Cemco Holdings, Inc vs National Life Insurance Company of the Philippines

G.R. No. 171815 August 7, 2007

FACTS:

Union Cement Corporation (UCC) is a publicly listed company with two principal
stockholders- United Cement Holdings Corporation (UCHC), a non-listed
company, with shares amounting to 60.51% and Cemco with 17.03%. Majority of
UCHC stocks were owned by Bacnotan Consolidated Industries (BCI) with
21.31%, Atlas Cement Corporation (ACC) with 29.69%. Cemco owns 9% of UCHC
stocks.
July 5, 2004- BCI informed Security and Exchange Commission (SEC) that it
and its subsidiary ACC had passed resolutions to sell to Cemco BCIs stocks in
UCHCH equivalent to 21.31% and ACCs stocks in UCHC with 29.69%. As a result
of Cemcos acquisition, its shares boosted to 53% of the shares of UCC.
July 15, 2014- Philippine Stock Exchange (PSE) inquired sec as to whether
Tender Offer Rule under RULE 19 OF THE IMPLEMENTING RULES OF THE
SECURITIES REGULATION CODE is not applicable to the purchase of Cemco of
the majority of shares of UCC.
July 27, 2004- Director Justina Callangan confirmed that SEC en banc had
resolved that the Cemco transaction was not covered by the tender offer rule.
July 28, 2004- National Life Insurance Company of the Philippines (a minor
stock holder of UCC) demands Cemco to comply with the rule of mandatory offer
but the latter refused.
August 19, 2004- after the transaction between Cemco and BIC and ACC was
consummated, National Life filed a complaint with the SEC to declare the
purchase agreement of Cemco void and praying that the mandatory tender offer
rule be applied to UCC shares.
Cemco argues that the tender offer rule applies only to a direct acquisition of the
shares of the listed company and does not extend to an indirect acquisition
arising from the purchase of the shares of a holding company of the listed firm.
Thus, it doesnt apply to Cemcos case and that SECs re-interpretation of Rule 19
of Security Regulation Code and Tender Offer Rule could not be made to
retroactively apply to Cemcos purchase of UCHC shares as it relied in good faith
on the letter dated July 27, 2004 of the SEC which stated that the transaction is
not covered by the mandatory offer rule.
COA an SEC favored the defendant saying that Tender Offer Rule applies to
Cemcos purchase of UCHC stocks.

ISSUE:

Whether or not the questioned ruling of the SDEC can be applied retroactively to
Cemcos transaction which was consummated under the authority of SECs prior
resolution.

HELD:

The letter dated July 27, 2004 of the SEC was nothing but an approval of draft
letter prepared by Director Callanga as this cannot be construed as passing merits
or giving approval to the questioned transaction. Advisor opinion of an agency
may be stricken down if it deviates from the provision of the statute. What is
applicable in this case is the ruling of SEC dated Feb. 14, 2005, under the case of
Serrano vs National Labor Commission, abandoning the opinion embodied in the
letter dated July 27, 2004. It states that when a judicial interpretation becomes a
part of the law, it shall overrule the previous decisions and that a different view
would be adopted. The new doctrine should be applied prospectively and should
not apply to parties who relied on the old doctrine and acted in good faith.
CEMCO argued that it relied in good faith on the previous SEC ruling but it was a
convoluted application of the non-retroactivity of judicial rulings. It is important
to remember that judicial decisions should have prospective application with
respect to previously decided cases and not pending cases.