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180064

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RepublicofthePhilippines
SUPREMECOURT
Manila

SECONDDIVISION

G.R.No.180064September16,2013

JOSEU.PUAandBENJAMINHANBENU.PUA,Petitioners,
vs.
CITIBANK,N.A.,Respondent.

DECISION

PERLASBERNABE,J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated May 21, 2007 and Resolution3 dated
October 16, 2007 of the Court of Appeals (CA) in CAG.R. SP No. 79297, which reversed and set aside the
OrdersdatedMay14,20034andJuly16,20035oftheRegionalTrialCourtofCauayanCity,Isabela,Branch19
(RTC), dismissing petitioners Jose(Jose) and Benjamin Hanben U. Pua's (petitioners) complaint against
respondentCitibank,N.A.(respondent).

TheFacts

OnDecember2,2002,petitionersfiledbeforetheRTCaComplaint6fordeclarationofnullityofcontractandsums
ofmoneywithdamagesagainstrespondent,7docketedasCivilCaseNo.191159.8Intheircomplaint,petitioners
alleged that they had been depositors of Citibank Binondo Branch (Citibank Binondo) since 1996. Sometime in
1999,GuadaAng,CitibankBinondosBranchManager,invitedJosetoadinnerpartyattheManilaHotelwherehe
was introduced to several officers and employees of Citibank Hongkong Branch (Citibank Hongkong).9 A few
monthsafter,ChingyeeYau(Yau),VicePresidentofCitibankHongkong,cametothePhilippinestosellsecurities
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.10 After opening such account, Yau offered and sold to
petitioners numerous securities11 issued by various public limited companies established in Jersey, Channel I
sands.Theoffer,sale,andsigningofthesubscriptionagreementsofsaidsecuritieswereallmadeandperfected
at Citibank Binondo in the presence of its officers and employees.12 Later on, petitioners discovered that the
securitiessoldtothemwerenotregisteredwiththeSecuritiesandExchangeCommission(SEC)andthattheterms
and conditions covering the subscription were not likewise submitted to the SEC for evaluation, approval, and
registration.13AssertingthatrespondentsactionsareinviolationofRepublicActNo.8799,entitledthe"Securities
RegulationCode"(SRC),theyassailedthevalidityofthesubscriptionagreementsandthetermsandconditions
thereofforbeingcontrarytolawand/orpublicpolicy.14

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
wouldlargelydependontheissueofwhetherornottherewasaviolationoftheSRC,inparticular,whetherornot
therewasasaleofunregisteredsecurities.Inthisregard,respondentcontendedthattheSRCconferreduponthe
SEC jurisdiction to investigate compliance with its provisions and thus, petitioners complaint should be first filed
withtheSECandnotdirectlybeforetheRTC.16

Petitioners opposed17 respondents motion to dismiss, maintaining that the RTC has jurisdiction over their
complaint.TheyassertedthatSection63oftheSRCexpresslyprovidesthattheRTChasexclusivejurisdictionto
hearanddecideallsuitstorecoverdamagespursuanttoSections56to61ofthesamelaw.18

TheRTCRuling

In an Order19 dated May 14, 2003, the RTC denied respondents motion to dismiss. It noted that petitioners
complaintisfordeclarationofnullityofcontractandsumsofmoneywithdamagesand,assuch,ithasjurisdiction
to hear and decide upon the case even if it involves the alleged sale of securities. It ratiocinated that the legal
questions or issues arising from petitioners causes of action against respondent are more appropriate for the
judiciarythanforanadministrativeagencytoresolve.20

Respondent filed an omnibus motion21 praying, among others, for there consideration of the aforesaid ruling,
whichpetitioners,inturn,opposed.22InanOrder23datedJuly16,2003,theRTCdeniedrespondentsomnibus
motionwithrespecttoitsprayerforreconsideration.Dissatisfied,respondentfiledapetitionforcertioraribefore
theCA.24

TheCARuling

InaDecision25datedMay21,2007,theCAreversedandsetasidetheRTCsOrdersanddismissedpetitioners
complaint for violation of the doctrine of primary jurisdiction. The CA agreed with respondents contention that
sincethecasewouldlargelydependontheissueofwhetherornotthelatterviolatedtheprovisionsoftheSRC,
thematteriswithinthespecialcompetenceorknowledgeoftheSEC.CitingthecaseofBavierav.Paglinawan26
(Baviera),theCAopinedthatallcomplaintsinvolvingviolationsoftheSRCshouldbefirstfiledbeforetheSEC.27

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Aggrieved, petitioners moved for reconsideration,28 which was, however, denied by the CA in a Resolution29
datedOctober16,2007.Hence,thispetition.

TheIssueBeforetheCourt

TheessentialissueinthiscaseiswhetherornotpetitionersactionfallswithintheprimaryjurisdictionoftheSEC.

Petitioners reiterate their original position that the SRC itself provides that civil cases for damages arising from
violationsofthesamelawfallwithintheexclusivejurisdictionoftheregionaltrialcourts.30

On the contrary, respondent maintains that since petitioners complaint would necessarily touch on the issue of
whetherornottheformerviolatedcertainprovisionsoftheSRC,thenthesaidcomplaintshouldhavebeenfirst
filedwiththeSECwhichhasthetechnicalcompetencetoresolvesuchdispute.31

TheCourtsRuling

Thepetitionismeritorious.

Attheoutset,theCourtobservesthatrespondenterroneouslyreliedontheBavierarulingtosupportitsposition
thatallcomplaintsinvolvingpurportedviolationsoftheSRCshouldbefirstreferredtotheSEC.Acarefulreading
oftheBavieracasewouldrevealthatthesameinvolvesacriminalprosecutionofapurportedviolatoroftheSRC,
andnotacivilsuitsuchasthecaseatbar.ThepertinentportionsoftheBavierarulingthusread:

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,courtswillnotdetermineacontroversyinvolvingaquestionwithinthejurisdictionoftheadministrative
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
SecuritiesRegulationCodeisaspeciallaw.ItsenforcementisparticularlyvestedintheSEC.

Hence,allcomplaintsforanyviolationoftheCodeanditsimplementingrulesandregulationsshouldbefiledwith
theSEC.Wherethecomplaintiscriminalinnature,theSECshallindorsethecomplainttotheDOJforpreliminary
investigationandprosecutionasprovidedinSection53.1earlierquoted.

We thus agree with the Court of Appeals that petitioner committed a fatal procedural lapse when he filed his
criminal complaint directly with the DOJ. Verily, no grave abuse of discretion can be ascribed to the DOJ in
dismissingpetitionerscomplaint.32(Emphasesandunderscoringsupplied)

Records show that petitioners complaint constitutes a civil suit for declaration of nullity of contract and sums of
moneywithdamages,whichstemmedfromrespondentsallegedsaleofunregisteredsecurities,inviolationofthe
variousprovisionsoftheSRCandnotacriminalcasesuchasthatinvolvedinBaviera.

Inthislight,whentheCourtruledinBavierathat"allcomplaintsforanyviolationofthe[SRC]xxxshouldbefiled
with the SEC,"33 it should be construed as to apply only to criminal and not to civil suits such as petitioners
complaint.

Moreover,itisafundamentalruleinprocedurallawthatjurisdictionisconferredbylaw34itcannotbeinferredbut
mustbeexplicitlystatedtherein.Thus,whenCongressconfersexclusivejurisdictiontoajudicialorquasijudicial
entity over certain matters by law, this, absent any other indication to the contrary, evinces its intent to exclude
otherbodiesfromexercisingthesame.

ItisapparentthattheSRCprovisionsgoverningcriminalsuitsareseparateanddistinctfromthosewhichpertain
tocivilsuits.Ontheonehand,Section53oftheSRCgovernscriminalsuitsinvolvingviolationsofthesaidlaw,
viz.:

SEC.53.Investigations,InjunctionsandProsecutionofOffenses.

53.1.TheCommissionmay,initsdiscretion,makesuchinvestigationsasitdeemsnecessarytodeterminewhether
anypersonhasviolatedorisabouttoviolateanyprovisionofthisCode,anyrule,regulationororderthereunder,
oranyruleofanExchange,registeredsecuritiesassociation,clearingagency,otherselfregulatoryorganization,
andmayrequireorpermitanypersontofilewithitastatementinwriting,underoathorotherwise,asthe
Commissionshalldetermine,astoallfactsandcircumstancesconcerningthemattertobeinvestigated.The
Commissionmaypublishinformationconcerninganysuchviolations,andtoinvestigateanyfact,condition,
practiceormatterwhichitmaydeemnecessaryorpropertoaidintheenforcementoftheprovisionsofthisCode,
intheprescribingofrulesandregulationsthereunder,orinsecuringinformationtoserveasabasisfor
recommendingfurtherlegislationconcerningthematterstowhichthisCoderelates:Provided,however,Thatany
personrequestedorsubpoenaedtoproducedocumentsortestifyinanyinvestigationshallsimultaneouslybe
notifiedinwritingofthepurposeofsuchinvestigation:Provided,further,Thatallcriminalcomplaintsforviolations
ofthisCode,andtheimplementingrulesandregulationsenforcedoradministeredbytheCommissionshallbe
referredtotheDepartmentofJusticeforpreliminaryinvestigationandprosecutionbeforethepropercourt:

Provided, furthermore, That in instances where the law allows independent civil or criminal proceedings of
violations arising from the same act, the Commission shall take appropriate action to implement the same:
Provided,finally,Thattheinvestigation,prosecution,andtrialofsuchcasesshallbegivenpriority.

Ontheotherhand,Sections56,57,58,59,60,61,62,and63oftheSRCpertaintocivilsuitsinvolvingviolations
ofthesamelaw.Amongthese,theapplicableprovisionstothiscaseareSections57.1and63.1oftheSRCwhich
provide:

SEC.57.CivilLiabilitiesArisinginConnectionWithProspectus,CommunicationsandReports.

57.1.Anypersonwho:

(a)OfferstosellorsellsasecurityinviolationofChapterIII

or

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(b)Offerstosellorsellsasecurity,whetherornotexemptedbytheprovisionsofthisCode,bytheuseof
anymeansorinstrumentsoftransportationorcommunication,bymeansofaprospectusorotherwrittenor
oralcommunication,whichincludesanuntruestatementofamaterialfactoromitstostateamaterialfact
necessaryinordertomakethestatements,inthelightofthecircumstancesunderwhichtheyweremade,
notmisleading(thepurchasernotknowingofsuchuntruthoromission),andwhoshallfailintheburdenof
proofthathedidnotknow,andintheexerciseofreasonablecarecouldnothaveknown,ofsuchuntruthor
omission, shall be liable to the person purchasing such security from him, who may sue to recover the
considerationpaidforsuchsecuritywithinterestthereon,lesstheamountofanyincomereceivedthereon,
uponthetenderofsuchsecurity,orfordamagesifhenolongerownsthesecurity.

xxxx

SEC.63.AmountofDamagestobeAwarded.63.1.AllsuitstorecoverdamagespursuanttoSections56,57,
58,59,60and61shallbebroughtbeforetheRegionalTrialCourtwhichshallhaveexclusivejurisdictiontohear
anddecidesuchsuits.TheCourtisherebyauthorizedtoawarddamagesinanamountnotexceedingtriplethe
amountofthetransactionplusactualdamages.

xxxx(Emphasesandunderscoringsupplied)

Based on the foregoing, it is clear that cases falling under Section 57of the SRC, which pertain to civil liabilities
arising from violations of the requirements for offers to sell or the sale of securities, as well as other civil suits
underSections56,58,59,60,and61oftheSRCshallbeexclusivelybroughtbeforetheregionaltrialcourts.Itis
awellsettledruleinstatutoryconstructionthattheterm"shall"isawordofcommand,andonewhichhasalways
orwhichmustbegivenacompulsorymeaning,anditisgenerallyimperativeormandatory.35Likewise,itisequally
revelatory that no SRC provision of similar import is found in its sections governing criminal suits quite the
contrary,theSRCstatesthatcriminalcasesarisingfromviolationsofitsprovisionsshouldbefirstreferredtothe
SEC. 1 w p h i1

Therefore,basedontheseconsiderations,itstandstoreasonthatcivilsuitsfallingundertheSRCareunderthe
exclusiveoriginaljurisdictionoftheregionaltrialcourtsandhence,neednotbefirstfiledbeforetheSEC,unlike
criminalcaseswhereinthelatterbodyexercisesprimaryjurisdiction.

All told, petitioners' filing of a civil suit against respondent for purported violations of the SRC was properly filed
directlybeforetheRTC.

WHEREFORE, the petition is GRANTED. Accordingly, the Court of Appeals' Decision dated May 21, 2007 and
Resolution dated October 16,2007 in CAG.R. SP No. 79297 are hereby REVERSED and SET ASIDE. Let Civil
CaseNo.191159beREINSTATEDandREMANDEDtotheRegionalTrialCourtofCauayanCity,Isabela,Branch
19forfurtherproceedings.

SOORDERED.

ESTELAM.PERLASBERNABE
AssociateJustice

WECONCUR:

ANTONIOT.CARPIO
AssociateJustice
Chairperson

ARTUROD.BRION MARIANOC.DELCASTILLO
AssociateJustice AssociateJustice

JOSEPORTUGALPEREZ
AssociateJustice

ATTESTATION

IattestthattheconclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecasewasassigned
tothewriteroftheopinionoftheCourt'sDivision.

ANTONIOT.CARPIO
AssociateJustice
Chairperson,SecondDivision

CERTIFICATION

PursuanttoSection13,ArticleVIIIoftheConstitution,andtheDivisionChairperson'sAttestation,Icertifythatthe
conclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriterof
theopinionoftheCourt'sDivision.

MARIALOURDESP.A.SERENO
ChiefJustice

Footnotes

1Rollo,Vol.1,pp.1034.

2 Id. at 3856. Penned by Associate Justice Japar B. Dimaampao, with Presiding Justice Ruben T.
Reyes(now retired Associate Justice of the Supreme Court) and Associate Justice Mario L. Guarifia III,
concurring.

3 Id. at 6467. Penned by Associate Justice Remedios A. SalazarFernanda, with Associate Justices
RosalindaAsuncionVicenteandEnricoA.Lanzanas,concurring.
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4Id.at176185.PennedbyExecutiveJudgeRaulV.Babaran.

5Id.at211214.

6Id.at6981.

7Id.at14.

8ThevariouspleadingsfiledbypetitionersbeforetheRTCweredocketedasCivilCaseNo.2387.

9Rollo,pp.39and70.

10Id.

11Id.at39and7071.Namely,AERISII,CERESII,andPALMYRA,issuedbyAerisFinance,Ltd.,CeresII
Finance,Ltd.,andPalmyraFunding,Limited,respectively.

12Id.at39and71.

13Id.at72and7577.

14Id.at4041.

15Id.at140163.DatedJanuary10,2003.

16Id.at152155.

17Id.at164173.VigorousOppositiondatedJanuary16,2003.

18Id.at168169.

19Id.at176185.

20Id.at180181.

21Id.at186200.DatedJune2,2003.

22Id.at202210.OppositionwithMotiontoDeclareDefendantinDefaultdatedJune5,2003.

23Id.at211214.

24Id.at287327.DatedSeptember15,2003.

25Id.at3856.

26G.R.Nos.168380and170602,February8,2007,515SCRA170.

27Rollo,pp.5455.

28Id.at357371.MotionforReconsiderationdatedJune7,2007.

29Id.at6467.

30Id.at26.

31Rollo,Vol.II,pp.445504.CommentdatedOctober9,2008.

32Bavierav.Paglinawan,supranote26,at182183.

33Id.at182.

34Magnov.People,G.R.No.171542,April6,2011,647SCRA362,371,citingMachadov.Gatdula,G.R.
No.156287,February16,2010,612SCRA546,559.

35Enriquezv.Enriquez,G.R.No.139303,August25,2005,468SCRA77,84,citingLacsonv.SanJose
Lacson,G.R.Nos.L23482,L23767,andL24259,August30,1968,24SCRA837,848.

TheLawphilProjectArellanoLawFoundation

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