Makati Stock Exchange v.
Campos
G.R. NO. 138814 | April 16, 2009 |, Chico-Nazario, J.
Doctrine of the Case
A pleading must identify the source or basis of the right or obligation being claimed,
otherwise it is considered as stating mere conclusions of fact or law. The mere assertion
of a right or claim of an obligation without specifying its legal source is insufficient to
constitute a cause of action.
Here, while a right was claimed, no legal source was cited as basis for the alleged right
to IPO allocations, resulting in failure to state a cause of action.
Facts: Respondent Miguel V. Campos filed a petition against Makati Stock Exchange,
Inc. (MKSE) and MKSE directors before the SEC's Securities Investigation and Clearing
Department (SICD). He sought: (1) nullification of MKSE's Board Resolution dated June
3, 1993 which allegedly deprived him of his right to participate equally in the allocation
of Initial Public Offerings (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)
payment of damages.
The SICD issued an Order granting respondent's prayer for the issuance of a
Temporary Restraining Order to enjoin petitioners from implementing or enforcing the 3
June 1993 Resolution of the MKSE Board of Directors.
MKSE sought the dismissal on the following grounds: (1) the Petition became moot due
to the cancellation of the license of MKSE; (2) the SICD had no jurisdiction over the
Petition; and (3) the Petition failed to state a cause of action.
The SICD denied the motion. On certiorari, the SEC En Banc annulled the SICD order
and dismissed the petition for failure to establish any basis for the alleged right to IPO
allocations under the law, MKSE's Articles of Incorporation, or elsewhere. Campos
challenged said dismissal via certiorari before the CA. The CA granted Campos’s
petition and nullified the dismissal order. MKSE now comes to the SC via Rule 45
petition.
Issue: Whether or not there is a source of obligation in this case which would lead to
the conclusion that such petition sufficiently states a cause of action (NO)
Ruling: NO. A complaint states a cause of action where it contains three essential
element, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or omission of the defendant in violation of said legal right. If
these elements are absent, the complaint becomes vulnerable to dismissal on the
ground of failure to state a cause of action.
1
Digest-maker (Castillo, Mark C.)
There is no question that the Petition in SEC Case No. 02-94-4678 asserts a right in
favor of respondent, particularly, respondent's alleged right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices; and stipulates the
correlative obligation of petitioners to respect respondent's right.
Art. 1157 of the Civil Code enumerates the sources of obligations such as (1) Law; (2)
Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5)
Quasi-delicts.
Therefore, an obligation imposed on a person, and the corresponding right granted to
another, must be rooted in at least one of these five sources. The mere assertion of a
right and claim of an obligation in an initiatory pleading, whether a Complaint or Petition,
without identifying the basis or source thereof, is merely a conclusion of fact and law.
In the case at bar, although the Petition in SEC Case No. 02-94-4678 alleges
respondent's right to subscribe to the IPOs of corporations listed in the stock market at
their offering prices, and petitioners' obligation to continue respecting and observing
such right, the Petition utterly failed to lay down the source or basis of respondent's right
and/or petitioners' obligation.
Respondent merely quoted in his Petition the MKSE Board Resolution, passed
sometime 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 that
respondent, by virtue of his position as Chairman Emeritus of MKSE, was granted by
law, contract, or any other legal source, the right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices.
A meticulous review of the Petition reveals that the allocation of IPO shares was merely
alleged to have been done in accord with a practice normally observed by the members
of the stock exchange. A practice or custom is, as a general rule, not a source of a
legally demandable or enforceable right.
There is no such law in this case that converts the practice of allocating IPO shares to
MKSE members, for subscription at their offering prices, into an enforceable or
demandable right.
The Petition in SEC Case No. 02-94-4678 should be dismissed for failure to state a
cause of action. With the dismissal of respondent's Petition, there is no more need for
this Court to resolve the propriety of the issuance by SCID of a writ of preliminary
injunction in said case.
WHEREFORE, the Petition is GRANTED.
2
Digest-maker (Castillo, Mark C.)
