Tengco III vs. People

A criminal complaint for violation of the Securities Regulation Code must first be filed before the SEC, which shall then refer it to the DOJ for preliminary investigation and prosecution; the "fatal procedural lapse" contemplated in Baviera vs. Paglinawan arises only when the criminal complaint is filed directly with the DOJ, not when the SEC receives the complaint, investigates, and endorses it to the DOJ as mandated by Section 53.1 of the SRC. The SEC's failure to conduct a full preliminary investigation before referral does not divest the trial court of jurisdiction over the case, nor does it constitute a denial of due process where the accused fully participated in the DOJ preliminary investigation.

Philippine International Planning Center Corporation (PIPCC), formerly Caravaggio Holdings, Inc., was incorporated on February 21, 2001, and authorized under its Articles of Incorporation to act as a research arm of foreign clients. It was not registered to engage in the solicitation and sale of securities, and its officers and agents were not licensed to solicit, offer, or sell securities to the public. PIPCC held itself out as the Philippine branch of Performance Investments Products Corporation–British Virgin Islands, engaged in offshore foreign currency exchange trading, and its officers and agents represented that they had secured the proper SEC licenses. On July 17, 2007, PIPCC Chairman and President Michael H.K. Liew disappeared along with approximately US$250 million worth of investments, triggering thirty-one verified complaints from investors who had been enticed by PIPCC's brokers and agents to place funds in U.S. Dollars or Euros with promises of 12% to 18% interest returns.

Philippine International Planning Center Corporation (PIPCC), incorporated on February 21, 2001, was authorized under its Articles of Incorporation to act as a research arm of foreign clients but was not registered to engage in the solicitation and sale of securities. Its officers and agents were correspondingly unlicensed to solicit, offer, or sell securities to the public. PIPCC represented itself as the Philippine branch of Performance Investments Products Corporation–British Virgin Islands, engaged in offshore foreign currency exchange trading, and its officers and agents made it appear that they had secured proper SEC licenses.

On July 17, 2007, PIPCC Chairman and President Michael H.K. Liew disappeared along with approximately US$250 million worth of investments in the corporation. Thereafter, the SEC Enforcement and Investor Protection Department (SEC-EIPD) received thirty-one verified complaints from individuals claiming to be PIPCC investors. The complaints uniformly alleged that PIPCC, through its agents and brokers — including petitioners Jose T. Tengco III, Anthony Kierulf, Barbara May L. Garcia, Herley Jesuitas, and co-accused Outline Santos, Nicoline Mendoza, and Maria Pamela Morris — enticed investors to place money in U.S. Dollars or Euros in PIPCC with promises of 12% to 18% interest at relatively lower risk compared with traditional investments. The investors made several investments from 2001 to 2007 through these agents, with individual placements ranging from P510,000 to US$500,000.

The SEC-EIPD conducted an investigation and called for a preliminary conference with the officers and directors of PIPCC. It found that PIPCC was not licensed to solicit, offer, or sell securities to the public, yet through its directors, officers, brokers, and agents, including petitioners, it had sold securities to complainant-investors. On the basis of its investigation, the SEC-EIPD found probable cause for violation of Section 28 of the Securities Regulation Code and, on November 27, 2007, filed a complaint-affidavit with the DOJ against petitioners and their co-accused. The DOJ formed a panel of prosecutors, conducted a preliminary investigation, and found probable cause. An Information dated June 19, 2008 was filed before the RTC of Makati City, charging petitioners and co-accused with violation of Section 28 of the SRC committed from March 2001 to July 2007.

During the hearing on April 16, 2015, the trial court directed the SEC to certify whether subpoenas were served on the accused before the complaint was filed with the DOJ, whether the SEC invited or summoned any of the accused to any hearing, whether notices of investigation were served, and whether a finding of probable cause was served on the accused before the DOJ referral. In a Manifestation/Compliance dated May 6, 2015, the SEC certified that it conducted an investigation and issued notices of conferences to the officers and directors of PIPCC, and that it was only after finding probable cause that it filed the complaint with the DOJ. On August 7, 2015 — seven years after her arraignment — Garcia filed a Motion to Dismiss for Lack of Jurisdiction, citing Section 53.1 of the SRC and the rulings in Baviera vs. Paglinawan and SEC vs. Interport Resources Corporation, arguing that the SEC's failure to conduct its own preliminary investigation before referral to the DOJ was a fatal procedural lapse violating her right to due process. The other petitioners filed similar motions. The RTC granted the motions to dismiss on May 16, 2016, declaring the case dismissable for lack of jurisdiction and denial of due process, and denied the prosecution's motion for reconsideration on November 23, 2016.

• Lack of Jurisdiction Due to SEC's Failure to Investigate: Petitioners maintained that the RTC lacked jurisdiction over the case because the SEC failed to conduct its own preliminary investigation before endorsing the complaint to the DOJ, citing Section 53.1 of the SRC and the rulings in Baviera vs. Paglinawan, SEC vs. Interport Resources Corporation, and Pua vs. Citibank, N.A. as requiring SEC referral as a jurisdictional prerequisite.
• Denial of Due Process: Petitioners argued that the SEC's failure to notify them of the investigation it conducted violated their rights to due process, invalidating the proceedings against them and warranting dismissal of the criminal charges.
• Propriety of RTC's Dismissal: Petitioners asserted that the RTC correctly took cognizance of the defense of lack of jurisdiction, which may be raised at any stage of the case, and that the RTC did not commit grave abuse of discretion in dismissing the criminal case.
• Wrong Remedy by Prosecution (Garcia): Garcia argued that the CA erred in allowing the OSG's Petition for Certiorari, contending that the RTC Orders were final judgments assailable only by appeal, that certiorari cannot substitute for a lost appeal, and that the RTC Orders had attained finality.
• No Grave Abuse of Discretion (Garcia): Garcia maintained that even assuming the RTC Orders incorrectly dismissed the criminal case, such error does not amount to grave abuse of discretion correctible by certiorari.
• Waiver Issue (Jesuitas): Jesuitas contended that the CA erred in ruling that she waived her right to question the validity of the investigation conducted by the SEC.

• Jurisdiction: Whether the SEC's failure to conduct its own preliminary investigation before referring the criminal complaint to the DOJ divests the trial court of jurisdiction over the case.
• Due Process: Whether the SEC's failure to notify petitioners of its investigation violated their right to due process, warranting dismissal of the criminal charges.
• Applicability of Precedents: Whether Baviera vs. Paglinawan and Pua vs. Citibank, N.A. apply to the present case to require dismissal for the SEC's alleged procedural lapse.
• Propriety of Certiorari: Whether the OSG properly availed of a Petition for Certiorari under Rule 65 before the CA to challenge the RTC's dismissal orders.

• Jurisdiction: No. The SEC's failure to conduct its own preliminary investigation before referral to the DOJ does not affect the trial court's jurisdiction over the case, as jurisdiction is conferred by law and determined by the allegations in the Information.
• Due Process: No. Petitioners were not deprived of due process because they fully participated in the DOJ preliminary investigation, where they were afforded the opportunity to refute the charges against them through counter-affidavits.
• Applicability of Precedents: No. Baviera vs. Paglinawan is not on all fours with the present case; the "fatal procedural lapse" in Baviera arose from filing the criminal complaint directly with the DOJ, whereas here complaints were first filed before the SEC, which then referred them to the DOJ as Section 53.1 requires.
• Propriety of Certiorari: Yes. A Petition for Certiorari under Rule 65 was the proper remedy, as the OSG asserted that the RTC's orders were issued with grave abuse of discretion amounting to lack or excess of jurisdiction, and there was no appeal or plain, speedy, and adequate remedy in the ordinary course of law.

• Jurisdiction: Section 53.1 of the SRC grants the SEC discretion in the conduct of its investigations and mandates that all criminal complaints for violations of the Code be referred to the DOJ for preliminary investigation and prosecution before the proper court. The provision does not prescribe the specific manner by which the SEC shall make its investigations; the SEC has discretion to determine what is necessary. Even if there was an irregularity during the preliminary investigation, it does not affect the jurisdiction of the court over the case, nor does it constitute a ground for quashing the Information. Any irregularity in the preliminary investigation may be remedied by suspension of the trial and ordering the SEC to conduct its investigation anew.

• Due Process: Petitioners do not dispute that complaint-affidavits were filed by complainant-investors before the SEC prior to the SEC's referral of the case to the DOJ. Petitioners filed their respective counter-affidavits before the DOJ and fully participated in the DOJ preliminary investigation. They cannot claim, after seven years from the filing of the Information, that they were deprived of due process at the SEC level. The opportunity to be heard and to refute the charges was afforded at the DOJ stage, satisfying the requirements of due process.

• Applicability of Precedents: Baviera vs. Paglinawan is distinguishable on its facts. In Baviera, the private individual-complainant directly filed with the DOJ a complaint for violation of Section 8.1 of the SRC, bypassing the SEC entirely. The Court held that the "fatal procedural lapse" consisted of filing the criminal complaint directly with the DOJ. In the present case, the duped investors filed complaints before the SEC, which, after investigation, filed a complaint before the DOJ — precisely the procedure mandated by Section 53.1. Pua vs. Citibank, N.A. is likewise inapposite, as it emphasizes the distinction between civil and criminal suits under the SRC, holding that civil suits may be filed directly with the RTC, while criminal cases must first be referred to the SEC. Neither case concerns a mandated notice of investigation from the SEC.

• Propriety of Certiorari: When the OSG questioned the RTC's orders before the CA, it did not question the RTC's appreciation of evidence or its conclusions therefrom. Rather, it asserted that the RTC's orders were issued without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and that there was no appeal or plain, speedy, and adequate remedy in the ordinary course of law. A Petition for Certiorari under Rule 65 is therefore the proper remedy.

• Doctrine of Primary Jurisdiction in Securities Regulation Code Cases — Under the doctrine of primary jurisdiction, courts will not determine a controversy involving a question within the jurisdiction of an administrative tribunal of special competence, where the question demands the exercise of sound administrative discretion requiring specialized knowledge and expertise. The Securities Regulation Code is a special law, and its enforcement is particularly vested in the SEC. All complaints for violation of the Code and its implementing rules must first be filed with the SEC. Where the complaint is criminal in nature, the SEC shall endorse the complaint to the DOJ for preliminary investigation and prosecution as provided in Section 53.1. The "fatal procedural lapse" contemplated in Baviera vs. Paglinawan arises only when the criminal complaint is filed directly with the DOJ, bypassing the SEC entirely.

• Effect of Irregularity in Preliminary Investigation on Jurisdiction — An irregularity in the preliminary investigation does not affect the jurisdiction of the court over the case and does not constitute a ground for quashing the Information. Such irregularity may be remedied by suspension of the trial and ordering the investigating body to conduct its investigation anew. Jurisdiction over the case is conferred by law and determined by the allegations in the Information, not by the regularity of the preliminary investigation that preceded it.

• "Clearly, Section 53.1 does not prescribe the specific manner by which the SEC shall make its investigations. The SEC has the discretion to determine what are necessary in the conduct of its investigations. However, the SEC is mandated to refer criminal complaints for violations of the SRC to the DOJ for preliminary investigation and prosecution before the proper court." — This passage defines the scope of the SEC's authority and obligation under Section 53.1, establishing that the SEC's investigative discretion is broad while its duty to refer criminal complaints to the DOJ is mandatory.

• "We underscore our ruling in Baviera that a criminal complaint for violation of any law or rule administered by the SEC must first be filed before it. There is a 'fatal procedural lapse' only when the criminal complaint is filed directly with the DOJ." — This passage clarifies the precise scope of the Baviera ruling, distinguishing the factual scenario that gives rise to a jurisdictional defect from one where the SEC receives and refers the complaint as required.

• "Petitioners cannot claim, after seven years from the filing of the Information, that they were deprived of due process at the SEC level." — This passage underscores the Court's rejection of the due process claim, emphasizing that full participation in the DOJ preliminary investigation satisfied the requirements of procedural fairness.

• Baviera vs. Paglinawan, 544 Phil. 107 (2007) — Distinguished. The Court held in Baviera that a criminal complaint for violation of the SRC must first be filed with the SEC, which must determine probable cause before referring the case to the DOJ. The "fatal procedural lapse" in Baviera consisted of the private complainant filing the criminal complaint directly with the DOJ, bypassing the SEC. In the present case, the complaints were filed before the SEC, which then referred them to the DOJ — the procedure mandated by Section 53.1 — so no fatal procedural lapse occurred.

• Pua vs. Citibank, N.A., 718 Phil. 1 (2013) — Distinguished. Pua emphasized the distinction between civil and criminal suits under the SRC: civil suits under Sections 56–61 are under the exclusive original jurisdiction of the RTC and need not be filed before the SEC, while criminal cases must first be referred to the SEC. The ruling does not concern a mandated notice of investigation from the SEC and is inapposite to the present factual scenario.

• SEC vs. Interport Resources Corporation — Cited by petitioners in support of their jurisdictional argument but found inapplicable for the same reasons as Baviera, as the present case did not involve a direct filing with the DOJ.

• Section 53.1, Republic Act No. 8799 (Securities Regulation Code) — This provision grants the SEC discretion to conduct investigations as it deems necessary to determine whether any person has violated the Code, and mandates that all criminal complaints for violations of the Code and its implementing rules be referred to the DOJ for preliminary investigation and prosecution before the proper court. The Court applied this provision to hold that the SEC's investigative discretion is broad and that its duty to refer criminal complaints to the DOJ is mandatory, but the provision does not prescribe the specific manner of SEC investigation nor require a particular form of notice to the accused before referral.

• Section 28, Republic Act No. 8799 (Securities Regulation Code) — This provision proscribes the engagement of any person in the business of buying or selling securities in the Philippines as a broker or dealer unless registered as such with the SEC. Petitioners were charged with violation of this section for selling and offering securities to the public without SEC registration as agents/brokers of PIPCC.

• Rule 65, Section 1, Rules of Court — This provision governs the remedy of certiorari, which the OSG invoked before the CA to challenge the RTC's dismissal orders. The Court upheld the propriety of certiorari, finding that the RTC's orders were issued with grave abuse of discretion amounting to lack or excess of jurisdiction and that no appeal or plain, speedy, and adequate remedy was available.

Gesmundo, C.J. (Chairperson), Hernando, Rosario, and Marquez, JJ., concurred.