Case Summary (G.R. No. 133113)
Key Dates and Procedural Milestones
Complaint filed: February 22, 2013 (Civil Case No. 13-171).
Motion to Dismiss filed by respondent: May 29, 2013.
RTC Branch 63 Order directing re-raffle: September 12, 2013.
Case re-raffled to Branch 149; Branch 149 Order denying Motion to Dismiss and ordering additional docket fees: October 25, 2013.
CA Decision reversing RTC orders and dismissing the case: October 9, 2014; CA denied reconsideration July 14, 2015.
Supreme Court decision reviewed in the prompt (decision date is after 1990, so the 1987 Constitution governs the Court’s rule-making and supervision of courts).
Factual Allegations by Petitioner
Petitioner opened a trading account with respondent in June 2007. He alleges an unauthorized insertion of M.G. Valbuena’s name as an agent on his account and that MGV represented herself as a respondent’s Sales Director and transacted on petitioner’s account. Petitioner claims 467 unauthorized transactions, fabricated trade confirmations, a diverted investment program called ARPO (to which petitioner had allegedly invested Php38,300,205.00), and discrepancies revealed by an audit. Petitioner’s audit asserted respondent owed him Php70,064,426.88 as of October 31, 2012 (breakdown included remaining cash, unaccounted payments, ARPO principal and unpaid ARPO interests). He sought recovery of the amounts, return of specified shares, treble and exemplary damages, and attorney’s fees.
Relief Sought and Initial Raffle
Petitioner prayed for monetary recovery and return of specified shares (with the complaint initially docketed as an ordinary civil action). Civil Case No. 13-171 was raffled to RTC Makati, Branch 63.
Respondent’s Motion to Dismiss and Grounds
Respondent moved to dismiss arguing: (1) lack of subject matter jurisdiction because petitioner evaded payment of correct docket fees; (2) failure to state a cause of action with particularity as to fraud and as to claims involving ARPO; and (3) waiver/abandonment of claims due to failure to timely object to statements of account under the parties’ agreement.
RTC Branch 63 Order (September 12, 2013)
After hearings, Branch 63 determined the case “involves trading of securities” and ordered the record forwarded for re-raffle to the Office of the Clerk of Court for assignment to a Special Commercial Court. The order directed re-raffle rather than dismissal.
Re-raffle to Branch 149 and Branch 149 Order (October 25, 2013)
The case was re-raffled to Branch 149 (a branch designated as a Special Commercial Court). Branch 149 denied respondent’s Motion to Dismiss, ruling: (a) payment of insufficient docket fees does not automatically divest the court of jurisdiction and petitioner must pay the deficiency assessment; (b) allegations of fraud were sufficiently pleaded to survive a motion to dismiss; and (c) alleged waiver/abandonment raised factual disputes appropriate for trial. Branch 149 ordered petitioner to pay docket fees based on the value of the shares prayed to be returned.
Court of Appeals Ruling
The CA granted respondent’s petition for certiorari under Rule 65, held that Branch 63’s September 12, 2013 Order acknowledged lack of jurisdiction and thus should have dismissed the case instead of re-raffling it, and concluded that Branch 63 committed grave abuse of discretion. Because Branch 149 received the case by virtue of that re-raffle, the CA held that all proceedings before Branch 149 were null and void and dismissed Civil Case No. 13-171 for lack of jurisdiction.
Central Legal Issue before the Supreme Court
Whether the CA erred in finding lack of jurisdiction and grave abuse of discretion in the RTC orders — specifically, whether the Makati RTC (Branches 63 and 149) had subject matter jurisdiction over petitioner’s complaint and whether procedural errors in re-raffling rendered subsequent proceedings void.
Governing Statutes and Principles on Jurisdiction
The Court examined the Securities Regulation Code (RA 8799), PD 902‑A (Section 5), and BP Blg. 129 (Section 19(1) and (8)) as amended. Key principles articulated: (a) subject matter jurisdiction is conferred by law and is determined by the allegations in the complaint; (b) the distinction between acquisition of subject matter jurisdiction (conferred by statute) and the exercise of jurisdiction (governed by procedural rules and by the Court’s designation of special branches); and (c) RA 8799 transferred to RTCs the SEC’s prior subject matter jurisdiction over controversies enumerated in PD 902‑A, though the Supreme Court may designate specific RTC branches to exercise that jurisdiction.
Tests to Determine Intra‑Corporate Controversy vs. Ordinary Civil Action
The Court applied the relationship test and the nature of the controversy test (from Medical Plaza Makati Condominium Corporation v. Cullen): an intra-corporate controversy involves (1) relationships such as corporation vs. stockholders/officers, or among stockholders; and (2) controversies that directly implicate enforcement of correlative rights/obligations under the Corporation Code or internal corporate regulatory rules. Both tests must be considered to classify a dispute.
Application of Tests to the Complaint — Nature of the Action
Applying those tests, the Court found petitioner’s action to be an ordinary civil action (collection, specific performance, damages) and not an intra‑corporate controversy: petitioner was not a stockholder, partner, member, or officer of respondent; the relationship was investor–broker; and the dispute did not implicate enforcement of internal corporate rights or Corporation Code regulatory matters. Thus, subject matter jurisdiction lay with the RTCs as courts of general jurisdiction.
Distinction between Subject Matter Jurisdiction and Procedural Designation
The Court emphasized that although Branch 63 erred in ordering re‑raffle to a Special Commercial Court, that error was procedural and did not divest the RTC of subject matter jurisdiction already conferred by law. The designation of Special Commercial Courts is an internal rule to aid the exercise of jurisdiction (under the Supreme Court’s rule-making authority) and does not remove a branch’s status as part of the RTC vested with general jurisdiction. Consequently, Branch 149 — though designated a Special Commercial Court — retained the RTC’s general jurisdiction to hear ordinary civil cases; the case remained docketed as an ordinary civil action after re‑raffle.
Docket Fees Issue and Relevant Precedent
On sufficiency of docket fees, the Court reviewed the jurisprudential development: Manchester required full payment for jurisdiction; Sun Insurance and later cases relaxed strictness where there is no deliberate intent to defraud and the plaintiff manifests willingness to pay deficiencies; La Salette and subsequent cases allow courts to exercise discretion and consider all attendant circumstances. The clerk of court’s assessment and authority to make deficiency assessments were highlighted; payment pursuant to such assessment negates bad faith.
Application to the Facts on Docket Fees
The Court found no sufficient proof that petitioner deliberately intended to evade payment of docket fees. Petitioner pa
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Parties and Nature of Case
- Petitioner: Stephen Y. Ku, who opened a trading account with respondent on June 5, 2007, for purchase and sale of securities.
- Respondent: RCBC Securities, Inc. (RSEC), a corporation engaged in brokerage and related securities business in the Philippines.
- Nature of the action: Petition for review on certiorari under Rule 45 seeking reversal of Court of Appeals Decision and Resolution that (1) reversed and set aside the RTC Branch 63 Order directing re-raffle of petitioner's Complaint, and (2) reversed and set aside RTC Branch 149 Order denying respondent's Motion to Dismiss and ordering petitioner to pay docket fees on the value of shares prayed to be returned.
- Relief sought in Supreme Court petition: Reinstatement of Civil Case No. 13-171 and direction to Branch 149 to proceed with hearing.
Factual Background
- Petitioner opened a trading account with respondent on 05 June 2007 as evidenced by a Customer Account Information Form and Agreement.
- After signing, an unknown third party, “M.G. Valbuena” (MGV), was inserted beside the name of Ivan L. Zalameda as one of the agents; petitioner discovered this only when he requested a copy of his account information.
- MGV represented herself as a Sales Director of RSEC and petitioner transacted with MGV believing she was authorized by RSEC.
- Petitioner received Trade Confirmations and trusted MGV due to profitable management of his account, and MGV also solicited petitioner’s investment in ARPO, represented as an investment arm of RSEC.
- Petitioner invested in ARPO starting November 2007; total investments over more than two years amounted to Php38,300,205.00.
- In January 2012, petitioner learned of mismanagement of his account; MGV was blacklisted by RSEC for fraudulent and unauthorized transactions and allegedly diverted investments of high net-worth clients.
- On 17 January 2012, RSEC furnished petitioner an undated audit report showing total claim by RSEC against petitioner of Php77,561,602.75; petitioner performed an independent audit.
- Petitioner’s audit found 467 unauthorized transactions, many involving multiple buy-sell transactions on the same day over four years, and fabricated confirmation statements for trades purportedly authorized by petitioner but not actually executed.
- After exclusion of unauthorized trades, petitioner claimed remaining cash of Php992,970.78 and specific stock positions (detailed listing of stocks and quantities in Complaint).
- Petitioner’s audit concluded RSEC owed him Php70,064,426.88 as of 31 October 2012, composed of: Php992,970.78 cash; Php15,166,251.10 unaccounted/wrongfully credited payments; Php38,300,205.00 principal investment in ARPO; and Php15,605,000.00 unpaid ARPO interests as of 31 October 2012.
- Petitioner demanded payment and return of shares by written demands (10 May 2012, 11 January 2013); RSEC denied relationship with ARPO and failed to explain alleged diversions.
- RSEC allegedly refused petitioner’s demands without valid reason.
Complaint: Causes of Action and Reliefs
- Complaint filed 22 February 2013 in RTC Makati: Civil Case No. 13-171, titled “Complaint for Sum of Money and Specific Performance with Damages.”
- Petitioner prayed for: payment of amounts itemized in audit (Php70,064,426.88 as of 31 October 2012), return of enumerated shares of stock, treble damages, exemplary damages, and attorney’s fees.
- Complaint set out specifics of alleged unauthorized transactions, fabricated confirmations, and alleged mismanagement/diversion by MGV.
Lower Court Proceedings and Orders
- Complaint was initially raffled to RTC Makati, Branch 63.
- Respondent filed Motion to Dismiss (May 29, 2013) arguing:
- RTC of Makati lacked jurisdiction because petitioner deliberately evaded payment of correct docket fees;
- Complaint failed to state cause of action with the particularity required for fraud and failed to allege basis for claims on ARPO investments;
- Petitioner waived/abandoned claims by failing to object to statements of account within the prescriptive period under the parties’ agreement.
- Petitioner filed Comment/Opposition; respondent filed Reply; hearings were held.
- RTC Makati, Branch 63 issued Order dated 12 September 2013 directing re-raffle of the Complaint to a Special Commercial Court, stating the case involves trading of securities and should be heard before a Special Commercial Court.
- Case was re-raffled to Branch 149, RTC Makati.
- RTC Makati, Branch 149 issued Order dated 25 October 2013 denying respondent’s Motion to Dismiss:
- Held insufficient docket fees did not warrant dismissal and the court acquired jurisdiction subject to payment of deficiency assessment;
- Ordered petitioner to pay docket fees on the value of shares prayed to be returned within 30 days of receipt of Order;
- Found allegations of fraud sufficiently pleaded for purposes of surviving a Motion to Dismiss;
- Determined alleged waiver/abandonment raised factual disputes for trial.
Court of Appeals Proceedings and Ruling
- Respondent filed petition for certiorari under Rule 65 with the Court of Appeals, accusing Judges Salvador, Jr. (Branch 63) and Untalan (Branch 149) of grave abuse of discretion in issuing the September 12 and October 25, 2013 Orders.
- Court of Appeals Decision (October 9, 2014) granted the petition, reversed and set aside both RTC orders, and dismissed Civil Case No. 13-171 for lack of jurisdiction.
- CA reasoned Branch 63’s September 12 Order acknowledged lack of jurisdiction and should have dismissed rather than re-raffle; re-raffle to Branch 149 rendered all proceedings before Branch 149 null and void.
- CA denied petitioner’s urgent motion for TRO/P.I. as moot and academic.
- Petitioner filed Motion for Reconsideration; CA denied it in Resolution dated July 14, 2015.
Issues Presented to the Supreme Court
- Assignment of Errors raised by petitioner:
- A. Whether the CA grievously erred in finding the RTC Orders were issued with grave abuse of