FIRST DIVISION
G.R. No. 206673, July 28, 2020
FIRST PHILIPPINE HOLDINGS CORPORATION, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondents.
D E C I S I O N
CAGUIOA, J.:
"To satisfy the due process requirement, official action, to paraphrase Cardozo, must not outrun the bounds of reason and result in sheer oppression. Due process is thus hostile to any official action marred by lack of reasonableness. Correctly it has been identified as freedom from arbitrariness."1This is a petition for review on certiorari2 (Petition) under Rule 45 of the Rules of Court assailing the September 28, 20123 and March 25, 20134 Resolutions of the Court of Appeals, Second Division (CA), in CA-G.R. SP No. 121883. The CA 1) dismissed First Philippine Holdings Corporation's (petitioner) petition for review and upheld the authority of the Securities and Exchange Commission (SEC) to impose a registration fee amounting to P24,000,000.00 for the extension of petitioner's corporate term,5 and 2) denied petitioner's motion for reconsideration.6
[Petitioner] is a domestic stock corporation registered with the [SEC] on 30 June 1961 with SEC Registration Number 19073. Its term was set to expire on 30 June 2011. On 01 March 2007, its Amended Articles of Incorporation ("AOI") was approved by the majority vote of the Board of Directors and ratified on 21 May 2007 by the vote of the stockholders owning or representing at least two-thirds of the outstanding capital stock, particularly, Articles II (Primary Purpose), IV (Extension of Corporate Term) and VI (Number of Directors).
x x x x
The amendment which caused the subject of this appeal is Article IV, which provides:cralawred"That the term for which the Corporation is to exist shall be [1)] fifty (50) years, from and after the date of incorporation, and 2) fifty (50) more years from and after the expiration of the said original term of fifty (50) years, or fifty (50) years more from and after June 30, 2011."Upon filing of the amended AOI, [petitioner] was assessed the filing fee for the extension of its corporate existence, based on paragraph 11 of [SEC M.C. No. 9, S. 2004]. It states that the filing fee for the application of amended articles of incorporation where [the] amendment consists of extending the term of corporate existence, shall be 1/5 of 1% of the authorized capital stock, but not less than P2,000.00.
Thus, based on [petitioner's] authorized capital stock (ACS) of TWELVE BILLION ONE HUNDRED MILLION PESOS (P12,100.000,000,00), [ petitioner] , on 21 June 2007, was assessed the amount of TWENTY[-]FOUR MILLION TWO HUNDRED THOUSAND PESOS (P24.200.000.00) for the amendment] of [its] articles of incorporation to extend its corporate term, which it paid on the same day.
Also on 21 June 2007. [petitioner] filed a letter dated 20 June 2007 expressing [its] "surprise and dismay" to find that it was required to pay filing tees in the amount of TWENTY[-]FOUR MILLION PESOS (P24,000,000.00) under [SEC M.C. No. 9, S. 2004], recalling that ten years ago, under SEC Memorandum] Circular No. 02 s. 1994 [(SEC M.C. No. 2, S. 1994)], the examining and filing fee for amended articles of incorporation of both stock and non-stock corporations was only TWO HUNDRED PESOS (P200.00). [Petitioner] questioned the reasonableness and necessity of the fee of P24.000.000.00 (P24million, as stated by [petitioner] in its documents, disregarding the amount of P200 thousand), and paid the fee under protest, "without prejudice to filing the appropriate position paper, among other things."
It was only four months later [or] on 17 October 2007, when [petitioner] filed its Position Paper, dated 2 October 2007, claiming that [SEC M.C. No. 9, S. 2004] that imposes the filing fee of 1/5 of 1% of the authorized capital stock for the extension of corporate term is not a valid exercise of its authority to promulgate administrative regulations, for not being reasonably necessary. [Petitioner] thus prayed that the amount of P24 million be reduced to TWO HUNDRED PESOS (P200.00) per [SEC M.C. No. 2, S. 1994] and that the amount in excess be promptly refunded to the corporation.
In November of the same year, a few months after its application for extending its corporate term ha[d] been granted, [petitioner] filed its application for the amendment of Article VII of its API by increasing its authorized capital stock to THIRTY-TWO BILLION ONE HUNDRED MILLION PESOS (P32,100,000.000.00). and the Certificate of Filing of the Amended API was granted by the Commission on 23 November 2007. For this, it was assessed and it paid the amount of FORTY MILLION PESOS (P40,000.000.00) as filing fee, based on paragraph fourteen also of [SEC M.C. No. 9. S. 2004]. which provides that the filing fee for [the] increase of capital stock for corporations with par value is, 1/5 of 1% of the increase in capital stock or the subscription price of the subscribed capital stock whichever is higher[,] but not less that P1,000.00.
On 07 January 2009, the Commission Secretary issued an Order, informing [petitioner] that the 02 October 2007 Position Paper is treated as an Appeal, from the assessment of the CRMD of the filing fee for extension of corporate term, approved on 25 June 2007. [Petitioner] was asked to pay the docket fee in the total amount of TWO THOUSAND TWENTY PESOS (P2,020.00), which was assessed on 21 January 2009 and paid on the same day.
On 28 January 2009, the Commission Secretary issued an Order addressed to Atty. Benito Cataran, Director of CRMD, to file a Reply Memorandum within TEN (10) days upon receipt of the Order.
On 26 February 2009, CRMD filed its Reply Memorandum by way of Comment ("CRMD Comment"), declaring that the imposition of the filing fee of 1/5 of 1% of the authorized capital stock for the extension of corporate term under [SEC M.C. No. 9, S. 2004] is a valid exercise of the Commission's authority to promulgate administrative regulation. CRMD also indicated that the fifteen[-]day period within which to file the Petition for Review should be reckoned from the actual receipt by [petitioner] of the certificate and in the instant case, more than fifteen days have transpired before the filing of the petition.
In response, [petitioner] filed a Request for Time to File Reply to Comment on 18 March 2009, and acknowledged therein that it received the CRMD Comment on 11 March 2009 but prayed that it be granted until 26 March 2009 within which to file its Reply. Again, on 26 March 2009, [petitioner] filed a Request for Time to File Reply to Comment and prayed that it be given until 31 March 2009 to submit its Reply. It was only on 31 March 2009 when it filed its Reply, way beyond the [10-]day period required by the 2006 Rules of Procedure of the Commission ("2006 Rules"). In its Reply, [petitioner] basically reiterated the contents of its 02 October 2007 Position Paper.8
Section 139. Incorporation and other fees. - The Securities and Exchange Commission is hereby authorized to collect and receive fees as authorized by law or by rules and regulations promulgated by the Commission, (n)46In addition, the Corporation Code included a repealing clause, which stated:cralawred
Section 143. Ride-making power of the Securities and Exchange Commission. - The Securities and Exchange Commission shall have the power and authority to implement the provisions of this Code, and to promulgate rules and regulations reasonably necessary to enable it to perform its duties hereunder, particularly in the prevention of fraud and abuses on the part of the controlling stockholders, members, directors, trustees or officers, (n)
Section 146. Repealing clause. - Except as expressly provided by this Code, all laws or parts thereof inconsistent with any provision of this Code shall be deemed repealed, (n)The foregoing provisions naturally give rise to the question of whether the Corporation Code impliedly repealed the specific fees prescribed under R.A. 944 and R.A. 3531, and if so, to what extent.
An implied repeal transpires when a substantial conflict exists between the new and the prior laws. In the absence of an express repeal, a subsequent law cannot be construed as repealing a prior law unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and the old laws. Repeal by implication is not favored, unless manifestly intended by the legislature, or unless it is convincingly and unambiguously demonstrated, that the laws or orders are clearly repugnant and patently inconsistent with one another so that they cannot co-exist; the legislature is presumed to know the existing law and would express a repeal if one is intended.A perusal of the three laws reveals that the first instance of implied repeal is present in this case.
There are two instances of implied repeal. One takes place when the provisions in the two acts on the same subject matter are irreconcilably contradictory, in which case, the later act, to the extent of the conflict, constitutes an implied repeal of the earlier one. The other occurs when the later act covers the whole subject of the earlier one and is clearly intended as a substitute; thus, it will operate to repeal the earlier law.48
Company Registration and Monitoring Department | |
Application | Filing Fee |
x x x x | |
7. Articles of Incorporation | |
a. Stock corporation with par value | 1/5 of 1% of the authorized capital stock or the subscription price of the subscribed capital stock whichever is higher but not less than P1,000.00. |
b. Stock corporation without par value | 1/5 of 1% of authorized capital stock computed at P100.00 per share or the subscription price of the subscribed capital stock whichever is higher but not less than P1 ,000.00 |
x x x x | |
@11. Amended Articles of Incorporation where amendment consists of extending the term of corporate existence | 1/5 of 1% of the authorized capital stock but not less than P2,000.00. |
x x x x | |
14. Increase of Capital Stock | |
a. Corporation with par value | 1/5 of 1% of the increase in capital stock or the subscription price of the subscribed capital stock whichever is higher but not less than P1,000.00 |
b. Corporation without par value | 1/5 of 1% of the increase in capital stock computed at P100.00 per share or the subscription price of the subscribed capital stock whichever is higher but not less than P1,000.00 |
x x x x |
A related factor which precludes consideration of the questioned issuance as interpretative in nature merely is the fact the SEC's assessment amounting to P 1,212,200.00 is exceedingly unreasonable and amounts to an imposition. A filing fee, by legal definition, is that charged by a public official to accept a document for processing. The fee should be just, fair, and proportionate to the service for which the fee is being collected, in this case, the examination and verification of the documents submitted by GMA to warrant an extension of its corporate term.It bears emphasis that the fee of PI,212,200.00 is a far cry from the P24,000,000.00 imposed on herein petitioner, even after accounting for inflation. Indeed, the amount appears exorbitant and confiscatory for the mere filing, "processing, examination, and verification" of a single paragraph of petitioner's articles of incorporation,67 even if the same were to be done by the SEC's most competent "Certified Public Accountants, lawyers, technical staff and competent support personnel."68
Rate-fixing is a legislative function which concededly has been delegated to the SEC by R.A. No. 3531 and other pertinent laws. The due process clause, however, permits the courts to determine whether the regulation issued by the SEC is reasonable and within the bounds of its rate-fixing authority and to strike it down when it arbitrarily infringes on a person's right to property.66
To be considered a license fee, the imposition questioned must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well. When an activity, occupation or profession is of such a character that inspection or supervision by public officials is reasonably necessary for the safeguarding and furtherance of public health, morals and safety, or the general welfare, the legislature may provide that such inspection or supervision or other form of regulation shall be carried out at the expense of the persons engaged in such occupation or performing such activity, and that no one shall engage in the occupation or carry out the activity until a fee or charge sufficient to cover the cost of the inspection or supervision has been paid. Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power.71The SEC itself recognizes that its authority to prescribe fees is limited to imposing a "fee sufficient in amount to include the expense of issuing the license and the cost of necessary inspection or police surveillance connected with the business or calling licensed."74 Nevertheless, it admitted that the fee imposed in the instant case was not based on the probable expense of issuing the license, the cost of necessary inspection and the probable expenses of regulation, but was instead made directly related to a corporation's capacity to pay.75
The Court, in Morcoin Co., Ltd. v. City of Manila,72 likewise held:
x x x The power to regulate and impose license fee for the operations of slot machines - which include juke box machines, pinball machines and other coin-operated contrivances - should not, however, be construed as including the power to impose license taxes for revenue purposes. Indeed, a cursory reading of the legislative powers of the Municipal Board enumerated in Section 18 of the City's Revised Charter shows that the power to tax is given where it was intended to be exercised and is not given where it was not so designed. As the authority was withheld, it must logically result that the power granted under the above-quoted provision of the City's Charter is purely regulatory for police purposes. ([Pacific Commercial Co. v. Romualdez and Alfonso, 49 Phil. 917; Hercules Lumber v. Municipality of Zamboanga, 55 Phil. 653.]) Such being the case, the amount of license fees that may be imposed upon juke box machines and other coin-operated contrivances cannot be prohibitive, extortionate, confiscatory or in an unlawful restraint of trade, but should be approximately commensurate with and sufficient to cover all the necessary or probable expenses of issuing the license and of such inspection, regulation and supervision as may be lawful. ([Cu Unjieng v. Patstone, 42 Phil. 818; City of Iloilo v. Villanueva, 105 Phil., 337]; 33 Am. Jur. 367; 53 C.J.S. 517]; See also the cases cited therein.) Any ordinance which imposes a license fee which is substantially in excess of the reasonable expense of issuing the license and regulating the occupation to which it pertains, is invalid. (25 Am. Law and Proc. 611; 28 Id. 749, 750.)73
SECTION 1. The Securities and Exchange Commission is hereby authorized to collect and receive fees for the following:Similarly, SEC M.C. No. 1, S. 1986 prescribed the filing fee for amending articles of incorporation, where the amendment consists of extending the term of corporate existence at 1/10 of 1% of the authorized capital stock but not less than P300.00 nor more than P100.000.00 for stock corporations, and 1/10 of 1% of the authorized capital stock but not less than P200.00 nor more than P100,000.00 for stock corporations without par value.77
(a) For examining and filing articles of incorporation of a corporation - One-tenth of one per centum of the authorized capital stock, but in no case shall the fee be less than twenty-five pesos or more than one thousand pesos: Provided, That in case of shares without par value, each share shall be taken to be of the par value of one hundred pesos for the purpose of fixing the fee: And provided, further, That the fee for the examination and filing of articles of incorporation of a non-stock corporation shall be twenty-live pesos; (b) For examining and filing a certificate of increase of the capital stock of a corporation - One-tenth of one per centum of the increase in capital stock, but in no case shall the fee be less than twenty-five pesos or more than one thousand pesos; (c) For examining and filing the by-laws of a corporation — Five pesos; and the same fee shall be charged for the examination and filing of an amendment to the by-laws; (d) For the examination and recording of articles of partnership: (1) Presentation Fee - One peso; (2) Recording fee - Ten pesos for a capital not exceeding ten thousand pesos; and two pesos for each thousand or fraction thereof in excess of the first ten thousand, but in no case shall the fee be more than six hundred pesos; (3) For examining and recording a document amending articles of partnership - Ten pesos. (Underscoring supplied)
SEC. 11. Corporate Term. - A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.Evidently, there is no more basis to impose a "license fee" for the purported grant of a fresh period for a corporation to act as a juridical being for another 50 years.87
Corporations with certificates of incorporation issued prior to the effectivity of this Code, and which continue to exist, shall have perpetual existence, unless the corporation, upon a vote of its stockholders representing a majority of its outstanding capital stock, notifies the Commission that it elects to retain its specific corporate term pursuant to its articles of incorporation: Provided, That any change in the corporate term under this section is without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code.
A corporate term for a specific period may be extended or shortened by amending the articles of incorporation: Provided, That no extension may be made earlier than three (3) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be determined by the Commission: Provided, further, That such extension of the corporate term shall take effect only on the day following the original or subsequent expiry date(s).
A corporation whose term has expired may apply for a revival of its corporate existence, together with all the rights and privileges under its certificate of incorporation and subject to all of its duties, debts and liabilities existing prior to its revival. Upon approval by the Commission, the corporation shall be deemed revived and a certificate of revival of corporate existence shall be issued, giving it perpetual existence, unless its application for revival provides otherwise.
No application for revival of certificate of incorporation of banks, banking and quasi-banking institutions, preneed, insurance and trust companies, non-stock savings and loan associations (NSSLAs), pawnshops, corporations engaged in money service business, and other financial intermediaries shall be approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency.
Endnotes:
1Ermita-Malate Hotel and Motel Operators Association. Inc. v. City Mayor of Manila, No. L-24693, July 31, 1967, 20 SCRA 849, 860.
2Rollo, pp. 9-73.
3 Id. at 76-78. Penned by Associate Justice Normandie B. Pizarro and concurred in by Associate Justices Remedios A. Salazar-Fernando and Manuel M. Barrios.
4 Id. at 80-81.
5 Supra note 3.
6 Supra note 4.
7 Id. at 19.
8 Id. at 147-150. Emphasis and italics in the original; underscoring supplied.
9 Id. at 147-161.
10 Amendment to Corporation Law Re: Articles of Incorporation, June 20, 1963.
11Rollo, p. 152.
12 Id. at 94.
13 Id. at 97.
14 Id. at 98.
15 Id.
16 Supra note 11.
17 Id. at 94-95.
18 Id. at 95.
19 Id.
20 Id.
21 Id. at 96.
22 Supra note 12.
23 Id.
24 Id. at 101.
25 Id. at 13.
26 Supra note 3.
27 Id. at 77.
28 Id. at 77-78.
29 Supra note 4.
30 Id. at 27-28.
31 Id. at 28.
32 Id.
33 Id.
34 Id. at 331-35
35 Id. at 338.
36 Id. at 343.
37 Id. at 346-348.
38 Computed under SEC M.C. No. 9, S. 2004 formula of 1/5 of 1% of authorized capital stock but not less than P2,000.00.
39Rollo, p. 31.
40 Supra note 34.
41 Increasing The Fees Charged By The Securities And Exchange Commission And To Authorize It To Collect and Receive Fees For Certain Services, June 20, 1953.
42 R.A. 944, Sec. 1 (a), provides:
Section 1. The Securities and Exchange Commission is hereby authorized to collect and receive fees for the following:cralawred(a) For examining and filing articles of incorporation of a corporation - One-tenth of one per centum of the authorized capital stock, but in no case shall the fee be less than twenty-five pesos or more than one thousand pesos: Provided, That in case of shares without par value, each share shall be taken to be of the par value of one hundred pesos for the purpose of fixing the fee: And provided, further, That the fee for the examination and filing of articles of incorporation of a non-stock corporation shall be twenty-five pesos[.]43 Reorganization of the Securities and Exchange Commission with Additional powers and Placing the Said Agency under the Administrative Supervision of the Office of the President, March 11,1 976.
44 P.D. 902-A, Sec. 7 provides:
SECTION 7. The Commission is authorized to recommend to the President the revision, alteration, amendment or adjustment of the charges and fees, which by law, it is authorized to collect.
45 Batas Pambansa Big. 68 (B.P. 68), CORPORATION CODE OF THE PHILIPPINES, May 1, 1980.
46 Notably, Sec. 139 of the Corporation Code was recently repealed by R.A. 11232 or the Revised Corporation Code of the Philippines, and now states:
SEC. 175. Collection and Use of Registration, Incorporation and Other Fees. - For a more effective implementation of this Code, the Commission is hereby authorized to collect, retain, and use fees, fines, and other charges pursuant to this Code and its rules and regulations. The amount collected shall be deposited and maintained in a separate account which shall form a fund for its modernization and to augment its operational expenses such as, but not limited to, capital outlay, increase in compensation and benefits comparable with prevailing rates in the private sector, reasonable employee allowance, employee health care services, and other insurance, employee career advancement and professionalization, legal assistance, seminars, and other professional fees.
47 G.R. Nos. 154470-71 & 154589-90, September 24, 2012, 681 SCRA 521.
48 Id. at 545-546. Underscoring supplied.
49 Supra note 41.
50 B.P. 68, Sec. 139, provides:cralawredSection 139. Incorporation and other fees. -The Securities and Exchange Commission is hereby authorized to collect and receive fees as authorized by law or by rules and regulations promulgated by the Commission, (n). Underscoring supplied.51 R.A. 944, Sec. 1.
52 R.A. 3531, Sec. 1 states:cralawredSection 1. x x x53PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618, July 12, 2007, 527 SCRA 405, 422. Citations omitted, underscoring supplied.
x x x x
x x x Provided, however, That where the amendment consists in extending the term of corporate existence the Securities and Exchange Commissioner shall be entitled to collect and receive for the filing of the amended articles of incorporation the same fees collectible under existing law for the filing of articles of incorporation." Underscoring supplied.
54Rollo, p. 339.
55 B.P. 68, Sec. 143 provides:cralawredSection 143. Rule-making power of the Securities and Exchange Commission. - The Securities and Exchange Commission shall have the power and authority to implement the provisions of this Code, and to promulgate rules and regulations reasonably necessary to enable it to perform its duties hereunder, particularly in the prevention of fraud and abuses on the part of the controlling stockholders, members, directors, trustees or officers, (n)56 See generally Mangune v. Ermita, G.R. No. 182604, September 27, 2016, 804 SCRA 237, 263 and Philippine Communications Satellite Corp. v. Alcuaz, G.R. No. 84818, December 18, 1989, 180 SCRA 218,233.
57Rollo, p. 60.
58 Id. at 65
59 Supra note 17.
60 Id. at 346-347.
61 In Progressive Development Corp. v. Quezon City, G.R. No. L-36081, April 24, 1989, 172 SCRA 729, 635, the Court explained: "The term "tax" frequently applies to all kinds of exactions of monies which become public funds. It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes of regulation, while the latter is imposed under the taxing power primarily for purposes of raising revenues. Thus, if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax."
62Quezon City PTCA Federation, Inc. v. Department of Education, G.R. No. 188720, February 23, 2016, 784 SCRA 505, 583. Underscoring supplied.
63 See http://www.sec.gov.ph/about/mission-values-and-vision/ (last accessed March 30, 2020).
64 G.R. No. 164026, December 23, 2008, 575 SCRA 113.
65 See generally Holy Spirit Homeowners Association, Inc. v. Defensor, G.R. No. 163980, August 3, 2006, 497 SCRA 581 and Philippine Communications Satellite Corp. v. Alcuaz, supra note 56.
66Securities and Exchanges Commission v. GMA Network, Inc., supra note 64 at 123. Emphasis and underscoring supplied.
67 Supra note 57.
68 Supra note 17.
69 Id. at 348-350.
70 Supra note 61.
71 Id. at 636. Emphasis and underscoring supplied.
72 No. L-15351, January 28, 1961, 1 SCRA 310.
73 Id. at 313-314.
74Rollo, p. 347. See also, City of Ozamiz v. Liunapas, 160 Phil. 33 (1975).
75 Id. at 99.
76See SEC Memorandum Circular No. 1, Series of 1986 (SEC M.C. No. 1, S. 1986) and SEC M.C. No. 2, S. 1994.
77Securities and Exchange Commission v. GMA Network, Inc., supra note 64 at 120
78 Id.
79Rollo, pp. 95-96.
80 Supra note 64.
81 220 Phil. 422(1985).
82 See SEC M.C. No. 9, S. 2004.
83Rollo, p. 98.
84 Section 3.1.16 of the 2015 IMPLEMENTING RULES AND REGULATIONS OF THE SECURITIES AND
Regulations Code defined public company as:
3.1.16. Public Company means any corporation with a class of equity securities listed on an Exchange, or with assets in excess of Fifty Million Pesos (PhP50,000,000.00) and has two hundred (200) or more holders each holding at least one hundred (100) shares of a class of its equity securities."
85 Supra note 8.
86 See for instance requirements for Increase of Authorized Capital Stock available http://www.sec.gov.ph/services-2/company-2/amendment/.
87 Supra note 69.
88 See Morcoin Co., Ltd. v. City of Manila, supra note 72.
89Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila, supra note 1.
90 Supra note 79.
91Securities and Exchange Commission v. GMA Network, Inc., supra note 64.
92 Id.
93 Id. at 120.
94Rollo, p. 89.
95 Supra note 58. Petitioner prayed that "the TWENTY-FOUR MILLION PESO (P24,000,000.00) Filing Fee, paid by Petitioner under protest for examination of the amendment of Petitioner's articles of incorporation, be computed according to the proper law and that the amount in excess thereof be properly refunded /credited to Petitioner accordingly." Emphasis in the original; underscoring supplied.