Yasay, Jr. vs. Recto

Contempt initiated by the court or tribunal itself is criminal in nature, and an exoneration from the contempt charge amounts to an acquittal from which an appeal does not lie. The SEC’s contempt power must be exercised preservatively and not vindictively, and it cannot suspend a lawyer from the practice of law.

Petitioners are the SEC Chairman and Associate Commissioners; respondents are Manuel D. Recto, Pelagio T. Ricalde, and Cesar P. Manalaysay, individuals connected with Interport Resources Corporation. The SEC’s power to punish contempt is recognized under P.D. 902-A, Section 6[e], while the power to suspend or disbar lawyers is vested exclusively in the Supreme Court under Article VIII, Section 5[5] of the Constitution. Interport Resources Corporation was the subject of a stockholders’ meeting dispute before the SEC.

On June 28, 1996, SEC Chairman Perfecto R. Yasay, Jr., upon the request of certain stockholders of Interport Resources Corporation, directed respondent Pelagio T. Ricalde to submit to the SEC a list of stockholders and to set a definite time and place for the validation of proxies and nominations for directors of the firm. On the same date, the SEC issued a temporary restraining order enjoining Interport Resources Corporation from holding the July 9, 1996 scheduled annual meeting of the stockholders.

Notwithstanding the SEC’s TRO, the stockholders proceeded with the meeting on July 9, 1996, presided over by respondent Cesar P. Manalaysay. On July 10, 1996, the SEC declared the stockholders meeting of Interport Resources Corporation held on July 9, 1996 null and void and directed respondents to appear before the SEC on July 15, 1996, at 3:00 p.m., to show cause why no disciplinary action should be taken against them or why they should not be cited in contempt.

At the hearing on July 15, 1996, respondent Manalaysay questioned the validity of the TRO as well as the contempt proceedings in light of the TRO issued by the CA restraining the SEC from enforcing its TRO. After the hearing, on July 15, 1996, the SEC issued an order declaring Atty. Cesar Manalaysay, Manuel D. Recto, and Atty. Pelagio T. Ricalde guilty of contempt and ordering them to pay a fine of P10,000.00 each upon finality of the order for willfully disobeying and disregarding the July 8, 1996 Order of the Commission. Atty. Cesar Manalaysay was likewise barred from practicing his law profession before the commission for a period of sixty (60) days from date of the order, and Mr. Recto and Atty. Ricalde were prohibited and barred from acting as President/Chairman and Secretary respectively of Interport Resources, Inc. within the same period. The order was to be immediately executory unless otherwise restrained by a court of competent jurisdiction.

• Nature of Contempt: Petitioners argued that the contempt committed by respondents was civil in nature, as the temporary restraining order the SEC issued was for the benefit of a party to a case.

• Nature of Contempt and Appealability: Respondents submitted that contempt is criminal in character and their exoneration from the charge amounts to an acquittal from which an appeal would not lie.
• Validity of Contempt Proceedings: Respondent Manalaysay questioned the validity of the TRO and the contempt proceedings in light of the CA TRO restraining the SEC from enforcing its TRO.

• Nature of Contempt and Appealability: Whether the CA erred in setting aside the SEC’s contempt order on the ground that contempt is criminal and exoneration is an acquittal from which no appeal lies.
• Willful Disobedience: Whether respondents were guilty of contempt for disobeying the SEC’s TRO despite the CA TRO restraining the SEC from enforcing it.
• Penalty: Whether the penalties imposed by the SEC exceeded its authority.

• Nature of Contempt and Appealability: No. The contempt was criminal because the SEC initiated it sua sponte to vindicate its dignity and power; an exoneration from a criminal contempt charge is an acquittal from which an appeal does not lie.
• Willful Disobedience: No. There was no willful disobedience because the CA TRO restrained the SEC from enforcing its TRO, allowing the meeting to proceed, and the CA later nullified the SEC order.
• Penalty: Yes. The SEC exceeded its authority; its suspension of Manalaysay from practice before the SEC infringed a power vested exclusively in the Supreme Court.

• Nature of Contempt and Appealability: The SC agreed with respondents that the charge of contempt partakes of the nature of a criminal offense and that exoneration from the charge amounts to an acquittal from which an appeal would not lie. It distinguished civil contempt—the failure to do something ordered by a court to be done for the benefit of a party—from criminal contempt—any conduct directed against the authority or dignity of the court. Civil contempt proceedings are generally remedial and should be instituted by an aggrieved party or someone with a pecuniary interest in the right to be protected; if the contempt is initiated by the court or tribunal exercising the power to punish, it is criminal in nature, the proceedings follow the principles and rules applicable to criminal cases, and the State is the real prosecutor. The real character is determined by the relief sought or the dominant purpose: primarily punishment makes it criminal; primarily compensatory or remedial makes it civil. Here the contempt was not civil but criminal, imposed to vindicate the dignity and power of the Commission; hence, as in criminal proceedings, an appeal would not lie from the order of dismissal or exoneration.

• Willful Disobedience: The SC held that the SEC order directing respondents to show cause why they should not be cited in contempt was highly improper. The CA issued on July 8, 1996 a TRO against the SEC’s June 28, 1996 order directing Interport Resources Corporation to desist from holding the stockholders’ meeting on July 9, 1996. Contrary to petitioners’ view, the effect of the CA TRO directing the SEC to desist from enforcing its own TRO was to allow the meeting to proceed as scheduled; more, the CA in its final decision nullified the SEC’s order. Hence there was no willful disobedience to a lawful order of the SEC, and respondents were not guilty of contempt. While the SEC is vested with the power to punish for contempt under P.D. 902-A, Section 6[e], that power must be exercised on the preservative, not vindictive principle, and on the corrective, not retaliatory, idea of punishment; it is intended as a safeguard for the functions of the tribunal, not for the persons who exercise them. The SEC issued the citation for contempt sua sponte; no private party aggrieved by respondents’ acts filed a charge. Strictly speaking, there was no disobedience to the SEC’s TRO because the CA enjoined that order, so respondents’ act in proceeding with the scheduled stockholders’ meeting was not contumacious. Disobedience punished as constructive contempt implies willfulness; contempt is a willful disregard or disobedience. The SEC was hasty in asserting its contempt power and must exercise it judiciously and sparingly with utmost self-restraint.

• Penalty: The penalty imposed exceeded those authorized in the powers of the SEC in relation to the 1964 Revised Rules of Court, as amended. If the contempt was committed against a superior court or judge, the accused may be fined not exceeding P30,000.00 or imprisoned not more than six months, or both. The SEC suspended respondent Manalaysay from the practice of law in the SEC, a power vested exclusively in the Supreme Court under Article VIII, Section 5[5] of the Constitution.

• Criminal contempt vs. civil contempt — Civil contempt is failure to do something ordered by a court for the benefit of a party; criminal contempt is conduct directed against the authority or dignity of the court. If the contempt is initiated by the court or tribunal itself, it is criminal, and the State is the real prosecutor. The real character is determined by the relief sought or dominant purpose: primarily punishment makes it criminal; primarily compensatory or remedial makes it civil. The SC applied this to the SEC’s sua sponte contempt citation and held it criminal.
• Appeal from exoneration in contempt — Because contempt partakes of the nature of a criminal offense, exoneration from the charge amounts to an acquittal from which an appeal does not lie. The SC applied this to bar petitioners’ appeal from the CA’s reversal of the SEC’s contempt order.
• Preservative, not vindictive, exercise of contempt power — The power to punish contempt must be exercised on the preservative, not vindictive principle, and on the corrective, not retaliatory, idea of punishment; it is a safeguard for the functions of the tribunal, not for the persons who exercise them. The SC held the SEC was hasty and should exercise the power judiciously and sparingly with utmost self-restraint.
• Willful disobedience in constructive contempt — Disobedience punished as constructive contempt implies willfulness; contempt is a willful disregard or disobedience. The SC found no willful disobedience because the CA TRO restrained the SEC from enforcing its TRO and allowed the stockholders’ meeting to proceed.
• Limits on SEC contempt penalty — The SEC’s contempt power under P.D. 902-A, Section 6[e], is subject to the penalty limits in the 1964 Revised Rules of Court, and the power to suspend a lawyer from practice belongs exclusively to the Supreme Court. The SC struck down the SEC’s 60-day suspension of Manalaysay from practice before the SEC.

• "The real character of the proceedings in contempt cases is to be determined by the relief sought or by the dominant purpose. the proceedings are to be regarded as criminal when the purpose is primarily punishment, and civil when the purpose is primarily compensatory or remedial." — The SC used this dominant-purpose test to classify the SEC’s contempt as criminal rather than civil.
• "If the contempt is initiated by the court or tribunal exercising the power to punish a given contempt, it is criminal in nature, and the proceedings are to be conducted in accordance with the principles and rules applicable to criminal cases. the State is the real prosecutor." — The SC applied this to the SEC’s sua sponte citation, making respondents’ exoneration an acquittal.
• "the power to punish for contempt must be exercised on the preservative, not vindictive principle, and on the corrective and not retaliatory idea of punishment." — The SC held the SEC was hasty in asserting contempt power and should exercise it judiciously and sparingly.
• "the SEC suspended respondent Manalaysay from the practice of law in the SEC, a power vested exclusively in the Supreme Court." — The SC cited this to show the penalty exceeded the SEC’s authority.

• Adorio vs. Bersamin, 273 SCRA 217 [1997] — Relied on for the rule that a charge of contempt partakes of the nature of a criminal offense and that exoneration amounts to acquittal.
• People vs. Godoy, 243 SCRA 64 [1995] — Followed for the civil/criminal contempt distinction, the rule that court-initiated contempt is criminal, and the dominant-purpose test.
• Remman Enterprises, Inc. vs. Court of Appeals, 268 SCRA 688 [1997] — Followed for determining the real character of contempt by the relief sought or dominant purpose.
• Santiago vs. Anunciacion, Jr., 184 SCRA 118 [1990] — Followed for the distinction between civil and criminal contempt and the rule that acquittal bars a second prosecution.
• Insurance Commissioner vs. Globe Assurance Co., Inc., 111 SCRA 202 [1982] — Followed for the ruling that the contempt was criminal and that an appeal would not lie from dismissal or exoneration.
• Commissioner of Immigration vs. Cloribel, 127 Phil. 716 [1967] — Followed for the preservative-not-vindictive principle and the requirement of willfulness in contempt.
• Nazareno vs. Barnes, 136 SCRA 57 [1985] — Followed for the corrective-not-retaliatory idea of punishment and the impersonal purpose of contempt power.
• Dee vs. Securities and Exchange Commission, 199 SCRA 238 [1991] — Relied on in support of the ruling that respondents’ act was not contumacious absent willful disobedience to the SEC’s order.

• P.D. 902-A, Section 6[e] — Vests the SEC with power to punish contempt. The SC recognized the power but held it must be exercised preservatively and within authorized penalties; the SEC’s suspension of Manalaysay exceeded it.
• Rule 71, Section 6, 1964 Revised Rules of Court, as amended — Sets the penalty limits for contempt; the SC held the SEC’s penalty exceeded those authorized under this rule in relation to the SEC’s contempt power.
• Article VIII, Section 5[5], Constitution — Vests exclusively in the Supreme Court the power to suspend or disbar lawyers; the SEC’s 60-day suspension of Manalaysay from practice before the SEC was invalid.