact does is to distinguish GOCCs in general from those that are sought to be privatized. In fact, the definition given in EO 292 itself stated that the GOCCs “may be further categorized”. This caveat suggests that the definition is broad enough to admit distinctions as to the kinds of GOCCs defined under AC 59. Hence, PNCC is as a GOCC under EO 292. However, for purposes of AO 59, particularly in the application of Section 16 thereof, PNCC is an acquired asset corporation. In this light, the alleged inconsistency is more apparent than real.