Skyworld Condominium Owners Association, Inc. v. Securities and Exchange Commission
REITERATIONFacts
The Antecedents: Inter-Realty obtained a loan from CBC, mortgaging three parcels of land and improvements thereon, later consolidated into TCT No. 33451. Inter-Realty failed to pay, leading CBC to foreclose the mortgage. CBC became the highest bidder. Inter-Realty and CBC executed a Memorandum of Agreement for an extended redemption period until all units were sold and proceeds applied to the loan. Inter-Realty authorized Angel Bautista to sell units. In May 1985, petitioner Skyworld Condominium Owners Association, Inc. (SCOAI), through its president Angel Bautista, notified CBC of its incorporation. When Inter-Realty failed to redeem by October 1985, CBC consolidated ownership over the land and 78% of condominium units. CBC authorized Bautista to sell unsold units, but later revoked this authority due to his violation of fiduciary obligations. CBC filed a petition with the SEC to contest SCOAI's existence, and BSCC (organized by CBC) filed a case seeking to stop SCOAI from exercising condominium corporation prerogatives. CBC also filed a case against Bautista for injunction, which was granted. The BSCC case was dismissed by the trial court, and the CBC case was dismissed by the SEC. Procedural History: BSCC filed a complaint with the SEC's Prosecution and Enforcement Department (PED) to revoke SCOAI's certificate of registration due to fraudulent procurement. SCOAI filed a similar complaint against BSCC. The PED, through Senior SE Specialist Norberto Ruiz, filed a petition for revocation of SCOAI's registration. The two revocation cases were consolidated. A hearing was conducted by Mr. Ruiz. On December 12, 1989, the PED issued a resolution, prepared by Mr. Ruiz and approved by PED Director Elnora Adviento, recommending the revocation of SCOAI's certificate of registration. The Commission en banc approved this resolution in an executive session. A motion for reconsideration was denied. SCOAI filed a notice of appeal, which the Commission treated as a motion for reconsideration and denied for lack of merit. The Petition: Petitioner SCOAI assails the SEC's decision, primarily questioning the authority of Special Prosecutor Norberto Ruiz to decide the consolidated petitions for revocation of its certificate of registration. SCOAI argues that Ruiz acted as both prosecutor and judge, and that the Commission erred in approving his resolution without proper appeal and in treating its appeal as a motion for reconsideration.
Issue(s)
Whether the respondent Commission erred in allowing Special Prosecutor Norberto Ruiz to decide the case after filing the petition. Whether the respondent Commission erred in approving the resolution of Norberto B. Ruiz dated December 12, 1989, in an executive session without appeal. Whether the respondent Commission erred in declaring that Prosecutor Norberto B. Ruiz had the authority to decide the revocation case after he had filed a petition to revoke the certificate of registration. Whether the respondent Commission erred in treating the appeal as a motion for reconsideration. Whether the respondent Commission erred in dismissing the appeal.
Ruling
The petition is DISMISSED for lack of grave abuse of discretion committed by the public respondent. The Order revoking and cancelling the certificate of registration of petitioner corporation is AFFIRMED.
Ratio Decidendi
On the authority of Mr. Ruiz and the Commission's approval of the resolution: The Court held that Presidential Decree No. 902-A vests the SEC with original and exclusive jurisdiction over cases involving the right of a corporation to exist. Section 6 of the same decree grants the Commission the power to suspend or revoke certificates of registration after proper notice and hearing, including grounds like fraud in procurement. The Commission can validly delegate this authority. In this case, the Commission empowered the PED to conduct the hearing and decide on the revocation, and the task was assigned to Mr. Ruiz on behalf of the Commission. Although Mr. Ruiz signed a petition prior to consolidation, that petition was disregarded. He was validly authorized to handle the consolidated cases. The Court clarified that in judging the merits, Mr. Ruiz acted as a trier of facts, not simultaneously as a prosecutor. The resolution was adopted by the Commission en banc as its own decision upon approval. The petitioner's contention that Mr. Ruiz acted beyond his authority as a member of the PED is unfounded, as his actions were within the ambit of the investigative authority delegated by the Commission under its power to revoke certificates of registration on grounds of fraud. The Court also noted that the Revised SEC Rules of Procedure, which designated the SICD for such filings, took effect after the case was ready for decision, making it impractical to require a transfer. The Court also addressed estoppel by laches, agreeing with the respondent Commission that the petitioner was barred from repudiating the jurisdiction of the hearing officer to whom it had voluntarily submitted itself. The Court reiterated its ruling in American Tobacco Company v. Director of Patents that while the power resides solely in the administrative agency, this does not preclude delegation to subordinates to investigate and report facts, as long as the final judgment and discretion exercised are those of the officer authorized by law. On the approval of the resolution without petitioner's knowledge: The Court stated that parties do not participate in the deliberation and decision-making process of administrative agencies; they are not supposed to be present when the SEC deliberates and votes. Notice is given after the decision is promulgated. In this case, the PED acted as a fact-gathering arm for the Commission, and the subsequent approval by the Commission en banc was the ultimate exercise of its judgment, done in accordance with law and its original jurisdiction. On the authority of Mr. Ruiz and the Commission's approval of the resolution (continued): The Court found that the Commission could validly delegate the hearing of the case to the PED, especially in the absence of specific rules at the time designating a particular officer or department to try such actions. This delegation was a practical administrative procedure to meet the demands of orderly administration and to free top-level officials from minor details. On treating the appeal as a motion for reconsideration: The Court found it proper for the Commission to have treated the petitioner's appeal as a motion for reconsideration. In doing so, no right of the petitioner to due process was violated. The Commission's order denying the motion for reconsideration was supported by substantial evidence and justified by relevant laws and jurisprudence. The Court upheld the Commission's finding that SCOAI failed to comply with the requirement that all incorporators must be shareholders, as only one incorporator, Angel Bautista, was considered an owner of a unit at the time of incorporation. The Court also confirmed that SCOAI was barred by estoppel from repudiating the adverse decision after voluntarily submitting to the hearing officer's jurisdiction. On forum-shopping and res judicata and the nature of the petition: The Court found these contentions to deserve scant consideration. The actions before the courts primarily sought injunctions against SCOAI, not an administrative inquiry into the revocation of a certificate of registration. The issue of revocation was more appropriately dealt with by the SEC, and thus, prior court decisions touching on SCOAI's right to exist would not bind the parties in the SEC proceedings. The Court viewed the petition as a dilatory attempt to stall the execution of the revocation order. It reiterated that judicial review or factual inquiry is not granted absent a showing of arbitrary action or manifest and grievous error by administrative agencies. The legal presumption is that official duty has been duly performed, especially by administrative agencies vested with quasi-judicial powers.
Main Doctrine
The Securities and Exchange Commission (SEC) can validly delegate its authority to conduct hearings and make preliminary rulings on cases involving revocation of certificates of registration to its Prosecution and Enforcement Department (PED), and the subsequent approval of such rulings by the Commission en banc constitutes the exercise of its original jurisdiction. Furthermore, a party that voluntarily submits to the jurisdiction of a hearing officer and presents evidence is barred by estoppel by laches from repudiating that jurisdiction.