People vs. Cariño

A projected or contingent completion date in a registration statement is a forward-looking statement that cannot constitute an "untrue statement of material fact" under Section 12.7 of the Securities Regulation Code at the time the registration statement is filed, because its inherent truth or falsity is not yet evident; however, failure to amend the registration statement once it becomes clear the estimate will not come to pass may constitute an omission under the same provision, and corporate officers may be held personally liable only if their direct responsibility for the violation is proved, not presumed.

Caliraya Springs Golf Club, Inc. (Caliraya) is a corporation formed to develop two 18-hole golf courses, a clubhouse, and other facilities in Caliraya, Laguna, promoting social, recreational, and athletic activities for its members. Respondents — Noel M. Cariño, Ferdinand T. Santos, Robert John L. Sobrepeña, Exequiel E. Robles, Roberto J. Chan, Susana S. Chan, Ruben C. Sy, Sofia C. Sy, Vicente Santos, and Igmidio Robles — were its incorporators, board members, and officers. The landowner, Atlanta Land Corporation, and the developers, Fil-Estate Properties, Inc. and Sta. Lucia Realty and Development Corporation, were also stockholders, receiving shares in exchange for the lot contributed and development costs shouldered. The dispute arose under RA No. 8799, the Securities Regulation Code, specifically Section 12.7 (procedure for registration of securities) in relation to Section 73 (penalties), which penalizes making any untrue statement of a material fact or omitting any material fact necessary to make statements not misleading in a registration statement.

In 1997, Caliraya Springs Golf Club, Inc. (Caliraya) filed a Registration Statement with the Securities and Exchange Commission (SEC) for the registration of its securities. Respondents — Noel M. Cariño, Ferdinand T. Santos, Robert John L. Sobrepeña, Exequiel E. Robles, Roberto J. Chan, Susana S. Chan, Ruben C. Sy, Sofia C. Sy, Vicente Santos, and Igmidio Robles — were indicated therein as incorporators, members of the board, and officers of Caliraya. The Registration Statement declared that Caliraya sought to sell its shares via secondary offering to finance the construction of two 18-hole golf courses, a golf clubhouse, and other facilities in Caliraya, Laguna, to promote social, recreational, and athletic activities for its members. The shares were sold via secondary offering because the landowner, Atlanta Land Corporation, would be issued shares in exchange for the lot contributed, and the developers, Fil-Estate Properties, Inc. and Sta. Lucia Realty and Development Corporation, would be issued shares for the development costs they would shoulder in the construction of the golf course and its attendant facilities.

The project was expected to be completed by July 1999, as reflected in the Project Information Memorandum appended to the Registration Statement. The memorandum provided a timetable showing incremental completion from 1996 to 1999 — at 1%, 33%, 33%, and 33% respectively — for the Lakeside Course, Upland Falls Course, and Clubhouse, totaling 100% by 1999. The problem arose when Caliraya's 2003 quarterly report was reviewed by the SEC Corporation Finance Department and it was discovered that the corporation had failed to comply with its undertaking under the Project Information Memorandum. The Corporation Finance Department ordered Caliraya to amend its Registration Statement to reflect the true and accurate status of the project, to explain why it should not be required to publish a notice of amendment and right of refund by purchasers, and to show cause why it should not be held liable for misrepresentation under the Securities Regulation Code. A Final Notice dated January 8, 2004 was issued following up on compliance. For its failure to comply, the SEC revoked Caliraya's registration of securities and permit to sell to the public on February 4, 2004.

In its Annual Report for fiscal year ending September 30, 2005, Caliraya declared that the first 18 holes had been completed and was already playable, with the last 18 holes to be made available upon completion. It stated that as of September 30, 2005, the accomplishment of the project was at 52%. At the time, the stockholders still comprised respondents, the landowner, and the two developers, and Caliraya had not yet started operations. In October 2009, the SEC Corporation Finance Department sent another letter to Caliraya and respondents asking them to show cause why they should not be held liable for misrepresentations regarding the project's development. When no reply was provided, the matter was referred to the SEC's Enforcement and Prosecution Department.

Proceedings then ensued, including an ocular inspection revealing that as of March 5, 2010, the facilities and clubhouse were 100% completed but only the first 18-hole golf course was finished. Several conferences and hearings were conducted but to no avail. This led the SEC to file a complaint-affidavit before the Department of Justice against Caliraya and respondents for violating Section 12.7 in relation to Section 73 of the Securities Regulation Code. An Information was eventually filed before the Regional Trial Court of Mandaluyong City, Branch 211, docketed as Criminal Case No. MC13-15299, accusing respondents of fraudulently making an untrue statement of material fact in the Registration Statement by declaring July 1999 as the expected date of completion of the golf course and clubhouse project, when in truth the project remained incomplete.

• Forward-Looking Statements Not Distinguished by Law: Petitioner conceded that the declared project completion date was a forward-looking statement — the truth or falsity of which could only be determined at the time the expected event was supposed to happen — but insisted that the Securities Regulation Code does not distinguish between historical statements and forward-looking statements, maintaining that what the law punishes is making untrue statements and those which tend to mislead investors.
• Failure to Disclose and Amend: Petitioner faulted respondents for not disclosing that they were encountering difficulties in the completion of the project and for failing to file an amended registration statement to reflect that the project would not be completed as scheduled.

• Proper Remedy: Whether the CA erred in holding that the proper remedy from a final order of dismissal in a criminal case is appeal and not certiorari.
• Probable Cause: Whether the trial court committed no grave abuse of discretion in dismissing the criminal case against respondents for lack of probable cause.

• Proper Remedy: No. The CA correctly held that the trial court's dismissal was a final order that should have been challenged via ordinary appeal under Sections 1 and 2(b) of Rule 122, not certiorari under Rule 65, as appeal and certiorari are mutually exclusive remedies.
• Probable Cause: No. The trial court committed no grave abuse of discretion in dismissing the Information, there being no probable cause to hold respondents personally liable for the alleged violation of Section 12.7 in relation to Section 73 of the Securities Regulation Code.

• Proper Remedy: The trial court's Order dated June 23, 2014, which dismissed the Information against respondents, was a final order because it conclusively terminated the criminal proceedings — "there was nothing left to be done by the trial court." As a final order, it should have been impugned via an ordinary appeal before the CA in accordance with Sections 1 and 2(b) of Rule 122 of the Rules of Criminal Procedure. Settled is the rule that where an appeal is available, certiorari will not be entertained, as remedies of appeal and certiorari are mutually exclusive, not alternative or successive. While exceptions to this general rule exist, a review of the records revealed none were present. Nevertheless, in the interest of substantial justice, the Court passed upon the merits as the final arbiter of all judicial disputes, limiting its review to whether the CA correctly determined the presence or absence of grave abuse of discretion on the part of the trial court.

• Probable Cause: Grave abuse of discretion implies capricious and whimsical exercise of judgment equivalent to lack of jurisdiction, exercised in an arbitrary or despotic manner by reason of passion or personal hostility, so patent and gross as to amount to an evasion of positive duty. The trial court's dismissal did not approach this standard. The trial court initially dismissed the Information on November 29, 2013, then afforded the prosecution an opportunity to present additional evidence upon reconsideration, and still found the evidence insufficient after applying the law — a determination neither capricious nor whimsical. The trial court's actions were in accord with Section 6, Rule 112 of the Rules of Criminal Procedure, which authorizes the judge to dismiss the case if the evidence clearly fails to establish probable cause and to order the prosecutor to present additional evidence in case of doubt. When the trial court's factual findings are affirmed by the CA, they are accorded the highest respect.

  On the merits, the Court corrected the lower courts' misconception that a forward-looking statement can never constitute an "untrue statement" under Section 12.7. The Securities Regulation Code assumes all untrue statements — whether intentional or unintentional — constitute fraud, and the courts should not distinguish where the law does not distinguish (ubi lex non distinguit, nec nos distinguere debemus). However, the very nature of contingent or forward-looking statements means that at the time they are made, their inherent truth or falsity is not evident even to the issuer. What the law punishes is making an untruthful statement at the time the registration statement is filed, which is impossible for projected events relying on external factors beyond the issuer's control. Thus, at the time of filing in April 1997, there could have been no untruthful statement as to the completion date. Nevertheless, Caliraya's failure to amend its Registration Statement after it became clear the estimate would not come to pass — despite repeated SEC notices — could have rendered it liable for the omission clause of Section 12.7, i.e., omitting to state a material fact necessary to make the statements therein not misleading.

  Three barriers prevented criminal liability from being imputed to respondents. First, the Information charged respondents with making an untruthful statement, not with omission — the proper mode of violation in this instance. Second, the Information did not charge Caliraya itself but only the private respondents in their capacities as incorporators, board members, and officers. Third, nothing in the record directly linked respondents to the purported violation. Generally, corporate agents are not personally liable for violations of the corporation unless they willfully and knowingly vote for or assent to a patently unlawful act, or are guilty of gross negligence or bad faith, and such liability must be proved, not presumed. The Securities Regulation Code itself recognizes this limited culpability by imposing penalties only on officers "responsible for the violation." Absent any showing of how respondents were directly responsible for failing to correct the Registration Statement, no criminal liability could be imputed to them. The facts presented did not support a finding that respondents were probably guilty of the crime charged, and the trial court correctly dismissed the Information.

• Forward-Looking Statements in Securities Registration — A projected or contingent completion date in a registration statement is a forward-looking statement whose inherent truth or falsity is not evident at the time of filing. It cannot constitute an "untrue statement of material fact" under Section 12.7 of the Securities Regulation Code at the time the registration statement is filed, because the law punishes making untrue statements at the time of filing — an impossibility for projected events that rely on external factors beyond the issuer's control. However, once it becomes clear that the estimate will not come to pass, the issuer's failure to amend the registration statement may constitute an omission under Section 12.7's clause covering the failure to state any material fact necessary to make the statements therein not misleading. The Court applied this doctrine to hold that Caliraya's July 1999 completion date was not an untrue statement when filed in April 1997, though its subsequent failure to amend could have constituted an omission — a charge not alleged in the Information.

• Personal Liability of Corporate Officers for Corporate Violations — Corporate agents are not personally liable for violations of the corporation unless they willfully and knowingly vote for or assent to a patently unlawful act, or are guilty of gross negligence or bad faith. Their liability must be proved, not presumed. The Securities Regulation Code recognizes this limited culpability by imposing penalties only on officers "responsible for the violation." The Court applied this doctrine to hold that absent any evidence directly linking respondents to the failure to amend the Registration Statement, no criminal liability could be imputed to them personally.

• Mutually Exclusive Remedies: Appeal and Certiorari — Remedies of appeal, including petitions for review, and certiorari are mutually exclusive, not alternative or successive. Where an appeal is available to the aggrieved party, certiorari will not be entertained. The Court applied this doctrine to affirm the CA's holding that petitioner should have appealed the trial court's final order of dismissal rather than filing a petition for certiorari under Rule 65.

• Grave Abuse of Discretion — Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and so patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform the duty enjoined by law. Not every error committed by a lower court in the exercise of its jurisdiction is correctible by certiorari; only acts so capricious and whimsical as to amount to an absence of jurisdiction qualify. The Court applied this standard to find no grave abuse in the trial court's dismissal of the Information.

• "However, the very nature of contingent or forward looking statements means that, at the time they are made, their inherent truth or falsity is not evident even to the issuer itself." — This passage articulates the ratio decidendi on why forward-looking statements cannot be untrue at the time of filing, distinguishing them from historical facts and limiting the scope of "untrue statement" under Section 12.7.

• "Generally, corporate agents are not personally liable for violations of the corporation unless they willfully and knowingly vote for or assent to a patently unlawful act, or are guilty of gross negligence or bad faith. In either case, their liability should not be presumed but must be proved." — This states the controlling doctrine on corporate officer liability, applied to bar imputation of criminal liability to respondents absent direct evidence of their responsibility.

• "Given that the law does not distinguish, the courts should likewise not distinguish. Ubi lex non distinguit, nec nos distinguere debemus." — This passage establishes the interpretive principle applied to Section 12.7, confirming that the Securities Regulation Code treats all untrue statements — intentional or unintentional — as fraud, while simultaneously clarifying that forward-looking statements cannot be assessed for truth at the time of filing.

• "The dismissal of the criminal Information ..., was a final judgment because it finally disposed of the case. With the dismissal of the Information, the trial court's task was ended as far as deciding the controversy was concerned." — This defines why the trial court's order of dismissal was a final order, making appeal — not certiorari — the proper remedy.

• Domingo vs. Macapagal, G.R. No. 242577, February 26, 2020 — Cited for the proposition that the dismissal of a criminal Information is a final judgment that finally disposes of the case, establishing that the trial court's order was a final order appealable under Rule 122.
• People vs. Villaber, G.R. No. 247248, June 16, 2021 — Cited for the settled rule that remedies of appeal and certiorari are mutually exclusive, not alternative or successive, and that certiorari will not be entertained where appeal is available.
• People vs. Celorio, G.R. No. 226335, June 23, 2021 — Cited for the definition of grave abuse of discretion as capricious and whimsical exercise of judgment equivalent to lack of jurisdiction.
• People vs. Palabrica III, G.R. Nos. 250590-91, November 17, 2021 — Cited for the principle of statutory interpretation that words should be read in their natural, plain, and ordinary acceptation unless a technical or special legal meaning was intended.
• Villanueva vs. People, G.R. No. 237864, July 8, 2020 — Cited for the maxim ubi lex non distinguit, nec nos distinguere debemus, applied to Section 12.7's treatment of untrue statements as fraud regardless of intent.
• People vs. Go, 845 Phil 15, 39 (2018) — Cited for the definition of probable cause as the existence of facts and circumstances that would engender belief in a reasonable mind that the person charged was guilty.

• Section 12.7, Republic Act No. 8799 (Securities Regulation Code) — Requires issuers to state under oath in every prospectus that all registration requirements have been met and all information is true and correct; provides that any untrue statement of fact or omission to state a material fact required or necessary to make the statements not misleading shall constitute fraud. The Court interpreted this provision to distinguish between untrue statements made at the time of filing (which cannot apply to forward-looking statements) and omissions arising from failure to amend after the projected date becomes clearly unattainable.
• Section 73, Republic Act No. 8799 (Securities Regulation Code) — Prescribes penalties for any person who, in a registration statement, makes any untrue statement of a material fact or omits any material fact necessary to make the statements not misleading: a fine of not less than ₱50,000 nor more than ₱5,000,000 or imprisonment of not less than 7 years nor more than 21 years, or both. The Court noted that this provision imposes penalties on officers "responsible for the violation," recognizing limited personal culpability.
• Section 6, Rule 112, Rules of Criminal Procedure — Authorizes the judge to personally evaluate the resolution of the prosecutor and its supporting evidence, to immediately dismiss the case if the evidence clearly fails to establish probable cause, and to order the prosecutor to present additional evidence in case of doubt. The Court found the trial court's actions consistent with this provision.
• Sections 1 and 2(b), Rule 122, Rules of Criminal Procedure — Govern who may appeal and where appeals may be taken from RTC decisions, providing the proper remedy for challenging the trial court's final order of dismissal.
• Section 31, Corporation Code of the Philippines (Batas Pambansa Blg. 68) — Governs the personal liability of corporate directors or officers, who are not personally liable unless they willfully and knowingly vote for or assent to a patently unlawful act, or are guilty of gross negligence or bad faith. The Court applied this principle to hold that respondents' liability must be proved, not presumed.

Caguioa, Inting, Gaerlan, and Singh, JJ., concurred.