SEC v. GMA Network, Inc.

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G.R. No. 164026 December 23, 2008

SECURITIES AND EXCHANGE COMMISSION, petitioner,
vs.
GMA NETWORK, INC., respondent.

Facts:

On August 19, 1995, the petitioner, GMA NETWORK, INC., (GMA), a domestic corporation, filed an application for collective approval of various amendments to its Articles of Incorporation and By-Laws with the respondent Securities and Exchange Commission, (SEC).

The amendments applied for include, among others, the change in the corporate name of petitioner from "Republic Broadcasting System, Inc." to "GMA Network, Inc." as well as the extension of the corporate term for another fifty (50) years from and after June 16, 2000.

Upon such filing, the petitioner had been assessed by the SEC’s Corporate and Legal Department a separate filing fee for the application for extension of corporate term equivalent to 1/10 of 1% of its authorized capital stock plus 20% thereof or an amount of P1,212,200.00.

On September 26, 1995, the petitioner informed the SEC of its intention to contest the legality and propriety of the said assessment. However, the petitioner requested the SEC to approve the other amendments being requested by the petitioner without being deemed to have withdrawn its application for extension of corporate term. The following month, the petitioner formally protested the assessment amounting to P1,212,200.00 for its application for extension of corporate term.

The following year, the SEC approved the other amendments to the petitioner’s Articles of Incorporation, specifically Article 1 thereof referring to the corporate name of the petitioner as well as Article 2 thereof referring to the principal purpose for which the petitioner was formed. But GMA requested for an official opinion/ruling from the SEC on the validity and propriety of the assessment for application for extension of its corporate term.

Consequently, the respondent SEC, through Associate Commissioner Fe Eloisa C. Gloria, on April 18, 1996, issued its ruling upholding the validity of the questioned assessment.

Thusly, GMA appealed the ruling of the SEC to the Court of Appeals (CA), on the ground that ground that the assessment of filing fees for the petitioner’s application for extension of corporate term equivalent to 1/10 of 1% of the authorized capital stock plus 20% thereof is not in accordance with law.

Issue:

Whether the SEC Memorandum Circular No. 1, Series of 1986 should be the basis for computing the filing fee relative to GMA’s application for the amendment of its articles of incorporation for purposes of extending its corporate term?

Held:

The SEC assailed the Decision dated February 20, 2004 of the Court of Appeals which directed that SEC Memorandum Circular No. 1, Series of 1986 should be the basis for computing the filing fee relative to GMA Network, Inc.’s (GMA’s) application for the amendment of its articles of incorporation for purposes of extending its corporate term.

The appellate court agreed with the SEC’s submission that an extension of the corporate term is a grant of a fresh license for a corporation to act as a juridical being endowed with the powers expressly bestowed by the State. As such, it is not an ordinary amendment but is analogous to the filing of new articles of incorporation.

However, the Court of Appeals ruled that Memorandum Circular No. 2, Series of 1994 is legally invalid and ineffective for not having been published in accordance with law. The challenged memorandum circular, according to the appellate court, is not merely an internal or interpretative rule, but affects the public in general. Hence, its publication is required for its effectivity.

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.

The instant appeal is dismissed for lack of merit.