GSIS versus Rosete et al The annual stockholders meeting (annual meeting) of the Manila Electric Company (Meralco) was

scheduled on 27 1 2 May 2008. In connection with the annual meeting, proxies were required to be submitted on or before 17 May 2008, 3 and the proxy validation was slated for five days later, or 22 May. In view of the resignation of Camilo Quiason, the position of corporate secretary of Meralco became vacant. On 15 6 May 2008, the board of directors of Meralco designated Jose Vitug to act as corporate secretary for the annual 7 meeting. However, when the proxy validation began on 22 May, the proceedings were presided over by respondent 8 Anthony Rosete (Rosete), assistant corporate secretary and in-house chief legal counsel of Meralco. Private 9 respondents nonetheless argue that Rosete was the acting corporate secretary of Meralco. Petitioner Government Service Insurance System (GSIS), a major shareholder in Meralco, was distressed over the proxy validation 10 proceedings, and the resulting certification of proxies in favor of the Meralco management. On 23 May 2008, GSIS filed a complaint with the Regional Trial Court (RTC) of Pasay City, docketed as R-PSY-0811 05777-C4 seeking the declaration of certain proxies as invalid. Three days later, on 26 May, GSIS filed a Notice with the RTC manifesting the dismissal of the complaint. On the same day, 13 GSIS filed an Urgent Petition with the Securities and Exchange Commission (SEC) seeking to restrain Rosete from "recognizing, counting and tabulating, directly or indirectly, notionally or actually or in whatever way, form, manner or 14 means, or otherwise honoring the shares covered by" the proxies in favor of respondents Manuel Lopez, Felipe 15 16 17 18 19 Alfonso, Jesus Francisco, Oscar Lopez, Christian Monsod, Elpidio Ibaez, Francisco Giles-Puno "or any 20 officer representing MERALCO Management," and to annul and declare invalid said proxies. GSIS also prayed for the issuance of a Cease and Desist Order (CDO) to restrain the use of said proxies during the annual meeting 21 22 scheduled for the following day. A CDO to that effect signed by SEC Commissioner Jesus Martinez was issued on 26 May 2008, the same day the complaint was filed. During the annual meeting held on the following day, Rosete 23 announced that the meeting would push through, expressing the opinion that the CDO is null and void. On 28 May 2008, the SEC issued a Show Cause Order (SCO) against private respondents, ordering them to appear before the Commission on 30 May 2008 and explain why they should not be cited in contempt. On 29 May 25 2008, respondents filed a petition for certiorari with prohibition with the Court of Appeals, praying that the CDO and the SCO be annulled. The petition was docketed as CA-G.R. SP No. 103692. Contention of GSIS: SEC. 20. Proxy Solicitations. 20.1. Proxies must be issued and proxy solicitation must be made in accordance with rules and regulations to be issued by the Commission; SEC. 53. Investigations, Injunctions and Prosecution of Offenses . - 53.1. The Commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of this Code, any rule, regulation or order thereunder, or any rule of an Exchange, registered securities association, clearing agency, other self-regulatory organization, and may require or permit any person to file with it a statement in writing, under oath or otherwise, as the Commission shall determine, as to all facts and circumstances concerning the matter to be investigated. The Commission may publish information concerning any such violations, and to investigate any fact, condition, practice or matter which it may deem necessary or proper to aid in the enforcement of the provisions of this Code, in the prescribing of rules and regulations thereunder, or in securing information to serve as a basis for recommending further legislation concerning the matters to which this Code relates
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Contention of Rosete et al: On the other hand, private respondents argue before us that under Section 5.2 of the SRC, the SECs jurisdiction over all cases enumerated in Section 5 of Presidential Decree No. 902-A was transferred to the courts of general jurisdiction or the appropriate regional trial court. The two particular classes of cases in the enumeration under Section 5 of Presidential Decree No. 902-A which private respondents especially refer to are as follows:

xxx (2) Controversies arising out of intra-corporate, partnership, or association relations, between and among stockholders, members, or associates; or association of which they are stockholders, members, or associates, respectively; 3) Controversies in the election or appointment of directors, trustees, officers or managers of corporations, partnerships, or associations; In addition, private respondents cite the Interim Rules on Intra-Corporate Controversies (Interim Rules) promulgated by this Court in 2001, most pertinently, Section 2 of Rule 6 (on Election Contests), which defines "election contests" as follows: SEC. 2. Definition. An election contest refers to any controversy or dispute involving title or claim to any elective office in a stock or nonstock corporation, the validation of proxies, the manner and validity of elections and the qualifications of candidates, including the proclamation of winners, to the office of director, trustee or other officer directly elected by the stockholders in a close

Issues (1) whether the SEC has jurisdiction over the petition filed by GSIS against private respondents; and (2) whether the CDO and SCO issued by the SEC are valid.

No Jurisdiction. The terms solicit and solicitation include: A. any request for a proxy whether or not accompanied by or included in a form of proxy B. any request to execute or not to execute, or to revoke, a proxy; or C. the furnishing of a form of proxy or other communication to security holders under circumstance reasonably calculated to result in the procurement, withholding or revocation of a proxy. It is plain that proxy solicitation is a procedure that antecedes proxy validation. The former involves the securing and submission of proxies, while the latter concerns the validation of such secured and submitted proxies. GSIS raises the sensible point that there was no election yet at the time it filed its petition with the SEC, hence no proper election contest or controversy yet over which the regular courts may have jurisdiction. And the point ties its cause of action to alleged irregularities in the proxy solicitation procedure, a process that precedes either the validation of proxies or the annual meeting itself.

I.

This qualification allows for a useful distinction that gives due effect to the statutory right of the SEC to regulate proxy solicitation, and the statutory jurisdiction of regular courts over election contests or controversies. The power of the SEC to investigate violations of its rules on proxy solicitation is unquestioned when proxies are obtained to vote on matters unrelated to the cases enumerated under Section 5 of Presidential Decree No. 902-A. However, when proxies are solicited in relation to the election of corporate directors, the resulting controversy, even if it ostensibly raised the violation of the SEC rules on proxy solicitation, should be properly seen as an election controversy within the original and exclusive jurisdiction of the trial courts by virtue of Section 5.2 of the SRC in relation to Section 5(c) of Presidential Decree No. 902-A.

The conferment of original and exclusive jurisdiction on the regular courts over such controversies in the election of corporate directors must be seen as intended to confine to one body the adjudication of all related claims and controversy arising from the election of such directors. For that reason, the aforequoted Section 2, Rule 6 of the Interim Rules broadly defines the term "election contest" as encompassing all plausible incidents arising from the election of corporate directors, including: 1) any controversy or dispute involving title or claim to any elective office in a stock or nonstock corporation, ( 2)the validation of proxies, II. No it is not valid.
The CDO actually refers and cites all three provisions, yet it is apparent that a singular CDO could not be founded on Section 5.1, Section 53.3 and Section 64 collectively. At the very least, the CDO under Section 53.3 and under Section 64 have their respective requisites and terms.

.The lack of jurisdiction of the SEC over the subject matter of GSISs petition necessarily invalidates the CDO and SDO issued by that body. However, especially with respect to the CDO, there is need for this Court to squarely rule on the question pertaining to its validity, if only for jurisprudential value and for the guidance of the SEC. To make matters worse for the SEC, the fact that the CDO was signed, much less apparently deliberated upon, by only by one commissioner likewise renders the order fatally infirm. The SEC is a collegial body composed of a Chairperson and four (4) Commissioners. In order to constitute a quorum to conduct business, the presence of at least three (3) Commissioners is required.
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b. the error of the SEC in granting the CDO without stating which kind of CDO it was issuing is more unpardonable, as it is
an act that contravenes due process of law.