Liga v. Allegro, Mkti Stock Exchange v. Campos

7/28/2019 Liga v. Allegro, Mkti Stock Exchange v. Campos

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SECOND DIVISION

[G.R. No. 175554. December 23, 2008.]

EDSEL LIGA, petitioner, vs. ALLEGRO RESOURCESCORP., respondent.

D E C I S I O N

TINGA, Jp:

Before the Court is the petition for review1under Rule 45 of the Rules of Courtassailing the Court of Appeals' Decision2dated 25 January 2006 andResolution3dated 22 November 2006 in CA-G.R. SP No. 86331. aDSHCc

The undisputed factual antecedents of the case are as follows:

On 10 October 1975, Ortigas & Company, Limited Partnership (Ortigas) entered intoa lease agreement with La Paz Investment & Realty Corporation (La Paz) whereinthe former leased to the latter its parcel of land located in San Juan, Metro Manila(now San Juan City) consisting of 5,514 square meters for a period of twenty-five(25) years from 1 January 1976 to 31 December 2000. Under the lease agreement,

La Paz undertook to construct a two or three-storey concrete framed commercialbuilding for the establishment of first class stores which would be subdivided intovarious stalls for subleasing to interested parties.4

In compliance with its undertaking, La Paz constructed the Greenhills ShoppingArcade (GSA) and divided it into several stalls and subleased them to other people.One of the sub-lessees was Edsel Liga (Liga), who obtained the leasehold right toUnit No. 26, Level A of the GSA. DIESHT

As the lease of La Paz had expired on 31 December 2000, the stallholders, throughthe Greenhills Shoppesville Unit Lessees' Association, Inc. (GSULAI), made severalattempts to have their leasehold rights extended. Even prior to the expiration of thei rleaseholds, the sub-lessees made several overtures to Ortigas but these were alldenied. These developments notwithstanding, Liga was allowed by Ortigas to

remain in possession of her leased property.

On 30 August 2001, Ortigas formally informed the GSULAI of the impending leaseof the GSA to respondent Allegro Resources Corporation (Allegro).5On 3September 2001, Ortigas and Allegro executed the corresponding Contract ofLease.6On the same day, the same parties executed the Addendum toAgreement, Section 1 of which provides that "(t)he LESSEE (Allegro) shall takeimmediate possession and control of the leased premises upon the signing of theContract of Lease". and "also assist in the collection of back rentals due to theLESSOR (Ortigas) in Shoppesville Arcade from 1 January 2001 up to the 31 August2001, when it shall commence to pay rentals for its own account".7

As the new lessee, Allegro offered to sublease Unit No. 26, Level A to Liga.Subsequently they entered into a lease agreement dubbed Rental Information8inwhich Liga agreed to pay rental of P40,000.00 monthly starting 1 September 2001.She also agreed to pay the back rentals covering the months of January throughAugust 2001 due Ortigas. Upon signing the agreement, Liga also gave P40,000.00as one month advance rental and another P40,000.00 as one month securitydeposit as provided in the agreement.9HCSEIT

Liga's compliance with the agreement ended as soon as it was executed. Despiterepeated demands from Allegro, Liga had failed to pay her rentals for the subleasedproperty, as well as the back rentals from January to August 2001 due Ortigas.Hence, Allegro filed a complaint for ejectment on 15 March 2002 with the

Metropolitan Trial Court (MeTC) of San Juan, Metro Manila, Branch 57. 10

The MeTC rendered a decision11in favor of Allegro, ordering Liga to vacate thesubleased stall and to pay back rentals for her continuous possession of theproperty. The MeTC held that Allegro has rightful possession over the disputed stallsince Liga's continued occupancy from 1 January 2001 to 31 August 2001 was bymere tolerance of Ortigas and that ceased upon the execution of a contract of leasebetween Ortigas and Allegro. The MeTC found that Liga had agreed to sublease theproperty for P40,000.00 per month. In compliance with the lease agreement withAllegro, Liga even paid the sum of P80,000.00 corresponding to one-month
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advance rental and one-month security deposit as evidenced by a provisionalreceipt issued by the former. It thus ordered Liga to pay Allegro P210,000.00representing back rentals from 1 October 2001 to February 2002 and P20,000.00per month as reasonable compensation for the use of the premises from the filing ofthe ejectment suit until it is vacated. HTCaAD

On appeal, the Regional Trial Court (RTC) affirmed the decision of the MeTC butmade modifications with respect to its monetary awards.12It extended the period oflease over the property for two years at a rental rate of P20,000.00 per month, andordered Liga to pay P80,000.00 as back rentals for the period of September 2001 toFebruary 2002 and P20,000.00 per month as rental from March 2002 until theproperty is vacated.

Allegro filed a petition for review13under Rule 42 of the Rules of Court before theCourt of Appeals assailing the modified decision of the RTC. The appellate court, ina Decision dated 25 January 2006, granted Allegro's petition and set aside theRTC's decision.14It held that after the expiration of La Paz's lease with Ortigas on

31 December 2000, Liga occupied the property merely by tolerance of Ortigas andthat it was incorrect for the RTC to extend the lease contract for two years since itwould infringe on the parties right to contract and Liga herself had never raised asan issue the extension of the lease contract before the MeTC. It found that Ligasigned the Rental Information with Allegro and agreed to a monthly rental ofP40,000.00 starting 1 September 2001. The appellate court ordered Liga to payOrtigas back rentals of P20,000.00 per month for the period of 1 January 2001 to 31August 2001 and P40,000.00 per month as rentals to Allegro starting 1 September2001 until the property is vacated. In a Resolution dated 22 November 2006, theCourt of Appeals denied Liga's motion for reconsideration.15

Hence, the present petition for review before this Court.

The petition raised the following issues: whether the Court of Appeals had erred inordering Liga to pay: (a) to Ortigas back rentals covering the period 1 January 2001to 31 August 2001 totaling P160,000.00; (b) to Allegro back rentals in the amount ofP40,000.00 a month starting from 1 September 2001 until such time as she vacatesthe leased property; and (c) to Allegro the amount of P20,000.00 as attorney's feesand the costs of suit.16

Liga argues that the Court of Appeals erred in ordering her to pay Ortigas backrentals although the latter is not a party in the instant case. The ruling of the

appellate court ran counter to the Court's doctrine that judgment cannot bindpersons who are not parties to the action.17She avers that Allegro was alreadyestopped from claiming monthly rentals in the amount of P40,000.00 starting from 1September 2001 since it filed the Motion to Release Cash Bond in Favor ofPlaintiff18with the MeTC. By filing the motion, Allegro signified its concurrence in

the monthly rental of P20,000.00.19Since Liga is willing and able to pay theappropriate rentals as evidenced by the deposits she made before the RTC, sheshould not be made liable for attorney's fees in the amount of P20,000.00 and forthe costs of suit.20

The Court will discuss the issues in seriatim.

We sustain Liga on the first issue. The Court of Appeals erred in awarding backrentals for the month of 1 January 2001 to 31 August 2001 in favor ofOrtigas. HDTcEI

Firstly, Ortigas is not a party to this case, whether as plaintiff or otherwise. It is basic

that no relief can be extended in a judgment to a stranger or one who is not a partyto a case.21

Secondly, Allegro cannot justify the award as a legal representative by virtue of aprovision in its lease agreement with Ortigas. Although Section 1 of Rule 70 of theRules of Court22specifically allows "the legal representatives or assigns of anysuch lessor, vendor, vendee, or other person" to bring action for restitution ofpossession with damages and costs against persons who unlawfully withheld ordeprived the lawful possessor of possession over any land or building, Allegro didnot aver in its complaint that it was acting as Ortigas's legal representative andseeking the back rentals due Ortigas. CHDaAE

Thirdly, there is no allegation or prayer in the complaint that Allegro was seeking thecollection of the back rentals due Ortigas. Nor was there evidence to that effect. It iselementary that a judgment must conform to, and be supported by, both thepleadings and the evidence, and be in accordance with the theory of the action onwhich the pleadings are framed and the case was tried.23The judgment mustbe secundum allegata et probata.

In Falcon v. Manzano,24the Court set aside the judgment of the trial court inconceding to her a remedy which was not prayed for in the complaint as the trialcourt rendered judgment allowing plaintiff to recover from the defendant the unpaid
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portion of the purchase price of a parcel of land when the plaintiff only asked for thenullification of the contract of sale of the realty and the return of the property to her.We held that courts, in rendering decisions, ought to limit themselves to the issuespresented by the parties in their pleadings. DcaECT

In the analogous case ofLerma v. De la Cruz,25the plaintiff therein brought anaction to recover accrued rents and damages for the injury to the land but the trialcourt extended the relief sought by giving judgment for possession of the land. TheCourt held that "(t)he plaintiff did not ask for possession, nor is there any prayer tothat effect in the complaint, and the judgment must, therefore be reversed insofar asit undertakes to provide for the restitution of the land in question to the plaintiff."

As to the second issue, the Court cannot countenance the obstinate refusal of Ligato pay P40,000.00 a month to Allegro since she had already acquiesced to pay suchrental rate when she signed the Rental Information. It i s fundamental that a contract

is the law between the parties.26Obligations arising from contracts have the forceof law between the contracting parties and should be complied with in goodfaith.27Unless the stipulations in a contract are contrary to law, morals, goodcustoms, public order or public policy, the same are binding as between theparties.28It is a general principle of law that no one may be permitted to changehis mind or disavow and go back upon his own acts, or to proceed contrary thereto,to the prejudice of the other party.29Likewise, it is settled that if the terms of thecontract clearly express the intention of the contracting parties, the literal meaning ofthe stipulations would be controlling.30

The filing by Allegro of the Motion to Release Cash Bond in Favor of the Plaintiffdidnot operate to estop it from claiming a monthly rental rate of P40,000.00. Estoppel

cannot be sustained by mere argument or doubtful inference.31Allegro did notabandon its stance nor did it represent to Liga that it was doing so. Liga cannot feignignorance of such fact since Allegro's petition for review before the Court of Appealsputs as an issue the reduction by the RTC of the monthly rentals from P40,000.00 toP20,000.00.32Allegro never made any deed or representation that could havemisled Liga. aICHEc

Moreover, the Court has previously sanctioned a similar partial execution of the trialcourt's decision awarding damages in an ejectment suit at the instance of the

plaintiff. Not only is such an act procedurally sound, it also serves the ends ofjustice. As the Court succinctly held in Sps. Catungal v. Jao:33

Finally, respondent questions why petitioners would want toreinstate the RTC decision when in fact they had already

applied for a writ of execution of the 8 March 1997 Decision.Respondent is of the view that since petitioners had alreadymoved for the execution of the decision awarding a smalleramount of damages or fair rental value, the same isinconsistent with a petition asking for a greater fair rentalvalue and, therefore, a possible case of unjust enrichment infavor of the petitioners. We are not persuaded. IEHDAT

In order to avoid further injustice to a lawful possessor,an immediate execution of a judgment is mandated andthe court's duty to order such execution is practicallyministerial. In City of Manila, et al. v. CA, et al., We held

that "Section 8 (now Section 19), Rule 70, on executionpending appeal, also applies even if the plaintiff-lessorappeals where, as in that case, judgment was rendered infavor of the lessor but it was not satisfied with theincreased rentals granted by the trial court, hence theappeal . . . ."

As above discussed, the petitioners have long been deprivedof the exercise of their proprietary rights over the leasedpremises and the rightful amount of rentals at the rate ofP40,000.00 a month. Consequently, petitioners are entitled toaccrued monthly rentals of P27,000.00, which is the

difference between P40,000.00 awarded by the Regional TrialCourt and P13,000.00 awarded by the MeTC and affirmed bythe Court of Appeals. Said amount of P27,000.00 shouldrightly be the subject of another writ of execution beingdistinct from the subject of the first writ of execution filed bypetitioners.(Emphasis supplied.) cHaDIA

On the last issue regarding damages, Liga also ends up at the shorter end. Law andjurisprudence support the award of attorney's fees and costs of suit in favor ofAllegro. The award of damages and attorney's fees is left to the sound discretion of
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the court, and if such discretion is well exercised, as in this case, it will not bedisturbed on appeal.34Attorney's fees and costs of litigation are awarded ininstances where "the defendant acted in gross and evident bad faith in refusing tosatisfy the plaintiff's plainly valid, just and demandable claim."35Having deliveredpossession over the leased property to Liga, Allegro had already performed its

obligation under the lease agreement. Liga should have exercised fairness andgood judgment in dealing with Allegro by religiously paying the agreed monthlyrental of P40,000.00.

However, the Court deems it proper to award interest in favor of Allegro. In EasternShipping Lines, Inc. v. Court of Appeals,36we gave the following guidelines in theaward of interest: cEISAD

II.With regard particularly to an award of interest in theconcept of actual and compensatory damages, the rate ofinterest, as well as the accrual thereof, is imposed, as follows:

1.When the obligation is breached, and it consists in thepayment of a sum of money, i.e., a loan or forbearance ofmoney, the interest due should be that which may have beenstipulated in writing. Furthermore, the interest due shall itselfearn legal interest from the time it is judicially demanded. Inthe absence of stipulation, the rate of interest shall be 12%per annum to be computed from default, i.e., from judicial orextrajudicial demand under and subject to the provisions ofArticle 1169 of the Civil Code.37

The back rentals in this case being equivalent to a loan or forbearance of money,the interest due thereon is twelve percent (12%) per annum from the time of

extrajudicial demand on 15 December 2001.38

WHEREFORE, the petition for review is DENIED. The Decision of the Court ofAppeals in CA-G.R. SP No. 86331 is AFFIRMED with the MODIFICATIONS that theaward of back rentals for the period of 1 January 2001 to 31 August 2001 to Ortigas& Company, Limited Partnership is DELETED and that petitioner Edsel Liga isORDERED to pay respondent Allegro Resources Corporation legal interest oftwelve percent (12%) per annum on the back rentals from the date of extrajudicialdemand on 15 December 2001 until fully paid. DcCIAa

SO ORDERED.

Quisumbing, Carpio-Morales, Velasco, Jr. and Brion, JJ., concur.

HIRD DIVISION

[G.R. No. 138814. April 16, 2009.]

MAKATI STOCK EXCHANGE, INC., MA. VIVIANYUCHENGCO, ADOLFO M. DUARTE, MYRON C. PAPA,NORBERTO C. NAZARENO, GEORGE UY-TIOCO,ANTONIO A. LOPA, RAMON B. ARNAIZ, LUIS J.L.VIRATA, and ANTONIO GARCIA, JR.petitioners, vs.MIGUEL V. CAMPOS, substituted by JULIA ORTIGASVDA. DE CAMPOS,1respondent.

D E C I S I O N

CHICO-NAZARIO, Jp:

This is a Petition for Review on Certiorariunder Rule 45 seeking the reversal of the

Decision2dated 11 February 1997 and Resolution dated 18 May 1999 of the Courtof Appeals in CA-G.R. SP No. 38455.ADCIca

The facts of the case are as follows:

SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondentMiguel V. Campos, who filed with the Securities, Investigation and ClearingDepartment (SICD) of the Securities and Exchange Commission (SEC), a Petitionagainst herein petitioners Makati Stock Exchange, Inc. (MKSE) and MKSE directors,Ma. Vivian Yuchengco, Adolfo M. Duarte, Myron C. Papa, Norberto C. Nazareno,
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George Uy-Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis J.L. Virata, and AntonioGarcia, Jr. Respondent, in said Petition, sought: (1) the nullification of theResolution dated 3 June 1993 of the MKSE Board of Directors, which allegedlydeprived him of his right to participate equally in the allocation of Initial PublicOfferings (IPO) of corporations registered with MKSE; (2) the delivery of the IPO

shares he was allegedly deprived of, for which he would pay IPO prices; and (3) thepayment of P2 million as moral damages, P1 million as exemplary damages, andP500,000.00 as attorney's fees and litigation expenses.

On 14 February 1994, the SICD issued an Order granting respondent's prayer forthe issuance of a Temporary Restraining Order to enjoin petitioners fromimplementing or enforcing the 3 June 1993 Resolution of the MKSE Board ofDirectors.

The SICD subsequently issued another Order on 10 March 1994 grantingrespondent's application for a Writ of Preliminary Injunction, to continuously enjoin,during the pendency of SEC Case No. 02-94-4678, the implementation or

enforcement of the MKSE Board Resolution in question. Petitioners assailed thisSICD Order dated 10 March 1994 in a Petition forCertiorarifiled with the SEC enbanc, docketed as SEC-EB No. 393.

On 11 March 1994, petitioners filed a Motion to Dismiss respondent's Petition inSEC Case No. 02-94-4678, based on the following grounds: (1) the Petition becamemoot due to the cancellation of the license of MKSE; (2) the SICD had no jurisdictionover the Petition; and (3) the Petition failed to state a cause of action.

The SICD denied petitioner's Motion to Dismiss in an Order dated 4 May 1994.Petitioners again challenged the 4 May 1994 Order of SICD before the SEC enbancthrough another Petition forCertiorari, docketed as SEC-EB No. 403.

In an Order dated 31 May 1995 in SEC-EB No. 393, the SEC en bancnullified the10 March 1994 Order of SICD in SEC Case No. 02-94-4678 granting a Writ ofPreliminary Injunction in favor of respondent. Likewise, in an Order dated 14 August1995 in SEC-EB No. 403, the SEC en bancannulled the 4 May 1994 Order of SICDin SEC Case No. 02-94-4678 denying petitioners' Motion to Dismiss, andaccordingly ordered the dismissal of respondent's Petition before the SICD. aDcEIH

Respondent filed a Petition forCertiorariwith the Court of Appeals assailing theOrders of the SEC en bancdated 31 May 1995 and 14 August 1995 in SEC-EB No.

393 and SEC-EB No. 403, respectively. Respondent's Petition before the appellatecourt was docketed as CA-G.R. SP No. 38455.

On 11 February 1997, the Court of Appeals promulgated its Decision in CA-G.R. SPNo. 38455, granting respondent's Petition forCertiorari, thus:

WHEREFORE, the petition in so far as it prays for annulmentof the Orders dated May 31, 1995 and August 14, 1995 inSEC-EB Case Nos. 393 and 403 is GRANTED. The saidorders are hereby rendered null and void and set aside.

Petitioners filed a Motion for Reconsideration of the foregoing Decision but it wasdenied by the Court of Appeals in a Resolution dated 18 May 1999.

Hence, the present Petition for Review raising the following arguments:

I.

THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE OFDISCRETION AMOUNTING TO LACK OR EXCESS OFJURISDICTION WHEN IT DISMISSED THE PETITIONFILED BY RESPONDENT BECAUSE ON ITS FACE, ITFAILED TO STATE A CAUSE OF ACTION.

II.

THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OFRESPONDENT WAS A MERE ACCOMMODATION GIVEN

TO HIM BY THE BOARD OF [DIRECTORS] OF THEMAKATI STOCK EXCHANGE, INC.

III.

THE COURT OF APPEALS ERRED IN HOLDING THAT THESEC EN BANC COMMITTED GRAVE ABUSE OFDISCRETION AMOUNTING TO LACK OR EXCESS OFJURISDICTION WHEN IT MADE AN EXTENDED INQUIRYAND PROCEEDED TO MAKE A DETERMINATION AS TO


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THE TRUTH OF RESPONDENT'S ALLEGATIONS IN HISPETITION AND USED AS BASIS THE EVIDENCEADDUCED DURING THE HEARING ON THE APPLICATIONFOR THE WRIT OF PRELIMINARY INJUNCTION TODETERMINE THE EXISTENCE OR VALIDITY OF A STATED

CAUSE OF ACTION. DaIACS

IV.

IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT TOBE BOUGHT BY THE BROKERS FOR THEMSELVES BUTARE TO BE DISTRIBUTED TO THE INVESTING PUBLIC.HENCE, RESPONDENT'S CLAIM FOR DAMAGES ISILLUSORY AND HIS PETITION A NUISANCE SUIT.3

On 18 September 2001, counsel for respondent manifested to this Court that hisclient died on 7 May 2001. In a Resolution dated 24 October 2001, the Court

directed the substitution of respondent by his surviving spouse, Julia Ortigas vda. deCampos.

Petitioners want this Court to affirm the dismissal by the SEC en bancofrespondent's Petition in SEC Case No. 02-94-4678 for failure to state a cause ofaction. On the other hand, respondent insists on the sufficiency of his Petition andseeks the continuation of the proceedings before the SICD.

A cause of action is the act or omission by which a party violates a right ofanother.4A complaint states a cause of action where it contains three essentialelements of a cause of action, namely: (1) the legal right of the plaintiff, (2) thecorrelative obligation of the defendant, and (3) the act or omission of the defendantin violation of said legal right. If these elements are absent, the complaint becomesvulnerable to dismissal on the ground of failure to state a cause of action.

If a defendant moves to dismiss the complaint on the ground of lack of cause ofaction, he is regarded as having hypothetically admitted all the averments thereof.The test of sufficiency of the facts found in a complaint as constituting a cause ofaction is whether or not admitting the facts alleged, the court can render a validjudgment upon the same in accordance with the prayer thereof. The hypotheticaladmission extends to the relevant and material facts well pleaded in the complaintand inferences fairly deducible therefrom. Hence, if the allegations in the complaint

furnish sufficient basis by which the complaint can be maintained, the same shouldnot be dismissed regardless of the defense that may be assessed by thedefendant.5

Given the foregoing, the issue of whether respondent's Petition in SEC Case No.

02-94-4678 sufficiently states a cause of action may be alternatively stated aswhether, hypothetically admitting to be true the allegations in respondent's Petitionin SEC Case No. 02-94-4678, the SICD may render a valid judgment in accordancewith the prayer of said Petition.

A reading of the exact text of respondent's Petition in SEC Case No. 02-94-4678 is,therefore, unavoidable. Pertinent portions of the said Petition reads: aEIADT

7.In recognition of petitioner's invaluable services, the generalmembership of respondent corporation [MKSE] passed aresolution sometime in 1989 amending its Articles ofIncorporation, to include the following provision therein:

"ELEVENTH WHEREAS, Mr. Miguel Campos isthe only surviving incorporator of the Makati StockExchange, Inc. who has maintained hismembership;

"WHEREAS, he has unselfishly served theExchange in various capacities, as governor from1977 to the present and as President from 1972 to1976 and again as President from 1988 to thepresent;

"WHEREAS, such dedicated service and leadershipwhich has contributed to the advancement and wellbeing not only of the Exchange and its members butalso to the Securities industry, needs to berecognized and appreciated;

"WHEREAS, as such, the Board of Governors in itsmeeting held on February 09, 1989 hascorrespondingly adopted a resolution recognizinghis valuable service to the Exchange, reward the
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same, and preserve for posterity such recognitionby proposing a resolution to the membership bodywhich would make him as Chairman Emeritus forlife and install in the Exchange premises acommemorative bronze plaque in his honor;

"NOW, THEREFORE, for and in consideration ofthe above premises, the position of the "ChairmanEmeritus" to be occupied by Mr. Miguel Camposduring his lifetime and irregardless of his continuedmembership in the Exchange with the Privilege toattend all membership meetings as well as themeetings of the Board of Governors of theExchange, is hereby created."

8.Hence, to this day, petitioner is not only an active memberof the respondent corporation, but its Chairman Emeritus as

well.

9.Correspondingly, at all times material to this petition, as anactive member and Chairman Emeritus of respondentcorporation, petitioner has always enjoyed the right given toall the other members to participate equally in the Initial PublicOfferings (IPOs for brevity) of corporations.

10.IPOs are shares of corporations offered for sale to thepublic, prior to the listing in the trading floor of the country'stwo stock exchanges. Normally, Twenty Five Percent (25%)of these shares are divided equally between the two stock

exchanges which in turn divide these equally among theirmembers, who pay therefor at the offering price. TcIaHC

11.However, on June 3, 1993, during a meeting of the Boardof Directors of respondent-corporation, individual respondentspassed a resolution to stop giving petitioner the IPOs he isentitled to, based on the ground that these shares wereallegedly benefiting Gerardo O. Lanuza, Jr., who theseindividual respondents wanted to get even with, for havingfiled cases before the Securities and Exchange * (SEC) for

their disqualification as member of the Board of Directors ofrespondent corporation.

12.Hence, from June 3, 1993 up to the present time,petitioner has been deprived of his right to subscribe to theIPOs of corporations listing in the stock market at theiroffering prices.

13.The collective act of the individual respondents indepriving petitioner of his right to a share in the IPOs for theaforementioned reason, is unjust, dishonest and done in badfaith, causing petitioner substantial financial damage.6

There is no question that the Petition in SEC Case No. 02-94-4678 assertsa right in favor of respondent, particularly, respondent's alleged right to subscribe tothe IPOs of corporations listed in the stock market at their offering prices; andstipulates the correlative obligation of petitioners to respect respondent's right,specifically, by continuing to allow respondent to subscribe to the IPOs ofcorporations listed in the stock market at their offering prices.

However, the terms rightand obligation in respondent's Petition are not magic wordsthat would automatically lead to the conclusion that such Petition sufficiently states acause of action. Rightand obligation are legal terms with specific legal meaning.A rightis a claim or title to an interest in anything whatsoever that is enforceable bylaw.7An obligation is defined in the Civil Code as a juridical necessity to give, to door not to do.8For every right enjoyed by any person, there is a correspondingobligation on the part of another person to respect such right. Thus, Justice J.B.L.Reyes offers9the definition given by Arias Ramos as a more complete definition:

An obligation is a juridical relation whereby a person (calledthe creditor) may demand from another (called the debtor) theobservance of a determinative conduct (the giving, doing ornot doing), and in case of breach, may demand satisfactionfrom the assets of the latter.

The Civil Code enumerates the sources of obligations:
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Art. 1157.Obligations arise from:

(1)Law;

(2)Contracts;

(3)Quasi-contracts;

(4)Acts or omissions punished by law; and

(5)Quasi-delicts. cTAaDC

Therefore, an obligation imposed on a person, and the corresponding right grantedto another, must be rooted in at least one of these five sources. The mere assertionof a right and claim of an obligation in an initiatory pleading, whether a Complaint orPetition, without identifying the basis or source thereof, is merely a conclusion of

fact and law. A pleading should state the ultimate facts essential to the rights ofaction or defense asserted, as distinguished from mere conclusions offactorconclusions of law.10Thus, a Complaint or Petition filed by a personclaiming a right to the Office of the President of this Republic, but without stating thesource of his purported right, cannot be said to have sufficiently stated a cause ofaction. Also, a person claiming to be the owner of a parcel of land cannot merelystate that he has a right to the ownership thereof, but must likewise assert in theComplaint either a mode of acquisition of ownership or at least a certificate of title inhis name.

In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allegerespondent's right to subscribe to the IPOs of corporations listed in the stock market

at their offering prices, and petitioners' obligation to continue respecting andobserving such right, the Petition utterly failed to lay down the source or basis ofrespondent's right and/or petitioners' obligation.

Respondent merely quoted in his Petition the MKSE Board Resolution, passedsometime in 1989, granting him the position of Chairman Emeritus of MKSE for life.However, there is nothing in the said Petition from which the Court can deduce thatrespondent, by virtue of his position as Chairman Emeritus of MKSE, was grantedby law, contract, or any other legal source, the right to subscribe to the IPOs ofcorporations listed in the stock market at their offering prices.

A meticulous review of the Petition reveals that the allocation of IPO shares wasmerely alleged to have been done in accord with a practice normally observed bythe members of the stock exchange, to wit:

IPOs are shares of corporations offered for sale to the public,

prior to their listing in the trading floor of the country's twostock exchanges.Normally, Twenty-Five Percent (25%) ofthese shares are divided equally between the two stockexchanges which in turn divide these equally among theirmembers, who pay therefor at the offeringprice.11(Emphasis supplied)

A practice orcustom is, as a general rule, not a source of a legally demandable orenforceable right.12Indeed, in labor cases, benefits which were voluntarily given bythe employer, and which have ripened into company practice, are considered asrights that cannot be diminished by the employer.13Nevertheless, even in suchcases, the source of the employees' right is not custom, but ultimately, the law,

since Article 100 of the Labor Code explicitly prohibits elimination or diminution ofbenefits. SEIcAD

There is no such law in this case that converts the practice of allocating IPO sharesto MKSE members, for subscription at their offering prices, into an enforceable ordemandable right. Thus, even if it is hypothetically admitted that normally, twentyfive percent (25%) of the IPOs are divided equally between the two stock exchanges which, in turn, divide their respective allocation equally among their members,including the Chairman Emeritus, who pay for IPO shares at the offering pr ice theCourt cannot grant respondent's prayer for damages which allegedly resulted fromthe MKSE Board Resolution dated 3 June 1993 deviating from said practice by nolonger allocating any shares to respondent.

Accordingly, the instant Petition should be granted. The Petition in SEC Case No.02-94-4678 should be dismissed for failure to state a cause of action. It does notmatter that the SEC en banc, in its Order dated 14 August 1995 in SEC-EB No. 403,overstepped its bounds by not limiting itself to the issue of whether respondent'sPetition before the SICD sufficiently stated a cause of action. The SEC en bancmayhave been mistaken in considering extraneous evidence in granting petitioners'Motion to Dismiss, but its discussion thereof are merely superfluous and obiterdictum. In the main, the SEC en bancdid correctly dismiss the Petition in SEC CaseNo. 02-94-4678 for its failure to state the basis for respondent's alleged right, to wit:
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9/9

Private respondent Campos has failed to establish the basisor authority for his alleged right to participate equally in theIPO allocations of the Exchange. He cited paragraph 11 of theamended articles of incorporation of the Exchange in supportof his position but a careful reading of the said provision

shows nothing therein that would bear out his claim. Theprovision merely created the position of chairman emeritus ofthe Exchange but it mentioned nothing about conferring uponthe occupant thereof the right to receive IPO allocations.14

With the dismissal of respondent's Petition in SEC Case No. 02-94-4678, there is nomore need for this Court to resolve the propriety of the issuance by SCID of a writ ofpreliminary injunction in said case.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appealsdated 11 February 1997 and its Resolution dated 18 May 1999 in CA-G.R. SP No.38455 are REVERSED and SET ASIDE. The Orders dated 31 May 1995 and 14

August 1995 of the Securities and Exchange Commission en bancin SEC-EB CaseNo. 393 and No. 403, respectively, are hereby reinstated. No pronouncement as tocosts.

SO ORDERED.

Ynares-Santiago, Austria-Martinez, Nachura and Peralta, JJ., concur.
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Liga v. Allegro, Mkti Stock Exchange v. Campos

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