Title
Tengco III vs. People
Case
G.R. No. 236620
Decision Date
Feb 1, 2023
PIPCC, unregistered for securities sales, defrauded investors via unlicensed agents. SEC investigation led to criminal charges; RTC dismissed case, citing due process violations. CA reinstated charges, upheld by SC, affirming DOJ's jurisdiction and proper referral.
lack of preliminary investigation
due process
criminal case

Case Summary (G.R. No. 236620)

Factual Background

The corporate subject was Philippine International Planning Center Corporation (PIPCC), formerly Caravaggio Holdings, Inc., incorporated in 2001 and authorized by its Articles to act as a research arm of foreign clients. PIPCC was not registered to solicit or sell securities in the Philippines, and its officers, agents, and brokers were not licensed to engage in such solicitation. In July 2007 PIPCC’s chairman and president, Michael H.K. Liew, disappeared together with approximately US$250 million in investor funds. The SEC Enforcement and Investor Protection Department (SEC-EIPD) received thirty-one verified complaints from alleged investors who asserted that PIPCC, through certain brokers and agents including petitioners and several co-accused, solicited investments in US Dollars or Euros by promising returns of 12% to 18%, represented affiliation with a BVI entity, and falsely suggested that they had obtained SEC licenses.

SEC Investigation and Referral to the DOJ

The SEC-EIPD conducted an investigation and preliminarily found that PIPCC was not licensed to solicit or sell securities but nevertheless engaged in such sales through its directors, officers, brokers, and agents. The SEC-EIPD concluded there was probable cause to charge multiple persons, including petitioners, with violating Section 28 of the Securities Regulation Code. The SEC, through the SEC-EIPD, filed a complaint-affidavit with the Department of Justice (DOJ) dated November 27, 2007, and the DOJ panel of prosecutors conducted a preliminary investigation and likewise found probable cause.

Information, Arraignment, and Trial Proceedings

An Information was filed on June 19, 2008 charging petitioners and others with violation of Section 28 for selling or offering securities without registration with the SEC from March 2001 to July 2007 in Makati City. During arraignments from September 2008 to February 2009 the accused pleaded not guilty. Trial on the merits commenced. At a hearing on April 16, 2015 the trial court directed the SEC to certify whether subpoenas, notices, or invitations had been served on any of the accused prior to the filing of the complaint with the DOJ and whether the SEC had reached and communicated a finding of probable cause before referral to the DOJ. The SEC certified on May 6, 2015 that it had conducted an investigation, issued notices of conferences to officers and directors of PIPCC, and that it filed the complaint only after it found probable cause.

Motions to Dismiss and RTC Ruling

On August 7, 2015 Garcia filed a Motion to Dismiss for Lack of Jurisdiction, asserting that the SEC had failed to conduct its own preliminary investigation in conformity with Section 53.1 and the Court’s precedents, thereby violating her right to due process and depriving the trial court of jurisdiction. Thereafter the other accused, including Jesuitas, Kierulf, Tengco, Santos, Mendoza, and Morris, filed similar motions. In an Order dated 16 May 2016, the RTC, through Judge Benjamin T. Pozon, granted the motions to dismiss and declared the case dismissible for lack of jurisdiction and for denial of petitioners’ right to due process. The RTC denied the prosecution’s motion for reconsideration in an Order dated 23 November 2016.

CA Proceeding and Decision

The Office of the Solicitor General filed a petition for certiorari under Rule 65, alleging that the RTC acted without or in excess of jurisdiction. The Court of Appeals framed the pivotal issue as whether the RTC judge committed grave abuse of discretion amounting to lack or excess of jurisdiction when it dismissed the case on the ground that the SEC failed to conduct its own preliminary investigation and thereby violated petitioners’ due process rights. The CA granted the petition. It held that petitioners were not deprived of due process because they had fully participated in the DOJ preliminary investigation and had the opportunity to refute the charges; that any irregularity in the SEC’s preliminary investigation did not affect the trial court’s jurisdiction; and that irregularity in the preliminary investigation could be remedied without quashing the Information. Consequently, the CA annulled and set aside the RTC Orders dated May 16, 2016 and November 23, 2016, reinstated Criminal Case No. 08-1083, and remanded the case to the RTC for further proceedings.

Petitioners’ Contentions on Review

Petitioners advanced substantially similar contentions before the Supreme Court. Tengco and Kierulf argued that the RTC correctly dismissed the case for lack of jurisdiction under the Court’s holdings in Baviera v. Paglinawan and Securities and Exchange Commission v. Interport, that the SEC did not substantially comply with Section 53.1, and that lack of jurisdiction may be raised at any stage. Garcia asserted that the RTC Orders were final judgments and not susceptible to a Rule 65 remedy before the CA, that the dismissal complied with the SRC and relevant precedent, and that denial of due process by the SEC prevented the RTC from acquiring jurisdiction. Jesuitas challenged the CA’s finding of substantial compliance with Section 53.1, contended that absence of an SEC preliminary investigation affected the trial court’s jurisdiction, and asserted she had not waived the right to question the SEC investigation.

Supreme Court Ruling

The Supreme Court denied the petitions and affirmed the Court of Appeals’ decision and resolution. The Court held that the CA did not commit reversible error in reinstating the criminal case and remanding it to the RTC. The Court accepted that the OSG properly invoked Rule 65 to challenge the RTC’s dismissal on jurisdictional grounds and found no grave abuse of discretion in the CA’s assessment that the RTC erred in dismissing the case.

Legal Basis and Reasoning

The Court examined the case under Section 53.1 of the Securities Regulation Code, noting that the provision vests the SEC with discretion in conducting investigations and requires that criminal complaints under the Code be referred to the DOJ for preliminary investigation and prosecution. The Court emphasized that Section 53.1 does not prescribe a specific mode of investigation; it leaves investigative methods to the SEC’s discretion, but mandates referral to the DOJ when criminal complaints are involved. The Court distinguished Baviera v. Paglinawan on the ground that Baviera involved a private complainant who filed directly

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