Orosa, Jr. v. Court of Appeals
REITERATIONFacts
1. The Antecedents: Petitioners Sixto L. Orosa, Jr., Jose Uranza, Gervacio E. Feria, William T. Guido, and Azucena A. Reyes made individual money market placements with respondent Mercantile Financing Corporation (Respondent Corporation). Upon maturity, Respondent Corporation failed to pay the full value of these placements, despite issuing checks, promissory notes, and certificates of trust. Petitioners subsequently filed separate civil suits against Respondent Corporation, seeking recovery of sums of money and damages, alleging fraud in incurring the obligations and seeking preliminary attachment based on this fraud. It was revealed that Respondent Corporation's license to operate as an investment entity had been revoked by the Central Bank prior to the Petitioners' placements. 2. Procedural History: The Trial Court granted the preliminary attachment writs and, after Respondent Corporation was declared in default for failing to file responsive pleadings, rendered default judgments ordering the corporation to pay the Petitioners. The Trial Court later granted execution pending appeal. Respondent Corporation then informed the court that the SEC had appointed a rehabilitation receiver, requesting a suspension of proceedings, but this was denied. The Trial Court subsequently allowed the auction sale of Respondent Corporation's real properties. The Rehabilitation Receiver filed a petition for preliminary injunction with the Court of Appeals, which was not acted upon. On September 29, 1986, the Court of Appeals ruled that the SEC had original and exclusive jurisdiction over the five suits, declared the lower court's proceedings and judgments void, and ordered the cases dismissed without prejudice to refiling with the SEC. 3. The Petition: This Petition for Review on certiorari challenges the Court of Appeals' ruling, questioning whether the Regional Trial Court or the Securities and Exchange Commission (SEC) has proper cognizance of the cases. Petitioners argue that their suits are ordinary actions for the recovery of sums of money, cognizable by the Regional Trial Court. Respondent Corporation contends that the SEC has original and exclusive jurisdiction, citing Presidential Decree No. 902-A, as amended, particularly Section 5(a) concerning fraud and misrepresentation detrimental to the public and Section 5(d) regarding suspension of payments and receivership. The core of the petition revolves around the applicability of PD 902-A and whether the alleged fraud and the nature of the claims fall within the SEC's exclusive jurisdiction, even after the revocation of the corporation's license by the Central Bank and the appointment of a rehabilitation receiver.
Issue(s)
Whether the Regional Trial Court or the Securities and Exchange Commission has original and exclusive jurisdiction over the five civil suits filed by the petitioners, considering allegations of fraud and misrepresentation by the Respondent Corporation. Whether the revocation of Respondent Corporation's license to operate as a financing company by the Central Bank divests the SEC of its jurisdiction over cases involving fraud and misrepresentation, and whether the claims were reduced to simple money claims cognizable by the RTC.
Ruling
The Supreme Court affirmed the ruling of the Court of Appeals, holding that the Securities and Exchange Commission (SEC) has original and exclusive jurisdiction over the five cases. The Court dismissed the individual complaints in the RTC, without prejudice to their refiling or submission of claims before the SEC.
Ratio Decidendi
On the jurisdiction of the SEC versus the RTC: The Court held that Presidential Decree No. 902-A, as amended, vests the SEC with absolute jurisdiction, supervision, and control over all corporations registered with it. Section 5(a) of PD 902-A grants the SEC original and exclusive jurisdiction over cases involving devices or schemes employed by corporate officers amounting to fraud and misrepresentation detrimental to the public and/or stockholders. The allegations in the petitioners' complaints sufficiently alleged such fraudulent acts and misrepresentations by Respondent Corporation, thereby placing the cases within the SEC's adjudicative powers, notwithstanding that the suits involved the recovery of sums of money. The Court emphasized that jurisdiction is determined by the allegations in the complaint at the time of its filing. On the effect of the Central Bank's revocation of license and the nature of the claims: The Court ruled that the revocation of Respondent Corporation's license to operate as a financing company by the Central Bank does not divest the SEC of its original and exclusive jurisdiction. The expanded jurisdiction of the SEC was established to protect the investing public, and the petitioners' money placements were in the nature of investments from which they expected returns, making them victims of fraud and misrepresentation. The SEC is empowered to enforce the Financing Company Act (Republic Act No. 5980) and violations thereof, including holding oneself out as a financing company without proper authorization, which falls under its jurisdiction. The Court rejected the petitioners' argument that the claims were reduced to simple money claims cognizable by the RTC after the revocation of the corporation's license. It reiterated that the allegations of fraud and misrepresentation in the complaints are determinative of jurisdiction. The fact that the SEC had appointed a rehabilitation receiver and directed the suspension of all actions against the corporation further bolstered the SEC's jurisdiction, as Section 6(c) of PD 902-A mandates the suspension of all claims against corporations under receivership.
Main Doctrine
The Securities and Exchange Commission (SEC) retains original and exclusive jurisdiction over cases involving fraud and misrepresentation detrimental to the public interest, even if the corporation's license to operate has been revoked and the suits involve simple money claims, as the nature of the transactions and the alleged fraudulent schemes fall within the SEC's adjudicative powers under Presidential Decree No. 902-A, as amended.