Cosmos Bottling Corporation vs. SEC

1/22/2017 SUPREMECOURTREPORTSANNOTATEDVOLUME740
G.R.No.199028.November12,2014.*
COSMOS BOTTLING CORPORATION, petitioner, vs.

COMMISSION EN BANC of the SECURITIES AND
EXCHANGE COMMISSION (SEC) and JUSTINA F.
CALLANGAN, in her capacity as Director of the Corporation,
FinanceDepartmentoftheSEC,respondents.
Administrative Agencies Securities and Exchange Commission

Delegation of Powers As an administrative agency with both regulatory
andadjudicatoryfunctions,theSecuritiesandExchangeCommission(SEC)
was given the authority to delegate some of its functions to, inter alia, its
various operating departments, such as the SECCorporation Finance
Department (SECCFD), the Enforcement and Investor Protection
Department, and the Company Registration and Monitoring Department,
pursuant to Section 4.6 of the Securities Regulation Code (SRC).As an
administrative agency with both regulatory and adjudicatory functions, the
SECwasgiventheauthoritytodelegatesomeofitsfunctionsto,interalia,
its various operating departments, such as the SECCFD, the Enforcement
and Investor Protection Department, and the Company Registration and
MonitoringDepartment,pursuanttoSection4.6oftheSRC.
Same Same Same Appeals This power of review is squarely
addressed by Section 111, Rule XI of the 2006 Securities and Exchange
Commission(SEC)RulesofProcedure,whichprovidesthat[a]nappealto
theCommissionEnBancmaybetakenfromadecision,order,orresolution
issuedbyanOperatingDepartmentiftherearequestionsoffact,oflaw,or
mixed questions of fact and law.Naturally, the aforesaid provision also
gives the SEC the power to review the acts performed by its operating
departmentsintheexerciseoftheformersdelegatedfunctions.Thispower
ofreviewissquarelyaddressedbySection111,RuleXIofthe2006SEC
RulesofProcedure,whichprovidesthat[a]nappealtotheCommissionEn
Banc may be taken from a decision, order, or resolution issued by an
Operating Department if there are questions of fact, of law, or mixed
questionsoffactandlaw.
_______________
* FIRSTDIVISION.
170
http://www.central.com.ph/sfsreader/session/00000159c6dbb561fed4e2ec003600fb002c009e/t/?o=False 1/10
170 SUPREMECOURTREPORTSANNOTATED
CosmosBottlingCorporationvs.CommissionEnBancofthe
SecuritiesandExchangeCommission(SEC)
PETITIONforreviewoncertiorariofthedecisionandresolutionof
theCourtofAppeals.
ThefactsarestatedintheopinionoftheCourt.
Angaran,Abello,Concepcion,Regala&Cruzforpetitioner.
TheSolicitorGeneralforrespondents.

PERLASBERNABE,J.:

Assailed in this petition for review on certiorari1 are the
Decision2 dated April 25, 2011 and the Resolution3 dated October
17,2011oftheCourtofAppeals(CA)inC.A.G.R.S.P.No.110714
affirmingtheDecision4datedSeptember10,2009ofrespondentthe
Securities and Exchange Commission (SEC) En Banc in SEC En
Banc Case No. 0408129 which dismissed petitioner Cosmos
Bottling Corporations (Cosmos) appeal on the ground that it was
treated as a prohibited motion for reconsideration. Thus, the Order
of Revocation5 (Revocation Order) dated March 19, 2008 of the
SECCorporation Finance Department (SECCFD) revoking
Cosmos Registration of Securities/Permit to Sell Securities to the
Public(SubjectRegistration/Permit)wasdeemedtohavelapsedinto
finality.
_______________
1Rollo,pp.1084.
2Id.,atpp.88106.PennedbyAssociateJusticePriscillaJ.BaltazarPadilla,with
AssociateJusticesFernandaLampasPeraltaandAgnesReyesCarpio,concurring.
3Id.,atpp.148149.
4Id.,atpp.483487.SignedbyChairpersonFeB.BarinandCommissionersMa.
Juanita E. Cueto, Raul J. Palabrica, and Thaddeus E. Venturanza. Commissioner
ManuelHubertoB.Gaitewasonvacationleave.
5Id.,atpp.392393.SignedbyDirectorJustinaF.Callangan.
171
VOL.740,NOVEMBER12,2014 171

TheFacts

The instant case stemmed from Cosmos failure to submit its
2005 Annual Report to the SEC within the prescribed period. In
connectiontherewith,itrequestedanextensionoftimewithinwhich
to file the same.6 In response, the SECCFD, through respondent
Director Justina F. Callangan (Director Callangan), sent Cosmos a
letter7datedMay18,2006denyingthelattersrequestanddirecting
it to submit its 2005 Annual Report. The same letter also 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).9
OnMay31,2006,Cosmossentareplyletter10totheSECCFD,
explainingthatitsfailuretofileits2005AnnualReport
_______________
6Id.,atpp.8991.
7Id.,atp.796.
8Section17.1(a)oftheSRCreads:
SEC.17.PeriodicandOtherReportsofIssuers.
17.1.EveryissuersatisfyingtherequirementsinSubsection17.2hereofshallfile
withtheCommission:
a) Within one hundred thirtyfive (135) days, after the end of the issuers fiscal
year, or such other time as the Commission may prescribe, an annual report which
shallinclude,amongothers,abalancesheet,profitandlossstatementandstatement
of cash flows, for such last fiscal year, certified by an independent certified public
accountant,andamanagementdiscussionandanalysisofresultsofoperations.xxx
xxxx
9Rollo,p.89.
10Id.,atp.797.
172

was due to the noncompletion by its external auditors of their
auditprocedures.Forthisreason,CosmosimploredtheSECCFDto
reconsideritspreviousdenialofCosmosrequestforadditionaltime
to file its 2005 Annual Report.11 Thereafter, hearings for the
suspension of the Subject Registration/Permit commenced, with
Cosmos advancing the same reasons for the nonsubmission of its
2005AnnualReportinitsMay31,2006lettertotheSECCFD.12

TheSECCFDsProceedings

In an Order13 dated May 8, 2007, the SECCFD ordered the
suspensionoftheSubjectRegistration/Permit(suspensionorder)for
aperiodof60daysfromreceiptofthesame,oruntilCosmosfiles
its 2005 Annual Report, whichever is earlier. The SECCFD also
statedthatCosmosfailuretosubmitits2005AnnualReportwithin
the60dayperiodshallconstraintheSECtoinitiateproceedingsfor
revocationoftheSubjectRegistration/Permit.14
After the lapse of the aforesaid period, Cosmos still failed to
complywiththeSECsdirectives.Thus,therevocationproceedings
commenced on August 22, 2007.15 On August 24, 2007, Cosmos
submitted its formal explanation,16 reiterating that the delay in
submitting its 2005 Annual Report, as well as its 2006 Annual
Report, is occasioned by the following factors: (a) noncompletion
ofits2005AuditedFinancialStatementsbyitsexternalauditor(b)
the adoption of new accounting standards which gave rise to
additional disclosures in the financial reports and (c) the sale of
CocaColaBottlersPhilippines,Inc.,whichistheparentcompanyof
_______________
11Id.,atp.90.
12Id.,atpp.9091.
11Id.,atp.90.
12Id.,atpp.9091.
15Id.,atpp.94,177A.
16Id.,atpp.179180.
173

Cosmos, to CocaCola South Asia Holdings, Inc.17 These
notwithstanding, Cosmos undertook to submit its 2005 and 2006
AnnualReportsnotlaterthanOctober31,2007,orassoonasthey
are duly accomplished, and to pay all the corresponding penalties.
Lastly,CosmosalsorequestedtheSECCFDtoabandonthepending
revocationproceedings.18
On October 31, 2007, Cosmos finally submitted its 2005 and
2006AnnualReportstotheSEC.19Inconnectiontherewith,Cosmos
sent a letter20 dated January 24, 2008 to the SECCFD, requesting
that the latter lift the suspension order and abandon the revocation
proceedingsagainsttheformer.21TheSECCFDreferredthematter
to the SEC En Banc for its consideration in its March 13, 2008
meeting.22 After the said meeting, the SEC En Banc issued
23
Resolution No. 87, Series of (s.) 2008 wherein they resolved to:
Resolution No. 87, Series of (s.) 200823 wherein they resolved to:
(a)denyCosmosrequestfortheliftingofthesuspensionorderand
(b) revoke the Subject Registration/Permit.24 On the basis thereof,
the SECCFD issued a Revocation Order echoing the
pronouncementsindicatedintheaforesaidresolution.
Dissatisfied,CosmosappealedtotheSECEnBanc.25
_______________
17Id.,atp.179.
18Id.,atp.180.
19Id.,atp.95.
20Id.,atp.387.
21Id.,atp.95.
22Id.
23 Resolution No. 88, s. 2008 in some parts of the record. See SEC En Bancs
September 10, 2009 Decision id., at pp. 483484. See also CAs April 25, 2011
Decisionid.,atpp.9596.
24Id.
25SeeNoticeofAppealandMemorandumofAppeal,bothdatedApril3,2008
id.,atpp.395429.
174

TheSECEnBancsRuling

In a Decision26 dated September 10, 2009, the SEC En Banc
dismissedCosmosappeal.27ItheldthattheRevocationOrderwasa
merearticulationoftheSECEnBancsResolutionNo.87,s.2008,
and thus, should be considered an issuance of the SEC En Banc
itself.TheSECEnBancthusdeemedCosmosappealasamotion
forreconsideration,aprohibitedpleadingunderSection36,RuleIII
of the 2006 SEC Rules of Procedure,28 and was accordingly
expungedfromtherecordsofthecase.29
Aggrieved,CosmosfiledapetitionforreviewbeforetheCA.30

TheCAsRuling

InaDecision31 dated April 25, 2011, the CA affirmed the SEC
EnBancRuling.ItheldthattheSECCFDmerelyactedasanarmof
the SEC En Banc when it issued the Revocation Order against
Cosmos,consideringthatitwassimplyareit
_______________
26Id.,atpp.483487.
27Id.,atp.486.
28Section36ofthe2006SECRulesofProcedurereads:
SEC.36.Prohibited Pleadings.The following pleadings or any submission
thatisfiledormadeunderasimilarguiseortitleshallnotbeallowed:
xxxx
(c)MotionforNewTrial,ReconsiderationofJudgmentorOrder,orReopeningof
Trial
xxxx
Should one be filed, said prohibited pleadings or submissions shall be
automaticallyexpungedfromtherecordsofthecase.
xxxx
29Rollo,p.486.
30SeePetitionforReviewdatedOctober14,2009id.,atpp.495534.
31Id.,atpp.88106.
175

eration of Resolution No. 87, s. 2008 which emanated from the
SEC En Banc itself. As such, Cosmos appeal before the SEC En
Banc assailing the Revocation Order was properly deemed as a
motionforreconsideration,sinceitistantamounttoarequestforthe
SEC En Banc to review or reconsider its own judgment.32 Hence,
theSECEnBanccorrectlydismissedCosmosappeal.
Further,theCAheldthatCosmosappeal,whichwastreatedasa
prohibitedmotionforreconsiderationunderthe2006SECRulesof
Procedure,didnottollthereglementaryperiodforfilinganappeal
before it. As such, the SEC En Bancs Ruling, as well as the
Revocation Order, had already lapsed into finality and could no
longerbedisturbed.33
Cosmos moved for reconsideration,34 which was, however,
deniedinaResolution35datedOctober17,2011,hence,thispetition.

TheIssueBeforetheCourt

TheprimordialissuefortheCourtsresolutioniswhetherornot
theCAcorrectlytreatedCosmosappealbeforetheSECEnBancas
a motion for reconsideration, and consequently, affirmed its
dismissalforbeingaprohibitedpleadingunderthe2006SECRules
ofProcedure.

TheCourtsRuling

Thepetitionismeritorious.
As an administrative agency with both regulatory and
adjudicatoryfunctions,36theSECwasgiventheauthorityto
_______________
32Id.,atpp.102103.
33Id.,atpp.104105.
34SeeMotionforReconsiderationdatedMay18,2011id.,atpp.108145.
35Id.,atpp.148149.
176

delegatesomeofitsfunctionsto,interalia,itsvariousoperating
departments, such as the SECCFD, the Enforcement and Investor
Protection Department, and the Company Registration and
MonitoringDepartment,pursuanttoSection4.6oftheSRC,towit:
SEC.4.AdministrativeAgency.
xxxx
4.6.TheCommissionmay,forpurposesofefficiency,delegateanyof
itsfunctionstoanydepartmentorofficeoftheCommission,anindividual
Commissioner or staff member of the Commission except its review or
appellateauthorityanditspowertoadopt,alterandsupplementanyruleor
regulation.
TheCommissionmayreviewuponitsowninitiativeoruponthepetition
of any interested party any action of any department or office, individual
Commissioner, or staff member or the Commission. (Emphasis and
underscoringsupplied)

Naturally, the aforesaid provision also gives the SEC the power
to review the acts performed by its operating departments in the
exerciseoftheformersdelegatedfunctions.Thispowerofreviewis
squarelyaddressedbySection111,RuleXIofthe2006SECRules
of Procedure, which provides that [a]n appeal to the Commission
EnBancmaybetakenfromadecision,order,orresolutionissuedby
an Operating Department if there are questions of fact, of law, or
mixedquestionsoffactandlaw.
In this case, the Court disagrees with the findings of both the
SECEnBancandtheCAthattheRevocationOrderema
_______________
36 See Calma v. Court of Appeals, 362 Phil. 297, 301 302 SCRA 682, 686
(1999), citing SEC v. Court of Appeals, 316 Phil. 903, 906 246 SCRA 738, 740
(1995).
177

nated from the SEC En Banc. Rather, such Order was merely
issuedbytheSECCFDasoneoftheSECsoperatingdepartments,
asevidencedbythefollowing:(a)itwasprintedandissuedonthe
letterhead of the SECCFD, and not the SEC En Banc (b) it was
docketedasacaseundertheSECCFDasanoperatingdepartment
of the SEC, since it bore the serial number SECCFD Order No.
027,[s.]2008and(c)itwassignedsolelybyDirectorCallangan
as director of the SECCFD, and not by the commissioners of the
SECEnBanc.
Further,boththeSECEnBancandtheCAerredinholdingthat
the Revocation Order merely reflected Resolution No. 87, s. 2008,
andthus,shouldalreadybeconsideredastherulingoftheSECEn
Banc in this case. As admitted by respondents, the SECCFDs
referral of the case to the SEC EnBancfor its consideration in its
March13,2008meeting,whicheventuallyresultedintheissuance
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
referencetothesame.Essentially,Cosmoswasonlyapprisedofthe
existenceofResolutionNo.87,s.2008whenitwasfinallycitedby
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 SECCFD as an
OperatingDepartmentoftheSEC,andthus,appealabletotheSEC
EnBanc.Therefore,theoutrightdismissalofCosmosappealbythe
SECEnBanceffectivelydenieditofitsrighttoappeal,asprovided
for under the SRC and the 2006 SEC Rules of Procedure, and
thereforecouldnotbecountenanced.
_______________
37SeeRollo,pp.560561and769.
38Id.,atpp.4752.
178

In sum, the Revocation Order is properly deemed as a decision
issuedbytheSECCFDasoneoftheOperatingDepartmentsofthe
SEC, and accordingly, may be appealed to the SEC En Banc, as
whatCosmosproperlydidinthiscase.Perforce,theSECEnBanc
and the CA erred in deeming Cosmos appeal as a motion for
reconsideration and ordering its dismissal on such ground. In view
thereof,theCourtdeemsitprudenttoreinstateandremandthecase
totheSECEnBancforitsresolutiononthemerits.
WHEREFORE, the petition is GRANTED. Accordingly, the
DecisiondatedApril25,2011andtheResolutiondatedOctober17,
2011 of the Court of Appeals in C.A.G.R. S.P. No. 110714 are
hereby SET ASIDE. The instant case is REMANDED to the
Securities and Exchange Commission En Banc for resolution of
CosmosBottlingCorporationsappealonthemerits.
SOORDERED.
Velasco, Jr.,** LeonardoDe Castro*** (Acting Chairperson),

DelCastillo****andPerez,JJ.,concur.
Petitiongranted,judgmentandresolutionsetaside.
Notes.TheSecuritiesandExchangeCommission(SEC)being
amereadministrativeagencyisatribunaloflimitedjurisdictionand
as such can only exercise those powers which are specifically
granted to them by their enabling statutes. (Lee vs. Bangkok Bank
PublicCompany,Limited,642SCRA447[2011])
_______________
** Designated acting member per Special Order No. 1870 dated November 4,
2014.
***PerSpecialOrderNo.1861datedNovember4,2014.
****DesignatedactingmemberperSpecialOrderNo.1862datedNovember4,
2014.
179
It stands to reason that civil suits falling under the Securities

RegulationCodeareundertheexclusiveoriginaljurisdictionofthe
regional trial courts and hence, need not be first filed before the
SecuritiesandExchangeCommission,unlikecriminalcaseswherein
the latter body exercises primary jurisdiction. (Pua vs. Citibank,
N.A.,705SCRA677[2013])
o0o
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Cosmos Bottling Corporation vs. SEC

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1/22/2017 SUPREMECOURTREPORTSANNOTATEDVOLUME740

COSMOS BOTTLING CORPORATION, petitioner, vs.

Administrative Agencies Securities and Exchange Commission

Velasco, Jr., LeonardoDe Castro* (Acting Chairperson),

It stands to reason that civil suits falling under the Securities

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