Sumndad v. Harrigan
REITERATIONFacts
The Antecedents: Respondent John William Harrigan filed a complaint for collection of a sum of money against Boracay Beach Club Hotel, Inc. (BBCHI). Harrigan alleged that he invested P1 million for 8,000 shares, representing 40% of BBCHI's stock, based on a joint venture agreement with petitioner Mila Yap Sumndad for the development of a resort on Sumndad's land. Harrigan further claimed he provided advances or loans to BBCHI totaling at least P8 million to finance the resort's construction and facilities, with interest accruing from September 1, 1990. By September 1994, BBCHI had failed to service these loans and accrued interests, prompting Harrigan to demand payment, which BBCHI allegedly refused. Procedural History: Harrigan's complaint was filed with the Regional Trial Court (RTC) of Makati, which granted a writ of preliminary attachment. An amended complaint impleading BBCHI's management committee was filed. Petitioner Mila Yap Sumndad sought to intervene, which the RTC granted, allowing her to file an answer or complaint in intervention. Instead, Sumndad filed a motion to dismiss, which was denied. Subsequently, Sumndad was declared in default for failing to file an answer. The RTC then rendered a judgment on the pleadings in favor of Harrigan, ordering BBCHI to pay P8 million plus interest and attorney's fees. Sumndad's motion for reconsideration was denied, and a writ of execution was issued. She then filed a petition for certiorari, prohibition, and mandamus with the Court of Appeals (CA), which dismissed her petition. The CA denied her subsequent motion for reconsideration. The Petition: Petitioner Mila Yap Sumndad seeks review on certiorari of the CA's decision, arguing that the RTC erred in taking cognizance of the collection case, asserting that jurisdiction properly lies with the Securities and Exchange Commission (SEC) under PD 902-A due to allegations of fraud and an intra-corporate dispute. She contends that the CA erred in ruling that her remedy was appeal rather than certiorari and that her petition for certiorari was filed belatedly. The petition further questions the CA's finding that she lacked personality to question the decision against BBCHI. The core of her argument is that the case involves fraud and an intra-corporate controversy, thus falling under the SEC's exclusive jurisdiction, and that the CA's dismissal of her petition was a grave error of jurisdiction.
Issue(s)
Whether the Regional Trial Court (RTC) has jurisdiction over the collection case filed by Harrigan against BBCHI, or if it falls under the exclusive jurisdiction of the Securities and Exchange Commission (SEC) under PD 902-A. Whether the Court of Appeals (CA) erred in holding that petitioner's remedy was an appeal and not certiorari. Whether the CA erred in ruling that the petition for certiorari was filed belatedly. Whether the CA erred in holding that petitioner lacked personality to question the RTC's decision against BBCHI.
Ruling
The petition is denied for lack of merit, and the challenged decision of the Court of Appeals is affirmed. The Supreme Court held that the RTC properly exercised jurisdiction over the collection case.
Ratio Decidendi
On the jurisdiction of the RTC versus the SEC: The Court reiterated that jurisdiction is conferred by law and determined by the allegations in the complaint. Section 5 of PD 902-A grants the SEC original and exclusive jurisdiction over cases involving schemes or acts of the Board of Directors, business associates, officers, or partners amounting to fraud and misrepresentation detrimental to the public or stockholders. However, Harrigan's amended complaint primarily sought the collection of loans and advances amounting to at least P8,000,000.00, plus interest. While the complaint mentioned the phrase "in fraud of creditors," the Court found that it did not sufficiently allege acts amounting to fraud and misrepresentation as contemplated by PD 902-A. The phrase "in fraud of creditors" was interpreted to mean "to the prejudice of creditors," not the specific types of fraudulent schemes within the SEC's original jurisdiction. Furthermore, the Court noted that even if it were an intra-corporate controversy, the jurisdiction has since been transferred to the Regional Trial Courts by virtue of Republic Act No. 8799 (Securities Regulation Code). On the propriety of certiorari as a remedy: Given that the RTC had jurisdiction over the subject matter, any alleged errors committed by the RTC in the exercise of its jurisdiction would be errors of judgment, which are reviewable by a timely appeal, not by a special civil action of certiorari. Certiorari cannot be used as a substitute for a lost or lapsed remedy of appeal, especially when such loss is due to one's own neglect or error in the choice of remedies. The Court found that petitioner's recourse to certiorari was improper. On the timeliness of the petition for certiorari: The Court found it moot and academic to delve into the third assigned error regarding the timeliness of the petition for certiorari, as the primary issue of the propriety of certiorari itself had already been resolved against the petitioner. On petitioner's personality to question the RTC order: The Court also deemed the issue of petitioner's personality to question the RTC order against BBCHI as merely academic. This issue, requiring a factual delve, should have been properly raised and threshed out in a timely appeal. By failing to appeal and incorrectly availing of certiorari, the petitioner lost the opportunity to have this issue considered at this late stage.
Main Doctrine
A simple collection case for recovery of loans and advances, even if containing the phrase "in fraud of creditors," does not automatically fall under the exclusive jurisdiction of the Securities and Exchange Commission (SEC) if it does not sufficiently allege acts amounting to fraud and misrepresentation as contemplated in PD 902-A. Furthermore, with the enactment of RA 8799, the jurisdiction over intra-corporate controversies has been transferred to the Regional Trial Courts.