G.R. No. 236620 - Tengco III vs. People

Case Digest (G.R. No. 236620)
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Facts:

Procedural Background

Multiple petitions for review on certiorari were filed by:

Jose T. Tengco III and Anthony Kierulf (G.R. No. 236620)
Barbara May L. Garcia (G.R. No. 236802)
Herley Jesuitas (G.R. No. 237156)

All petitions assailed the same decisions rendered by the Court of Appeals:

A Decision dated 10 July 2017
A Resolution dated 05 January 2018

The Court of Appeals annulled and set aside the RTC Orders:

Order dated 16 May 2016 granting motions to dismiss the case on alleged lack of jurisdiction and denial of due process
Order dated 23 November 2016 denying the prosecution’s motion for reconsideration

Factual Background of the Underlying Case

Corporate Facts of PIPCC

Originally incorporated as Caravaggio Holdings, Inc. on February 21, 2001, and renamed Philippine International Planning Center Corporation (PIPCC) on March 12, 2001
PIPCC’s Articles of Incorporation permitted it to act as a research arm for foreign clients; it was not authorized or registered to solicit and sell securities
Consequently, its officers and agents were not licensed to engage in the sale or offer of securities to the public

The Investment Scam

On July 17, 2007, PIPCC’s Chairman/President Michael H.K. Liew disappeared with approximately US$250 Million in investments
The SEC Enforcement and Investor Protection Department (SEC-EIPD) received 31 verified complaints from investors alleging that:

PIPCC, through its agents/brokers (including the petitioners, Santos, Mendoza, and Morris), enticed investors into investing funds in US Dollars or Euros with promises of returns ranging between 12% and 18%
The promises were pitched as lower-risk investments compared to traditional banking products

PIPCC falsely claimed to be the Philippine branch/office of a British Virgin Islands entity engaged in offshore foreign currency exchange trading, and suggested that its officers had secured proper licenses from the SEC

Investigative and Procedural Developments

SEC Investigation

The SEC-EIPD conducted an investigation after receiving numerous complaints and determined that PIPCC was not licensed to engage in the solicitation, offer, or sale of securities
Notices and preliminary conferences were held with the officers and/or directors of PIPCC, where it was only after establishing probable cause that a complaint-affidavit was filed with the Department of Justice (DOJ)

Filing of Criminal Charges

The SEC’s complaint, dated November 27, 2007, was filed with the DOJ against the petitioners along with other accused for violation of Section 28 of Republic Act No. 8799 (the Securities Regulation Code), which prohibits unregistered persons from acting as brokers or dealers in securities
An Information was subsequently filed on June 19, 2008 at the RTC charging the accused with the said violation

Allegations of Procedural Lapses and Denial of Due Process

During the trial phase, a series of motions to dismiss were filed by petitioners (including Garcia, Jesuitas, Tengco, Santos, Mendoza, and Morris) arguing that the SEC did not conduct its own preliminary investigation before referring the case to the DOJ
Specifically, it was contended that the SEC failed to serve subpoenas, notify, or invite the accused for any preliminary conference prior to filing the complaint, thereby violating their right to due process

Trial Court and Appellate Developments

RTC Rulings

On 16 May 2016, the RTC granted the petitioners’ motions to dismiss the criminal case on the grounds of lack of jurisdiction and denial of due process
On 23 November 2016, the RTC denied the prosecution’s motion for reconsideration on the merits

Court of Appeals Ruling

The Office of the Solicitor General (OSG) intervened by filing a Petition for Certiorari under Rule 65 that questioned the RTC’s dismissal of the case
The CA determined that the core issue was whether the alleged irregularity in the SEC’s preliminary investigation rendered the RTC without jurisdiction or amounting to a grave abuse of discretion
The CA ruled that:

Due process was not violated since the petitioners had the opportunity to participate fully in the investigation and preliminary proceedings
Any irregularity related to the SEC’s investigation could be remedied without affecting the jurisdiction over the criminal case

The CA annulled the RTC Orders and reinstated the criminal case, remanding it to the RTC for further proceedings

Specific Transactional and Evidentiary Details

Detailed investment transactions were presented, including dates, names of brokers/agents (such as Garcia, Morris, Tengco, Santos, Mendoza, Jesuitas, and Kierulf), names of investors, and amounts invested
These details underscored the operation of PIPCC and its agents in soliciting investments even though they were not licensed to do so, as required under the Securities Regulation Code

Issues:

Due Process and Procedural Compliance

Whether the failure of the SEC to conduct a preliminary investigation or properly notify the accused before referring the case to the DOJ constituted a violation of the petitioners’ right to due process
Whether such procedural lapse should automatically void the jurisdiction of the RTC over the criminal case

Jurisdiction of the RTC

Whether the RTC, by granting motions to dismiss based on alleged lack of jurisdiction and denial of due process, exceeded or abused its discretion
Whether the timing and nature of the SEC’s investigation affected the proper filing and prosecution of the criminal complaint under the Securities Regulation Code

Applicability of the Discretionary Power of the SEC

Whether the SEC’s discretion under Section 53.1 of the Securities Regulation Code allowed it to determine the course of its investigation, including the issuance of notifications and subpoenas
Whether the failure to adhere to certain procedural requirements meant that the criminal complaint should be dismissed or remedied differently (e.g., through suspension of the trial until re-investigation)

Remedy and Judicial Review

Whether a petition for certiorari under Rule 65 is the proper remedy to question the RTC’s dismissal in light of alleged procedural irregularities
Whether the court’s supervisory power over administrative and prosecutorial actions extends to re-assessing procedural choices made by the SEC and the DOJ

Ruling:

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Ratio:

(Subscriber-Only)

Doctrine:

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