Cosmos Bottling Corporation v. Commission En Banc of the Securities and Exchange Commission

G.R. No. 199028, 12 November 2014

FACTS:

Cosmos’s failure to submit its 2005 Annual Report to the SEC within the prescribed period… requested an extension of time within which to file the same. SEC-CFD, through… respondent Director Justina F. Callangan (Director Callangan), sent Cosmos a letter[7] dated May 18, 2006 denying the latter’s request ordered Cosmos to show cause why the Subject Registration/Permit should not be revoked for violating Section 17.1(a)[8] of Republic Act No. 8799, otherwise known as “The Securities Regulation Code” (SRC). Cosmos sent a reply-letter[10] to the SEC-CFD due to the non-completion by its external auditors of their audit procedures.

Cosmos implored the SEC-CFD to reconsider SEC-CFD ordered the suspension of the Subject Registration/Permit(suspension order)for a period of 60 days from receipt of the same, or until Cosmos files its 2005 Annual Report, whichever is earlier… failure to submit its 2005 Annual Report within the 60-day period… revocation of the Subject Registration/Permit.

Cosmos still failed to comply, revocation proceedings commenced on August 22, 2007 and the latter submitted its formal explanation on delay occasioned by the following factors: non-completion of its 2005 Audited Financial Statements by its external auditor; (b) the adoption of new accounting… standards which gave rise to additional disclosures in the financial reports; and (c) the sale of Coca-Cola Bottlers Philippines, Inc., which is the parent company of Cosmos, to Coca-Cola South Asia Holdings, Inc.

October 31, 2007, Cosmos finally submitted its 2005 and 2006 Annual Reports to the SEC requesting that the latter lift the suspension order. SEC-CFD referred the matter to the SEC En Banc. SEC En Banc issued Resolution No. 87… they resolved to: (a) deny Cosmos’s request for the lifting of the suspension order; and (b) revoke the Subject Registration/Permit. Cosmos appealed to the SEC En Banc. SEC En Banc dismissed Cosmos’s appeal. SEC En Banc’s Resolution No. 87, s. 2008, and thus, should be considered an issuance of the SEC En Banc itself. Cosmos filed a petition for review before the CA. CA affirmed the SEC En Banc Ruling.

SEC-CFD merely acted as an arm of the SEC En Banc when it issued the Revocation Order against Cosmos… it was simply a reiteration… of Resolution No. 87,… SEC En Banc correctly dismissed Cosmos’s appeal.. Cosmos’s appeal, which was treated as a prohibited motion for reconsideration under the 2006 SEC Rules of Procedure… did not toll the reglementary period for filing an appeal… already lapsed into finality… reconsideration,… enied in

ISSUE:

Whether or not the CA correctly treated Cosmos’s appeal before the SEC En Banc as a motion for reconsideration, and consequently, affirmed its dismissal for being a prohibited pleading under the 2006 SEC Rules of Procedure.

RULING:

The petition is meritorious.

As an administrative agency with both regulatory and adjudicatory functions,36 the SEC was given the authority to delegate some of its functions to, inter alia, its various operating departments, such as the SECCFD, the Enforcement and Investor Protection Department, and the Company Registration and Monitoring Department, pursuant to Section 4.6 of the SRC, to wit: SEC. 4. Administrative Agency.

x x x x

4.6. The Commission may, for purposes of efficiency, delegate any of its functions to any department or office of the Commission, an individual Commissioner or staff member of the Commission except its review or appellate authority and its power to adopt, alter and supplement any rule or regulation.The Commission may review upon its own initiative or upon the petition of any interested party any action of any department or office, individual Commissioner, or staff member or the Commission. (Emphasis and underscoring supplied)

In this case, the Court disagrees with the findings of both the SEC En Banc and the CA that the Revocation Order emanated from the SEC En Banc. Rather, such Order was merely issued by the SEC-CFD as one of the SEC’s operating departments, as evidenced by the following: (a) it was printed and issued on the letter head of the SEC-CFD, and not the SEC En Banc; (b) it was docketed as a case under the SEC-CFD as an operating department of the SEC, since it bore the serial number “SEC-CFD Order No. 027, [s.] 2008;” and (c) it was signed solely by Director Callangan as director of the SEC-CFD, and notby the commissioners of the SEC En Banc. Further, both the SEC En Banc and the CA erred in holding that the Revocation Order merely reflected Resolution No. 87, s. 2008, and thus, should already be considered as the ruling of the SEC En Banc in this case.

As admitted by respondents, the SEC-CFD’s referral of the case to the SEC En Banc for its consideration in its March 13, 2008 meeting, which eventually resulted in the issuance of Resolution No. 87, s.2008, was merely an internal procedure inherent in the exercise by the SEC of its administrative and regulatory functions.37 Moreover, Cosmos never knew of the existence of Resolution No. 87, s. 2008, as it was not furnished a copy thereof; nor did the Revocation Order make any specific reference to the same. Essentially, Cosmos was only apprised of the existence of Resolution No. 87, s. 2008 when it was finally cited by the SEC En Banc in its September 10, 2009 Decision.38 Accordingly, when Cosmos received the Revocation Order, it had every reason to believe that it was issued by the SEC-CFD as an Operating Department of the SEC, and thus, appealable to the SEC En Banc. Therefore, the outright dismissal of Cosmos’s appeal by the SEC En Banc effectively denied it of its right to appeal, as provided for under the SRC and the 2006 SEC Rules of Procedure, and therefore could not be countenanced.

*Case Digest by April Rose B. Tuanda, JD-IV, Andres Bonifacio Law School, S.Y 2019-2020