G.R. No. 180064, 16 September 2013

FACTS:

Petitioners alleged that they had been depositors of Citibank Binondo Branch (Citibank Binondo) since 1996. Sometime in 1999, Guada Ang, Citibank Binondo’s Branch Manager, invited Jose to a dinner party at the Manila Hotel where he was introduced to several officers and employees of Citibank Hongkong Branch (Citibank Hongkong). A few months after, Chingyee Yau (Yau), Vice-President of Citibank Hongkong, came to the Philippines to sell securities to Jose. They averred that Yau required Jose to open an account with Citibank Hongkong as it is one of the conditions for the sale of the aforementioned securities. After opening such account, Yau offered and sold to petitioners numerous securities issued by various public limited companies established in Jersey, Channel I sands.

Petitioners discovered that the securities sold to them were not registered with the Securities and Exchange Commission (SEC)and that the terms and conditions covering the subscription were not likewise submitted to the SEC for evaluation, approval, and registration. Asserting that respondent’s actions are in violation of Republic Act No.8799, entitled the “Securities Regulation Code” (SRC), they assailed the validity of the subscription agreements and the terms and conditions thereof for being contrary to law and/or public policy.

For its part, respondent filed a motion to dismiss15 alleging, inter alia, that petitioners’ complaint should be dismissed outright for violation of the doctrine of primary jurisdiction. It pointed out that the merits of the case would largely depend on the issue of whether or not there was a violation of the SRC, in particular, whether or not there was a sale of unregistered securities. In this regard, respondent contended that the SRC conferred upon the SEC jurisdiction to investigate compliance with its provisions and thus, petitioners’ complaint should be first filed with the SEC and not directly before the RTC.

Petitioners opposed respondent’s motion to dismiss, maintaining that the RTC has jurisdiction over their complaint. They asserted that Section 63of the SRC expressly provides that the RTC has exclusive jurisdiction to hear and decide all suits to recover damages pursuant to Sections 56 to 61 of the same law.

ISSUE:

Whether or not petitioners’ action falls within the primary jurisdiction of the SEC.

RULING:

The petition is meritorious.

At the outset, the Court observes that respondent erroneously relied on the Baviera ruling to support its position that all complaints involving purported violations of the SRC should be first referred to the SEC. A careful reading of the Baviera case would reveal that the same involves a criminal prosecution of a purported violator of the SRC, and not a civil suit such as the case at bar. The pertinent portions of the Baviera ruling thus read:

A criminal charge for violation of the Securities Regulation Code is a specialized dispute. Hence, it must first be referred to an administrative agency of special competence, i.e., the SEC. Under the doctrine of primary jurisdiction, courts will not determine a controversy involving a question within the jurisdiction of the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the specialized knowledge and expertise of said administrative tribunal to determine technical and intricate matters of fact. The Securities Regulation Code is a special law. Its enforcement is particularly vested in the SEC.

*Case Digest by Catherine C. Velasco, LLB-IV, Andres Bonifacio Law School, SY 2019-2020