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MAKATI STOCK EXCHANGE v. MIGUEL V. CAMPOS

FACTS:

The case begins with SEC Case No. 02-94-4678 filed by respondent Miguel V. Campos against the petitioners, Makati Stock Exchange, Inc. (MKSE) and MKSE directors. Campos seeks the nullification of a resolution made by the MKSE Board of Directors, claiming that he was deprived of IPO shares and seeks payment for damages and attorney's fees.

The Securities, Investigation and Clearing Department (SICD) of the Securities and Exchange Commission (SEC) initially granted a Temporary Restraining Order and later a Writ of Preliminary Injunction to prevent the implementation of the MKSE resolution. Petitioners challenged these orders through petitions for certiorari.

Eventually, the SEC en banc nullified the orders and dismissed Campos' petition. Unhappy with this decision, Campos filed a Petition for Certiorari with the Court of Appeals, which granted the petition and reversed the SEC en banc's orders. Petitioners then filed a Motion for Reconsideration, but it was denied.

The case was then elevated to the Supreme Court through a Petition for Review. It is worth noting that Campos had passed away, and his surviving spouse substituted him as a party to the case.

The primary issue before the Supreme Court is whether Campos' petition before the SEC adequately states a cause of action. The court proceeds to explain the essential elements of a cause of action and the test utilized to determine if the facts alleged in a complaint are sufficient. Additionally, the court delves into the relevant allegations presented in Campos' petition.

ISSUES:

  1. Whether the petitioner's right to subscribe to Initial Public Offerings (IPOs) of corporations is a valid and enforceable right.

  2. Whether the petitioner's deprivation of his right to subscribe to IPOs constitutes a violation of his rights and is unjust, dishonest, and done in bad faith.

RULING:

  1. The court held that the petitioner's right to subscribe to IPOs is not a valid and enforceable right. The terms "right" and "obligation" are legal terms with specific legal meanings. A right is a claim or title to an interest that is enforceable by law, while an obligation is a juridical necessity to give, do, or not to do. Both a right and an obligation must have a basis or source in law, contract, quasi-contract, acts or omissions punished by law, or quasi-delicts. In this case, the petitioner's alleged right to subscribe to IPOs is not rooted in any of these sources. Therefore, the petitioner's claim of a right in his petition does not sufficiently state a cause of action.

  2. Since the court ruled that the petitioner does not have a valid and enforceable right to subscribe to IPOs, the second issue of whether the petitioner's deprivation of this right constitutes a violation of his rights and is unjust, dishonest, and done in bad faith becomes moot and academic.

PRINCIPLES:

  • A right is a claim or title to an interest in anything enforceable by law and must have a basis or source in law, contract, quasi-contract, acts or omissions punished by law, or quasi-delicts.

  • An obligation is a juridical necessity to give, do, or not to do and must also have a basis or source in law, contract, quasi-contract, acts or omissions punished by law, or quasi-delicts.

  • A pleading should state the ultimate facts essential to the rights of action or defense asserted, rather than mere conclusions of fact or law.

  • A claim or assertion of a right or obligation in an initiatory pleading, such as a Complaint or Petition, without identifying the basis or source of such right or obligation is merely a conclusion of fact and law and does not sufficiently state a cause of action.

  • A meticulous review of a petition is necessary to determine whether it sufficiently states a cause of action by presenting the basis of the alleged right.

  • A practice or custom is not a source of a legally demandable or enforceable right, unless supported by law or contract.

  • Even in cases where benefits have ripened into company practice, the ultimate source of the employees' right is the law and not just custom.

  • The Securities and Exchange Commission (SEC) must limit its consideration to the issue of whether a petition before the SEC sufficiently states a cause of action.