REM REV DIGESTS

4CDE 2020 – 2021

Topic: Doctrine of Primary Jurisdiction

FABIA v. CA
G.R. No. 132684. August 20, 2001

DOCTRINE: The doctrine of primary jurisdiction exhorts us to refer the instant case to the SEC
for its resolution of the matter in dispute. However, it should be noted that RA 8799, The
Securities Regulation Code, has amended PD 902-A, and transferred the jurisdiction of the SEC
over intra-corporate cases to the courts of general jurisdiction or the appropriate Regional Trial
Courts.
FACTS:

Petitioner Hernani N. Fabia, until his resignation on 10 August 1994, was the President
of private respondent MTCP, a domestic corporation engaged in providing maritime courses
and seminars to prospective overseas contract workers and seamen. He was likewise a Director
and stockholder thereof. MTCP through its new President Exequiel B. Tamayo filed an affidavit-
complaint for estafa against Hernani N. Fabia alleging that on various occasions Fabia drew
cash advances from MTCP, covered by cash vouchers, amounting to P1,291,376.61 which he
failed to liquidate despite repeated demands

Petitioner Fabia in his Reply-Affidavit and Motion to Dismiss admitted having received
the various amounts covered by the cash vouchers but reasoned that they were in the nature of
simple loans that had already been liquidated and paid as shown by the receipts and vouchers
which he had attached to his pleadings.

The Office of the City Prosecutor dismissed the complaint for lack of jurisdiction for the
reason that the controversy pertained to the relationship between a corporation and a former
officer thereof, hence, it was the Securities and Exchange Commission (SEC) which had
original and exclusive jurisdiction over the case. The Department of Justice found no reversible
error committed by the Office of the City Prosecutor.The Court of Appeals held that the amount
subject of the estafa charge had in fact been determined by an independent certified public
accountant as shown by the report from the accounting firm of Mendoza, Ignacio, Corvera and
Co. The CA further held that the instant case comprehends a simple transaction where the
requirement of prior accounting and liquidation may be done away with, as it is not essential.
Petitioner now questions the jurisdiction of the trial court arguing that the instant case
involves an intra-corporate controversy primarily cognizable by the SEC and, as such, the public
prosecutor had no authority to initially rule in the preliminary investigation of the complaint for
estafa filed against him as it was barred under the doctrine of primary jurisdiction from
exercising jurisdiction over the criminal case without the prior resolution of the SEC on the
matter.
ISSUE:
Whether or not the trial court has the jurisdiction to decide issues involving intra-
corporate controversies.
HELD:

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 REM REV DIGESTS
4CDE 2020 – 2021
Yes. Section 6, PD 902-A confines the jurisdiction of the SEC to "intra-corporate
disputes" defined as any act or omission of the Board of Directors/Trustees of corporations, or
of partnerships, or of other associations, or of their stockholders, officers, or partners, including
any fraudulent devices, schemes or representations, in violation of any law or rules and
regulations administered and enforced by the Commission. This underscores the relationship of
the party-litigants with each other, and indicates that the nature of the cause of action should be
limited to fraudulent devices, schemes or representations, in violation of any law, rules and/or
regulations administered and enforced by the Commission for the cause of action to fall within
the ambit of authority of the SEC elements that are both present in the instant case.

Indeed, the charge against petitioner is for estafa, an offense punishable under The
Revised Penal Code (RPC), and prosecution for the offense is presently before the regular
courts. However, as correctly pointed out by private respondent MTCP, jurisdiction is
determined not from the law upon which the cause of action is based, nor the type of
proceedings initiated, but rather, it is gleaned from the allegations stated in the complaint. It is
evident from the complaint that the acts charged are in the nature of an intra-corporate dispute
as they involve fraud committed by virtue of the office assumed by petitioner as President,
Director, and stockholder in MTCP, and committed against the MTCP Corporation. This
sufficiently removes the action from the jurisdiction of the regular courts, and transposes it into
an intra-corporate controversy within the jurisdiction of the SEC. The fact that a complaint for
estafa, a felony punishable under the RPC, has been filed against petitioner does not negate
and nullify the intra-corporate nature of the cause of action, nor does it transform the
controversy from intra-corporate to a criminal one.

Accordingly, as the matter involves an intra-corporate dispute within the jurisdiction of

the SEC, the issue of whether prior non-accounting precludes a finding of probable cause for
the charge of estafa no longer finds relevance.
The doctrine of primary jurisdiction exhorts us to refer the instant case to the SEC for its
resolution of the matter in dispute. However, it should be noted that RA 8799, The Securities
Regulation Code, has amended PD 902-A, and transferred the jurisdiction of the SEC
over intra-corporate cases to the courts of general jurisdiction or the appropriate
Regional Trial Courts. To transfer the present case to the SEC would only result in a
circuitous administration of justice. Thus, the Regional Trial Court of Manila should
dismiss Crim. Case No. 98-162570 without prejudice to the filing of the proper action
which shall then be raffled off to the appropriate branch of the court pursuant to A.M. No.
00-11-03-SC.

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