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26 BAVIERA vs PAGLINAWAN, GR 168380, FEBRUARY 8, 2007, 515 SCRA 170.


Manuel Baviera, was the former head of the HR Service Delivery and Industrial Relations of
Standard Chartered Bank-Philippines (SCB). SCB is a foreign banking corporation duly licensed to
engage in banking, trust, and other fiduciary business in the Philippines. Apparently, SCB did not
comply with the conditions in conducting business within this jurisdiction. 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.

SCB’s counsel, advised the bank to proceed with the selling of the foreign securities although
unregistered with the SEC, under the guise of a custodianship agreement; and should it be
questioned, it shall invoke Section 72 of the General Banking Act (Republic Act No.337).

On July 18, 1997, the Investment Capital Association of the Philippines (ICAP) filed with the SEC a
complaint alleging that SCB violated the Revised Securities Act, particularly the provision
prohibiting the selling of securities without prior registration with the SEC. In its answer SCB contend
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 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. The SEC then issued a Cease and
Desist Order against SCB, holding that its services violated Sections 4(a) and 19 of the

Revised Securities Act.

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. Upon knowing that SCB was prohibited by the BSP to sell GPTMF
Securities petitioner filed a complaint charging SCN officials of syndicated Estafa. And was
followed with perjury as against respondents.

On December 4, 2003, the SEC issued a Cease and Desist Order against SCB. Subsequently, the
SEC and SCB reached an amicable settlement.

Meanwhile DOJ dismissed all the complaints of Petitioner. While the CA dismissed petitioners
petition and sustained the ruling of the DOJ that the case should have been filed initially with the
SEC. hence this petition for certiorari.

ISSUE #1: Whether or not, 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.

RULING FOR ISSUE #1: For violation of the Securities Regulation Code

Section 53.1 of the Securities Regulation Code provides:

SEC. 53. Investigations, Injunctions and Prosecution of Offenses.

however. Since petitioner failed to comply with the foregoing procedural requirement.S. but that justice shall be . or any rule of an Exchange. ISSUE #2: Whether or not. therefore. prosecution. as the Commission shall determine. a criminal complaint for violation of any law or rule administered by the SEC must first be filed with the latter. The Commission may. all complaints for any violation of the Code and its implementing rules and regulations should be filed with the SEC. courts will not determine a controversy involving a question within the jurisdiction of the administrative tribunal.e. 1. as: [T]he representative not of an ordinary party to a controversy. the SEC. as to all facts and circumstances concerning the matter to be investigated. the Commission shall take appropriate action to implement the same: Provided. i. and whose interest. furthermore. 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 SEC shall indorse the complaint to the DOJ for preliminary investigation and prosecution as provided in Section 53. in its discretion. the Court of Appeals erred in concluding that the DOJ did not commit grave abuse of discretion in dismissing petitioners complaint in I. 2003-1059 for syndicated estafa. any rule. clearing agency.S. That in instances where the law allows independent civil or criminal proceedings of violations arising from the act. If the Commission finds that there is probable cause. No. A criminal charge for violation of the Securities Regulation Code is a specialized dispute. make such investigation as it deems necessary to determine whether any person has violated or is about to violate any provision of this Code. finally. other self-regulatory organization. That the investigation. practice or matter which it may deem necessary or proper to aid in the enforcement of the provisions of this Code. Hence. registered securities association. further. RULING FOR ISSUE #2: in the old case of Suarez v. condition. but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all.53. it must first be referred to an administrative agency of special competence. 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. Its enforcement is particularly vested in the SEC. and may require or permit any person to file with it a statement in writing. No. under oath or otherwise.. Under the doctrine of primary jurisdiction.1 earlier quoted. The Commission may publish information concerning any such violations and to investigate any fact. then it should refer the case to the DOJ. in the prescribing of rules and regulations thereunder. Where the complaint is criminal in nature. the DOJ did not gravely abuse its discretion in dismissing his complaint in I. 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. regulation or order thereunder. The Court of Appeals held that under the above provision. or in securing information to serve as a basis for recommending further legislation concerning the matters to which this Code relates: Provided. 2004-229. Platon. in a criminal prosecution is not that it shall win a case. and trial of such cases shall be given priority. Hence. The Securities Regulation Code is a special law.

unless these are patently shown to have been made with grave abuse of discretion. . 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.done. Rather. In determining whether the DOJ committed grave abuse of discretion. As such. 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. 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. Differently stated. they invested it in accordance with his written instructions. 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 prosecutors findings on the existence of probable cause are not subject to review by the courts. upon a complaint. Nor did they act as a syndicate to misappropriate his money for their own benefit. There is no showing from the record that private respondents herein did induce petitioner by false representations to invest in the GTPMF securities. 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 of the corresponding information against an offender. where he finds the evidence before him insufficient to warrant the filing of an action in court. Given this latitude and authority granted by law to the investigating prosecutor. he is in a peculiar and very definite sense a servant of the law. In sum. Courts are not empowered to substitute their own judgment for that of the executive branch. the twofold aim of which is that guilt shall not escape or innocence suffers. That he lost his investment is not their fault since it was highly speculative. as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.