Baviera v. Paglinawan

FIRST DIVISION
MANUEL V. BAVIERA, G.R. No. 168380

Petitioner,
- versus -
ESPERANZA PAGLINAWAN, in her

capacity as Department of Justice State
Prosecutor; LEAH C. TANODRA-
ARMAMENTO, In her capacity as Assistant
Chief State Prosecutor and Chairwoman of
Task Force on Business Scam;
JOVENCITO R. ZUNO, in his capacity as
Department of Justice Chief State
Prosecutor; STANDARD CHARTERED
BANK, PAUL SIMON MORRIS, AJAY
KANWAL, SRIDHAR
RAMAN, MARIVEL GONZALES, CHONA
REYES, MARIA ELLEN VICTOR, and
ZENAIDA IGLESIAS, Respondents.
x-----------------------------x
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MANUEL V. BAVIERA, Petitioner, G.R. No. 170602
- versus -
Present:
STANDARD CHARTERED BANK,
BRYAN K. SANDERSON, THE RIGHT PUNO, C.J.,Chairperson,
HONORABLE LORD STEWARTBY, SANDOVAL-GUTIERREZ,
EVAN MERVYN DAVIES, MICHAEL *CORONA,
BERNARD DENOMA, CHRISTOPHER AZCUNA, and
AVEDIS KELJIK, RICHARD HENRY GARCIA, JJ.
MEDDINGS, KAI NARGOLWALA,
PETER ALEXANDER SANDS, RONNIE Promulgated:
CHI CHUNG CHAN, SIR CK CHOW,
BARRY CLARE, HO KWON PING, February 8, 2007
RUDOLPH HAROLD PETER ARKHAM,
DAVID GEORGE MOIR, HIGH
EDWARD NORTON, SIR RALPH
HARRY ROBINS, ANTHONY WILLIAM
PAUL STENHAM (Standard Chartered
Bank Chairman, Deputy Chairman, and
Members of the Board), SHERAZAM
MAZARI (Group Regional Head for
Consumer Banking), PAUL SIMON
MORRIS, AJAY KANWAL, SRIDHAR
RAMAN, MARIVEL GONZALES,
CHONA REYES, ELLEN VICTOR,
RAMONA H. BERNAD, DOMINGO
CARBONELL, JR., and ZENAIDA
IGLESIAS (Standard Chartered Bank-
Philippines Branch Heads/Officers),
Respondents.
x -------------------------------------------------------------------------------------------x
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us are two consolidated Petitions for Review on Certiorari assailing the Decisions of the Court of
[1] [2]
Appeals in CA-G.R. SP No. 87328 and in CA-G.R. SP No. 85078.
The common factual antecedents of these cases as shown by the records are:
Manuel Baviera, petitioner in these cases, was the former head of the HR Service Delivery and Industrial
Relations of Standard Chartered Bank-Philippines (SCB), one of herein respondents. SCB is a foreign
banking corporation duly licensed to engage in banking, trust, and other fiduciary business in the
Philippines. Pursuant to Resolution No. 1142 dated December 3, 1992 of the Monetary Board of the
Bangko Sentral ng Pilipinas (BSP), the conduct of SCBs business in this jurisdiction is subject to the
following conditions:
1. At the end of a one-year period from the date the SCB starts its trust functions, at least 25% of its trust
accounts must be for the account of non-residents of the Philippines and that actual foreign exchange had
been remitted into the Philippines to fund such accounts or that the establishment of such accounts had
reduced the indebtedness of residents (individuals or corporations or government agencies) of the Philippines
to non-residents. At the end of the second year, the above ratio shall be 50%, which ratio must be observed
continuously thereafter;
2. The trust operations of SCB shall be subject to all existing laws, rules and regulations applicable to trust
services, particularly the creation of a Trust Committee; and
3. The bank shall inform the appropriate supervising and examining department of the BSP at the start of its
operations.
Apparently, SCB did not comply with the above conditions. Instead, as early as 1996, it acted as a stock
broker, soliciting from local residents foreign securities called GLOBAL THIRD PARTY MUTUAL
FUNDS (GTPMF), denominated in US dollars. These securities were not registered with the Securities and
Exchange Commission (SEC). These were then remitted outwardly to SCB-Hong Kong and SCB-
Singapore.
SCBs counsel, Romulo Mabanta Buenaventura Sayoc and Delos Angeles Law Office, advised the bank to
proceed with the selling of the foreign securities although unregistered with the SEC, under the guise of a
[3]
custodianship agreement; and should it be questioned, it shall invoke Section 72 of the General Banking
[4]
Act (Republic Act No.337). In sum, SCB was able to sell GTPMF securities worth around P6 billion to
Act (Republic Act No.337). In sum, SCB was able to sell GTPMF securities worth around P6 billion to
some 645 investors.
However, SCBs operations did not remain unchallenged. On July 18, 1997, the Investment Capital
Association of the Philippines (ICAP) filed with the SEC a complaint alleging that SCB violated the
[5]
Revised Securities Act, particularly the provision prohibiting the selling of securities without prior
registration with the SEC; and that its actions are potentially damaging to the local mutual fund industry.
In its answer, SCB denied offering and selling securities, contending that it has been performing a purely
informational function without solicitations for any of its investment outlets abroad; that it has a trust
license and the services it renders under the Custodianship Agreement for offshore investments are
[6]
authorized by Section 72 of the General Banking Act; that its clients were the ones who took the
initiative to invest in securities; and it has been acting merely as an agent or passive order taker for them.
On September 2, 1997, the SEC issued a Cease and Desist Order against SCB, holding that its services
[7] [8]
violated Sections 4(a) and 19 of the
Revised Securities Act.
Meantime, the SEC indorsed ICAPs complaint and its supporting documents to the BSP.
On October 31, 1997, the SEC informed the Secretary of Finance that it withdrew GTPMF securities from
the market and that it will not sell the same without the necessary clearances from the regulatory authorities.
Meanwhile, on August 17, 1998, the BSP directed SCB not to include investments in global mutual funds
issued abroad in its trust investments portfolio without prior registration with the SEC.
On August 31, 1998, SCB sent a letter to the BSP confirming that it will withdraw third-party fund
products which could be directly purchased by investors.
However, notwithstanding its commitment and the BSP directive, SCB continued to offer and sell GTPMF
securities in this country. This prompted petitioner to enter into an Investment Trust Agreement with SCB
wherein he purchased US$8,000.00 worth of securities upon the banks promise of 40% return on his
investment and a guarantee that his money is safe. After six (6) months, however, petitioner learned that the
value of his investment went down to US$7,000.00. He tried to withdraw his investment but was persuaded
by Antonette de los Reyes of SCB to hold on to it for another six (6) months in view of the possibility that
the market would pick up.
Meanwhile, on November 27, 2000, the BSP found that SCB failed to comply with its directive of August
17, 1998. Consequently, it was fined in the amount of P30,000.00.
The trend in the securities market, however, was bearish and the worth of petitioners investment went down
further to only US$3,000.00.
On October 26, 2001, petitioner learned from Marivel Gonzales, head of the SCB Legal and Compliance
Department, that the latter had been prohibited by the BSP to sell GPTMF securities. Petitioner then filed
with the BSP a letter-complaint demanding compensation for his lost investment. But SCB denied his
demand on the ground that his investment is regular.
On July 15, 2003, petitioner filed with the Department of Justice (DOJ), represented herein by its
prosecutors, public respondents, a complaint charging the above-named officers and members of the SCB
Board of Directors and other SCB officials, private respondents, with syndicated estafa, docketed as I.S.
No. 2003-1059.
For their part, private respondents filed the following as counter-charges against petitioner: (1) blackmail
and extortion, docketed as I.S. No. 2003-1059-A; and blackmail and perjury, docketed as I.S. No. 2003-
1278.
On September 29, 2003, petitioner also filed a complaint for perjury against private respondents Paul
Simon Morris and Marivel Gonzales, docketed as I.S. No. 2003-1278-A.
On December 4, 2003, the SEC issued a Cease and Desist Order against SCB restraining it from further
offering, soliciting, or otherwise selling its securities to the public until these have been registered with the
SEC.
Subsequently, the SEC and SCB reached an amicable settlement.
On January 20, 2004, the SEC lifted its Cease and Desist Order and approved the P7 million settlement
offered by SCB. Thereupon, SCB made a commitment not to offer or sell securities without prior
compliance with the requirements of the SEC.
[9]
On February 7, 2004, petitioner filed with the DOJ a complaint for violation of Section 8.1 of the
Securities Regulation Code against private respondents, docketed as I.S. No. 2004-229.
[10]
On February 23, 2004, the DOJ rendered its Joint Resolution dismissing petitioners complaint for
syndicated estafa in I.S. No. 2003-1059; private respondents complaint for blackmail and extortion in I.S.
No. 2003-1059-A; private respondents complaint for blackmail and perjury in I.S. No. 2003-1278; and
petitioners complaint for perjury against private respondents Morris and Gonzales in I.S. No. 2003-1278-A.
[11]
Meanwhile, in a Resolution dated April 4, 2004, the DOJ dismissed petitioners complaint in I.S. No.
2004-229 (violation of Securities Regulation Code), holding that it should have been filed with the SEC.
Petitioners motions to dismiss his complaints were denied by the DOJ. Thus, he filed with the Court of
Appeals a petition for certiorari, docketed as CA-G.R. SP No. 85078. He alleged that the DOJ acted with
grave abuse of discretion amounting to lack or excess of jurisdiction in dismissing his complaint for
syndicated estafa.
He also filed with the Court of Appeals a separate petition for certiorari assailing the DOJ Resolution
dismissing I.S. No. 2004-229 for violation of the Securities Regulation Code. This petition was docketed
as CA-G.R. SP No. 87328. Petitioner claimed that the DOJ acted with grave abuse of discretion
tantamount to lack or excess of jurisdiction in holding that the complaint should have been filed with the
SEC.
On January 7, 2005, the Court of Appeals promulgated its Decision dismissing the petition. It sustained the
ruling of the DOJ that the case should have been filed initially with the SEC.
Petitioner filed a motion for reconsideration but it was denied in a Resolution dated May 27, 2005.
Meanwhile, on February 21, 2005, the Court of Appeals rendered its Decision in CA-G.R. SP No. 85078
(involving petitioners charges and respondents counter charges) dismissing the petition on the ground that
the purpose of a petition for certiorari is not to evaluate and weigh the parties evidence but to determine
whether the assailed Resolution of the DOJ was issued with grave abuse of discretion tantamount to lack of
jurisdiction. Again, petitioner moved for a reconsideration but it was denied in a Resolution of November
22, 2005.
Hence, the instant petitions for review on certiorari.
For our resolution is the fundamental issue of whether the Court of Appeals erred in concluding that the
DOJ did not commit grave abuse of discretion in dismissing petitioners complaint in I.S. 2004-229 for
violation of Securities Regulation Code and his complaint in I.S. No. 2003-1059 for syndicated estafa.
G.R. No 168380
Re: I.S. No. 2004-229
For violation of the Securities Regulation Code
Section 53.1 of the Securities Regulation Code provides:

SEC. 53. Investigations, Injunctions and Prosecution of Offenses.
53. 1. The Commission may, in its discretion, make such investigation as it deems necessary to determine whether
any person has violated or is about to violate any provision of this Code, any rule, regulation or order thereunder, or
any rule of an Exchange, registered securities association, clearing agency, other self-regulatory organization, and
may require or permit any person to file with it a statement in writing, under oath or otherwise, as the Commission
shall determine, as to all facts and circumstances concerning the matter to be investigated. The Commission may
publish information concerning any such violations and to investigate any fact, condition, practice or matter which it
may deem necessary or proper to aid in the enforcement of the provisions of this Code, in the prescribing of rules
and regulations thereunder, or in securing information to serve as a basis for recommending further legislation
concerning the matters to which this Code relates: Provided, however, That any person requested or subpoenaed
to produce documents or testify in any investigation shall simultaneously be notified in writing of the purpose of such
investigation: Provided, further, That all criminal complaints for violations of this Code and the
implementing rules and regulations enforced or administered by the Commission shall be referred to the
Department of Justice for preliminary investigation and prosecution before the proper court: Provided,
furthermore, That in instances where the law allows independent civil or criminal proceedings of violations arising
from the act, the Commission shall take appropriate action to implement the same: Provided, finally; That the
investigation, prosecution, and trial of such cases shall be given priority.
The Court of Appeals held that under the above provision, a criminal complaint for violation of any law or
rule administered by the SEC must first be filed with the latter. If the Commission finds that there is
probable cause, then it should refer the case to the DOJ. Since petitioner failed to comply with the
foregoing procedural requirement, the DOJ did not gravely abuse its discretion in dismissing his complaint
in I.S. No. 2004-229.
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
[12]
intricate matters of fact. The Securities Regulation Code is a special law. Its enforcement is particularly
vested in the SEC. Hence, all complaints for any violation of the Code and its implementing rules and
regulations should be filed with the SEC. Where the complaint is criminal in nature, the SEC shall indorse
the complaint to the DOJ for preliminary investigation and prosecution as provided in Section 53.1 earlier
quoted.
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 dismissing petitioners complaint.
G.R. No. 170602

Re: I.S. No. 2003-1059 for
Syndicated Estafa
Section 5, Rule 110 of the 2000 Rules of Criminal Procedure, as amended, provides that all criminal
actions, commenced by either a complaint or an information, shall be prosecuted under the direction and
control of a public prosecutor. This mandate is founded on the theory that a crime is a breach of the
security and peace of the people at large, an outrage against the very sovereignty of the State. It follows
[13]
that a representative of the State shall direct and control the prosecution of the offense. This
representative of the State is the public prosecutor, whom this Court described in the old case of Suarez v.
[14]
Platon, as:
[T]he representative not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern
impartially is as compelling as its obligation to govern at all; and whose interest, therefore, in a criminal prosecution is
not that it shall win a case, but that justice shall be done. As such, he is in a peculiar and very definite sense a servant
of the law, the twofold aim of which is that guilt shall not escape or innocence suffers.
Concomitant with his authority and power to control the prosecution of criminal offenses, the public
prosecutor is vested with the discretionary power to determine whether a prima facie case exists or
[15]
not. This is done through a preliminary investigation designed to secure the respondent from hasty,
malicious and oppressive prosecution. A preliminary investigation is essentially an inquiry to determine
whether (a) a crime has been committed; and (b) whether there is probable cause that the accused is guilty
[16] [17]
thereof. In Pontejos v. Office of the Ombudsman, probable cause is defined as such facts and
circumstances that would engender a well-founded belief that a crime has been committed and that the
respondent is probably guilty thereof and should be held for trial. It is the public prosecutor who
determines during the preliminary investigation whether probable cause exists. Thus, the decision whether
or not to dismiss the criminal complaint against the accused depends on the sound discretion of the
prosecutor.
Given this latitude and authority granted by law to the investigating prosecutor, the rule in this
jurisdiction is that courts will not interfere with the conduct of preliminary investigations or
reinvestigations or in the determination of what constitutes sufficient probable cause for the filing
[18]
of the corresponding information against an offender. Courts are not empowered to substitute
[19]
their own judgment for that of the executive branch. Differently stated, as the matter of whether to
prosecute or not is purely discretionary on his part, courts cannot compel a public prosecutor to file the
corresponding information, upon a complaint, where he finds the evidence before him insufficient to
warrant the filing of an action in court. In sum, the prosecutors findings on the existence of probable
cause are not subject to review by the courts, unless these are patently shown to have been made
[20]
with grave abuse of discretion.
Grave abuse of discretion is such capricious and whimsical exercise of judgment on the part of the public
officer concerned which is equivalent to an excess or lack of jurisdiction. The abuse of discretion must be
as patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an arbitrary and
[21]
despotic manner by reason of passion or hostility.
In determining whether the DOJ committed grave abuse of discretion, it is expedient to know if the
findings of fact of herein public prosecutors were reached in an arbitrary or despotic manner.
The Court of Appeals held that petitioners evidence is insufficient to establish probable cause for
syndicated estafa. There is no showing from the record that private respondents herein did induce
petitioner by false representations to invest in the GTPMF securities. Nor did they act as a syndicate to
misappropriate his money for their own benefit. Rather, they invested it in accordance with his written
instructions. That he lost his investment is not their fault since it was highly speculative.
Records show that public respondents examined petitioners evidence with care, well aware of their duty to
prevent material damage to his constitutional right to liberty and fair play. In Suarez previously cited, this
Court made it clear that a public prosecutors duty is two-fold. On one hand, he is bound by his oath of
office to prosecute persons where the complainants evidence is ample and sufficient to show prima facie
guilt of a crime. Yet, on the other hand, he is likewise duty-bound to protect innocent persons from
[22]
groundless, false, or malicious prosecution.
Hence, we hold that the Court of Appeals was correct in dismissing the petition for review against
private respondents and in concluding that the DOJ did not act with grave abuse of discretion tantamount
to lack or excess of jurisdiction.
On petitioners complaint for violation of the Securities Regulation Code, suffice it to state that, as
aptly declared by the Court of Appeals, he should have filed it with the SEC, not the DOJ. Again, there is
no indication here that in dismissing petitioners complaint, the DOJ acted capriciously or arbitrarily.
WHEREFORE, we DENY the petitions and AFFIRM the assailed Decisions of the Court of Appeals
in CA-G.R. SP No. 87328 and in CA-G.R. SP No. 85078.
Costs against petitioner.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
(On leave)
RENATO C. CORONA ADOLFO S. AZCUNA
Associate Justice Associate Justice
CANCIO C. GARCIA
Associate Justice
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in
the above Decision were reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.
REYNATO S. PUNO
Chief Justice
* On leave.
[1]
Rollo, G.R. No. 168380, Vol. I, pp. 48-62. Penned by Associate Justice Remedios A. Salazar-Fernando and concurred in by Associate Justice
Rosemarie D. Carandang and Associate Justice Monina Arevalo-Zenarosa.
[2]
Id., G.R. No. 170602, Vol. I, pp. 63-73. Written by Associate Justice Juan Q. Enriquez, Jr., with Associate Justice Portia Alio-Hormachuelos and
Associate Justice Vicente Q. Roxas, concurring.
[3]
SEC.72. In addition to the operations specifically authorized elsewhere in this Act, banking institutions other than building and loan associations may perform the
following services:
a) Receive in custody funds, documents and valuable objects, and rent safety deposit boxes for the safeguarding of such effects;
b) Act as financial agent and buy and sell, by order of and for the account of their customers, shares, evidences of indebtedness and all other types of securities;
c) Make collections and payments for the account of others and perform such other services for their customers as are not incompatible with banking business;
d) Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or administrator of investment management advisory/consultancy
accounts.
T he banks shall perform the services permitted under subsections (a), (b), and (c) of this section as depositaries or as agents. Accordingly they shall keep the
funds, securities and other effects which they thus receive duly separated and apart from the banks own assets and liabilities.
T he Monetary Board may regulate the operations authorized by this section in order to insure that said operations do not endanger the interest of the depositors
and other creditors of the banks.
[4]
Now repealed by T he General Banking Law of 2000 (Republic Act No. 8791).
[5]
Batas Pambansa Blg. 178. Now repealed by Republic Act No. 8799 (The Securities Regulation Code), which took effect on July 19. 2000.
[6]
Supra at footnote 3.
[7]
SEC. 4. Requirement of registration of securities. (a) No securities, except of a class exempt under any of the provisions of Section five hereof or
unless sold in any transaction exempt under any of the provisions of Section six hereof shall be sold or offered for sale or distribution to the
public within the Philippines unless such securities shall have been registered and permitted to be sold as hereinafter provided.
[8]
SEC. 19. Registration of brokers, dealers and salesmen.- No broker, dealer or salesman shall engage in business in the Philippines as such broker,
dealer or salesman or sell any securities, including securities exempted under this Act, except in exempt transactions, unless he has been
registered as a broker, dealer, or salesman pursuant to the provisions of this Section.
[9]
Sec. 8. Requirement of Registration of Securities:
8.1. Securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved
by the Commission. Prior to such sale, information on the securities, in such form and with such substance as the Commission may prescribe,
shall be made available to each prospective purchaser.
[10]
Vol. I, Rollo, G.R. No. 170602, pp. 451-473.
[11]
Vol. I, Rollo, G.R. No. 168380, pp. 241-43.
[12]
Saavedra, Jr. v. Securities and Exchange Commission, G.R. No. 80879, March 21, 1988, 159 SCRA 57, 62, citing Pambujan Sur United Mine
Workers v. Samar Mining Co. Inc., 94 Phil. 932 (1954).
[13]
Tan, Jr. v. Gallardo, G.R. Nos. 41213-14, October 5, 1976, 73 SCRA 306, 310.
[14]
80 Phil. 556 (1940).
[15]
Zulueta v. Nicolas, 102 Phil. 944 (1958).
[16]
Ching v. Secretary of Justice, G.R. No. 164317, February 6, 2006, 481 SCRA 609.
[17]
G.R. Nos. 158613-14, February 22, 2006, p. 11.
[18]
Glaxosmithkline Philippines, Inc. v. Malik and Ateeque, G.R. No. 166824, August 17, 2006, p. 5, citing Punzalan v. Dela Pea and Cagara. 434
SCRA 601 (2004).
[19]
Alcaraz v. Gonzales, G.R. No. 164715, September 20, 2006, 10, citing Metropolitan Bank and Trust Company v. Tonda, 392 Phil. 797 (2000).
[20]
Glaxosmithkline Philippines, Inc. v. Malik and Ateeque, supra, p. 5, citing Cabaling v. People, 376 SCRA 113 (2002).
[21]
Soria v. Desierto, G.R. Nos. 153524-25, January 31, 2005, 450 SCRA 339. 345, citing Duero v. Court of Appeals, 373 SCRA 11 (2002), Perez v. Office
of the Ombudsman, 429 SCRA 357 (2004).
[22]
Vda. de Bagatua v. Revilla and Lombos, 104 Phil. 392 (1958).

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FIRST DIVISION

MANUEL V. BAVIERA, G.R. No. 168380

ESPERANZA PAGLINAWAN, in her

Subsequently, the SEC and SCB reached an amicable settlement.

Hence, the instant petitions for review on certiorari.

Section 53.1 of the Securities Regulation Code provides:

G.R. No. 170602

Costs against petitioner.

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