Tengco v. People
REITERATIONFacts
The Antecedents: Philippine International Planning Center Corporation (PIPCC), formerly Caravaggio Holdings, Inc., was incorporated to act as a research arm for foreign clients and was not registered to solicit or sell securities. In July 2007, its Chairman and President, Michael H.K. Liew, disappeared with approximately US$250 Million in investments. Numerous investors filed complaints with the SEC Enforcement and Investor Protection Department (SEC-EIPD), alleging that PIPCC, through its agents including petitioners Jose T. Tengco III, Anthony Kierulf, Barbara May L. Garcia, and Herley Jesuitas, enticed them to invest substantial sums with promises of high returns and misrepresented its affiliation with an offshore entity. The investors claimed they were led to believe PIPCC and its agents were properly licensed to sell securities, which the SEC-EIPD later found to be untrue. The SEC-EIPD's investigation revealed that PIPCC was not licensed to solicit, offer, or sell securities, yet it proceeded to do so through its officers, brokers, and agents. Procedural History: Following the SEC-EIPD's investigation and finding of probable cause, a complaint-affidavit was filed with the Department of Justice (DOJ) against the petitioners and other individuals for violation of Section 28 of the Securities Regulation Code (RA 8799). The DOJ conducted a preliminary investigation and found probable cause, leading to the filing of an Information before the Regional Trial Court (RTC) of Makati City. The petitioners pleaded not guilty and trial ensued. Subsequently, the petitioners filed motions to dismiss, arguing that the SEC failed to conduct its own preliminary investigation and notify them, thereby violating their right to due process and divesting the RTC of jurisdiction. The RTC granted these motions, dismissing the case. The prosecution, through the Office of the Solicitor General (OSG), filed a Petition for Certiorari with the Court of Appeals (CA), which annulled and set aside the RTC's dismissal orders and reinstated the criminal case, remanding it for further proceedings. The CA ruled that the petitioners were not deprived of due process as they participated in the DOJ's preliminary investigation and that any irregularity in the SEC's investigation did not affect the court's jurisdiction. The Petition: Petitioners Jose T. Tengco III, Anthony Kierulf, Barbara May L. Garcia, and Herley Jesuitas filed separate Petitions for Review on Certiorari under Rule 45 of the Rules of Court, assailing the CA's Decision and Resolution. They argue that the CA erred in overturning the RTC's dismissal orders, contending that the RTC correctly dismissed the case for lack of jurisdiction due to the SEC's failure to conduct a proper preliminary investigation and notify them, which violated their right to due process. Petitioners assert that this procedural lapse was fatal and that the RTC did not commit grave abuse of discretion in dismissing the case. They also argue that the CA erred in allowing a Petition for Certiorari when the RTC orders were allegedly final and should have been assailed by appeal, and that the CA failed to appreciate key facts and decided contrary to law and jurisprudence. The core of their argument is that the SEC's non-compliance with the procedural requirements under Section 53.1 of the Securities Regulation Code invalidated the proceedings against them.
Issue(s)
Whether the Court of Appeals erred in reversing the Regional Trial Court's dismissal of the criminal case. Whether the Regional Trial Court correctly dismissed the criminal case for alleged lack of jurisdiction and denial of due process due to the Securities and Exchange Commission's failure to conduct its own preliminary investigation. Whether the Securities and Exchange Commission substantially complied with Section 53.1 of the Securities Regulation Code. Whether the alleged absence of a preliminary investigation by the SEC affects the court's jurisdiction over the case. Whether the petitioners waived their right to question the validity of the investigation conducted by the SEC.
Ruling
The petitions are denied. The Decision dated 10 July 2017 and the Resolution dated 05 January 2018 of the Court of Appeals in CA G.R. SP No. 149445 are affirmed. Criminal Case No. 08-1083 is reinstated and remanded to the RTC for further proceedings.
Ratio Decidendi
On the propriety of the Petition for Certiorari: The Court affirmed the CA's ruling that a Petition for Certiorari under Rule 65 was the proper remedy for the OSG to question the RTC's dismissal orders, as these were asserted to have been issued without or in excess of jurisdiction, or with grave abuse of discretion, and there was no other plain, speedy, and adequate remedy. On the alleged lack of jurisdiction and denial of due process: The Court held that the RTC erred in dismissing the criminal cases. Petitioners' claim of lack of jurisdiction due to denial of due process stemmed from the SEC's alleged failure to conduct its own preliminary investigation. However, Section 53.1 of the Securities Regulation Code (SRC) grants the SEC discretion in conducting investigations and does not prescribe a specific manner. The provision mandates that all criminal complaints for SRC violations shall be referred to the DOJ for preliminary investigation and prosecution. The Court emphasized that the "fatal procedural lapse" occurs only when a criminal complaint is filed directly with the DOJ, not when the SEC, after its own investigation, refers the case to the DOJ. On substantial compliance with Section 53.1 of the SRC: The Court found that the SEC did not commit a fatal procedural lapse. The investors filed complaints with the SEC, which then conducted an investigation and found probable cause before filing a complaint with the DOJ. This process aligns with the SRC's mandate. The Court distinguished the present case from Baviera v. Paglinawan, where the private complainant directly filed the criminal complaint with the DOJ, which was deemed a fatal procedural lapse. In this case, the SEC initiated the referral after its own investigation, and the petitioners fully participated in the preliminary investigation conducted by the DOJ. On the effect of absence of SEC preliminary investigation on court jurisdiction: The Court reiterated that an irregularity in the preliminary investigation does not affect the jurisdiction of the court over the case and is not a ground for quashing the Information. Such irregularities may be remedied by suspending the trial and ordering the SEC to conduct its investigation anew. The Court noted that petitioners fully participated in the DOJ's preliminary investigation and cannot claim deprivation of due process at the SEC level after seven years from the filing of the Information. On waiver of the right to question the investigation: The Court found that petitioners did not waive their right to question the validity of the investigation. They raised the issue of lack of jurisdiction and denial of due process through motions to dismiss. However, their claim was found to be without merit because the process followed by the SEC and DOJ was consistent with the SRC, and their participation in the DOJ preliminary investigation demonstrated their opportunity to be heard.
Main Doctrine
The Court of Appeals did not commit reversible error in reinstating the criminal case for violation of the Securities Regulation Code, finding that the Regional Trial Court erred in dismissing the case based on alleged lack of jurisdiction and denial of due process due to the Securities and Exchange Commission's failure to conduct its own preliminary investigation prior to referral to the Department of Justice. The Securities and Exchange Commission has discretion in conducting investigations, and the failure to conduct a preliminary investigation does not affect the court's jurisdiction, nor does it constitute a ground for quashing the Information, especially when the accused fully participated in the preliminary investigation conducted by the Department of Justice.