MAKATI STOCK EXCHANGE, INC.

VS MIGUEL CAMPOS
G.R. NO. 138814, APRIL 26, 2009
FACTS:
SEC Case No. 02-94-4678 was instituted on 10 February 1994 by
respondent Miguel V. Campos with the Securities, Investigation and Clearing
Department (SICD) of the Securities and Exchange Commission (SEC), a
Petition against herein petitioners Makati Stock Exchange, Inc. (MKSE).
The Petition, sought: (1) the nullification of the Resolution dated 3 June
1993 of the MKSE Board of Directors, 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) the payment of P2 million
as moral damages, P1 million as exemplary damages, and P500,000.00 as
attorneys fees and litigation expenses.
The SICD issued an Order granting respondents prayer for the issuance
of a Temporary Restraining Order to enjoin petitioners from implementing or
enforcing the Resolution of the MKSE Board of Directors. Subsequently issued
another Order on 10 March 1994 granting respondents 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.
On 11 March 1994, petitioners filed a Motion to Dismiss respondents
Petition based 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
petitioners Motion to Dismiss. Petitioners again challenged Order of SICD before
the SEC en banc through another Petition for Certiorari.
The SEC en banc nullified the Order of SICD granting a Writ of
Preliminary Injunction in favour of respondent. SEC en banc annulled the Order
of SICD in SEC Case No. 02-94-4678 denying petitioners Motion to Dismiss, and
accordingly ordered the dismissal of respondents Petition before the SICD.
Respondent filed a Petition for Certiorari with the Court of Appeals.
Petitioners filed a Motion for Reconsideration but was denied by the Court of
Appeals.

ISSUE:
WHETHER OR NOT THE PETITION FAILED TO STATE A
CAUSE OF ACTION.

RULING:
The petition filled by the respondent, Miguel Campos should be dismissed
for failure to state a cause of action.
A cause of action is the act or omission by which a party violates a right of
another. A complaint states a cause of action where it contains three essential
elements of a cause of action, 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.
However, the terms right and obligation are not magic words that would
automatically lead to the conclusion that such Petition sufficiently states a cause
of
action. Right and obligation are
legal
terms
with
specific
legal
meaning. A right is a claim or title to an interest in anything whatsoever that is
enforceable by law while an obligation is defined in the Civil Code as a juridical
necessity to give, to do or not to do. Justice J.B.L. Reyes offers the definition
given by Arias Ramos as a more complete definition:
An obligation is a juridical relation whereby a person (called
the creditor) may demand from another (called the debtor) the
observance of a determinative conduct (the giving, doing or not
doing), and in case of breach, may demand satisfaction from the
assets of the latter.
Art. 1157 of the Civil Code provides that Obligations arise from (1) Law;
(2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5)
Quasi-delicts.
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 does allege respondents 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 respondents 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. (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.