EN BANC
[ G.R. No. 198425, January 30, 2024 ]
SECURITIES AND EXCHANGE COMMISSION, PETITIONER, VS. HON. RODOLFO R. BONIFACIO, IN HIS CAPACITY AS THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT, BRANCH 159, PASIG CITY, PHILIPPINE ASSOCIATION OF SECURITIES BROKERS AND DEALERS, INC. (PASBDI), MA. VIVIAN YUCHENGCO, ISMAEL G. CRUZ, NESTOR S. AGUILA, AND MARITA A. LIMLINGAN, PHILIPPINE STOCK EXCHANGE (PSE) PSE'S 2009 NOMINATIONS AND ELECTIONS COMMITTEE (NOMELEC), RESPONDENTS.
[G.R. No. 201174]
SECURITIES AND EXCHANGE COMMISSION, PETITIONER, VS. HON. RODOLFO R. BONIFACIO, IN HIS CAPACITY AS THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT, BRANCH 159, PASNG CITY, PHILIPPINE ASSOCIATION OF SECURITIES BROKERS AND DEALERS, INC. (PASBDI), MA. VIVIAN YUCHENGCO, ISMAEL G. CRUZ, NESTOR S. AGUILA, AND MARITA A. LIMLINGAN, PHILIPPINE STOCK EXCHANGE (PSE) PSE'S 2009 NOMINATIONS AND ELECTIONS COMMITTEE (NOMELEC), RESPONDENTS.
[G.R. No. 244462]
SECURITIES AND EXCHANGE COMMISSION, PETITIONER, VS. PHILIPPINE ASSOCIATION OF SECURITIES BROKERS AND DEALERS, INC. (PASBDI), MA. VIVIAN YUCHENGCO, ISMAEL G. CRUZ, NESTOR S. AGUILA, AND MARITA A. LIMLINGAN, RESPONDENTS.
>CONCURRING OPINION
HERNANDO, J.:
The issue before Us is whether Securities and Exchange Commission (SEC) Resolution No. 86, series of 2010, and the directives issued pursuant thereto, can be subject of an appeal under Rule 43 to the Court of Appeals (CA), instead of an act on for injunction before the Regional Trial Court (RTC).
Below is a brief summary of the case:
A petition for injunction was filed before the RTC by the Philippine Association of Securities Brokers and Dealers, Inc. (PASBDI) and its several brokers (respondents), which own voting shares in the Philippine Stock Exchange (PSE), enjoining the implementation of Resolution No. 86, as well as the SEC's orders and directives to the PSE pursuant to said resolution.
Resolution No. 86 granted exemption to certain companies/industries from the limitation of voting rights under Republic Act No. 8799,1 otherwise known as the Securities Regulation Code (SRC), specifically Section 33.2 (c); however, it maintained that brokers are not exempt and are thus subject to the limitation. The pertinent provisions of Section 33.2 (c) are as follows:
33.2 Registration of an Exchange shall be granted upon compliance with the following provisions:
. . . .
(c) Where the Exchange is organized as a stock corporation, that no person may beneficially own or control, directly or indirectly, more than five percent (5%) of the voting rights of the Exchange and no industry or business group may beneficially own or control, directly or indirectly, more than twenty percent (20%) of the voting rights of the Exchange: Provided, however, That the Commission may adopt rules, regulations, or issue an order, upon application, exempting an applicant from this prohibition where it finds that such ownership or control will not negatively impact on the exchange's ability to effectively operate in the public interest.
In consonance with Section 33.2 (c), the SEC had previously advised the PSE that brokers are considered as industry groups that are subject to the 20% limitation. The PSE submitted several requests for deferment and eventually, an application for exemption from the provisions of Section 33.2 (c). In the questioned Resolution, the SEC reiterated the application of the 20% limitation on brokers; it also issued directives to the PSE to implement this Resolution in the latter's 2010 and 2011 Annual Stockholders' Meeting. In response thereto, the PSE issued its 2010 and 2011 Nominations and Elections Committee (NOMELEC) Rules which imposed the voting rights limitation on its brokers1aшphi1.
In the injunction case filed by respondents, they prayed for the RTC to permanently enjoin the SEC from Emphasis Resolution No. 86 and the directives issued pursuant thereto as these allegedly encroach upon their proprietary rights as shareholders. One of the issues for resolution was whether the RTC has jurisdiction over the petition. Both the RTC and the CA decided in the affirmative and also granted the injunction prayed for.
For the purpose of determining whether the assailed Resolution and the SEC directives may be subject of an appeal under Rule 43 of the Rules of Court (Rules) before the CA, instead of an injunction before the RTC, it is imperative to determine whether these were issued by the SEC pursuant to its quasi-judicial/adjudicative or quasi-legislative/regulatory function.
The powers of an administrative body are classified into quasi-legislative and quasi-judicial.2
Quasi-legislative power, otherwise known as the power of subordinate legislation, has been defined as the authority delegated by the lawmaking body to the administrative body to adopt rules and regulations intended to carry out the provisions of law and implement legislative policy.3 "[A] legislative rule is in the nature of subordinate legislation, designed to implement a primary legislation by providing the details thereof."4
Quasi-judicial power, on the other hand, is known as the power of the administrative agency to determine questions of fact to which the legislative policy is to apply, in accordance with the standards laid down by the law itself.5
In Securities and Exchange Commission v. Universal Rightfield Property Holdings, Inc.6 the Court held that the SEC has both regulatory and adjudicative functions, thus:
Under its regulatory responsibilities, the SEC may pass upon applications for, or may suspend or revoke (after due notice and hearing), certificates of registration of corporations, partnerships and associations (excluding cooperatives, homeowners associations, and labor unions); compel legal and regulatory compliances; conduct inspections; and impose fines or other penalties for violations of the Revised Securities Act, as well as Emphasis rules and directives of the SEC, such as may be warranted1aшphi1.
Relative to its adjudicative authority, the SEC has original and exclusive jurisdiction to hear and decide controversies and cases involving -
a. Intra-corporate and partnership relations between or among the corporation, officers and stockholders and partners, including their elections or appointments;
b. State and corporate affairs in relation to the legal existence of corporations, partnerships and associations or to their franchises; and
c. Investors and corporate affairs particularly in respect of devices and schemes, such as fraudulent practices, employed by directors, officers, business associates, and/or other stockholders, partners, or members of registered firms; ...7
In Universal, the Court considered the revocation of registration of securities and permit to sell them to the public as an exercise of the SEC's regulatory power, and not of its quasi-judicial power. It explained that a "quasi-judicial function" is a term which applies to the action, discretion, etc., of public administrative officers or bodies, who are required to investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their official action and to exercise discretion of a judicial nature.8 In addition, the Court explained that although Sec. 13.1 of the SRC requires due notice and hearing before issuing an order of revocation, the SEC does not perform such quasi-judicial functions and exercise discretion of a judicial nature in the exercise of such regulatory power. It neither settles actual controversies involving rights which are legally demandable and enforceable, nor adjudicates private rights and obligations in cases of adversarial nature. Rather, when the SEC exercises its incidental power to conduct administrative hearings and make decisions, it does so in the course of the performance of its regulatory and law enforcement function.9
Applying the foregoing, it is submitted that the instant assailed Resolution and the directives to the PSE were issued pursuant to the SEC's quasi-legislative/regulatory functions. The directives were made to regulate the activities of the PSE and its shareholders to ensure compliance with the law, i.e., 20% limitation provided under Section 33.2 (c) of the SRC. This is in consonance with Section 5 of the SRC which provides that the SEC is vested with the power and function to regulate, investigate or supervise the activities of persons to ensure compliance;10 impose sanctions for the violations of laws and the rules, regulations and orders issued pursuant thereto;11 and prepare rules, regulations and orders, and issue opinions and provide guidance on and supervise compliance with such rules, regulations and orders.12
In resolving PSE's application .for deferment or exemption from the voting rights limitation, the SEC exercised its regulatory, and not its adjudicative, powers. There was no actual controversy which would prompt the SEC to investigate or ascertain a set of facts, adjudicate demandable or enforceable private rights and obligations, conduct hearings and make conclusions based on the parties' respective positions, and exercise discretion of a judicial nature. Rule 43, Sec. 1 of the Rules is clear that only decisions of a quasi-judicial agency in the exercise of its quasi-judicial functions (except judgments or final orders issued under the Labor Code of the Philippines) can be appealed to the CA under this rule. Thus, the said SEC issuances may not be subject of an appeal under Rule 43.
As to which Court has jurisdiction over the petition for injunction, I submit that the RTC has jurisdiction over it.
In British American Tobacco v. Camacho,13 the Court considered the petition for injunction filed therein as a direct attack on the constitutionality or validity of a law or its Emphasis rules and regulations, and thus upheld the jurisdiction of the RTC over the same, thus:
Where what is assailed is the validity or constitutionality of a law, or a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the regional trial courts.14
It echoed the ruling in Smart Communications, Inc. v. National Telecommunications Commission15 where the Court held that petitioners were justified in invoking the judicial power of the RTC in assailing the constitutionality and validity of the questioned issuances which were issued in the exercise of NTC's quasi-legislative powers, viz.:
The rules and regulations that administrative agencies promulgate, which are the product of a delegated legislative power to create new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by the legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law, and be not in contradiction to but in conformity with, the standards prescribed by law. They must conform to and be consistent with the provisions of the enabling statute in order for such rule or regulation to be valid.1aшphi1 Constitutional and statutory provisions control with respect to what rules and regulations may be promulgated by an administrative body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it; or which are in derogation of, or defeat, the purpose of a statute. In case of conflict between a statute and an administrative order, the former must prevail.
. . . .
In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not exhaust administrative remedies before going to court. This principle applies only where the act of the administrative agency concerned was performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative power...
. . . .
[W]here what is assailed is the validity or constitutionality or a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the regional trial courts...
. . . .
In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its Memorandum dated October 6, 2000 was pursuant to its quasi-legislative or rule-making power. As such, petitioners were justified in invoking the judicial power of the Regional Trial Court to assail the constitutionality and validity of the said issuances...16
SEC Resolution No. 86 and its directives having been issued in the SEC's quasi-legislative or regulatory function, it is respectfully submitted that the RTC has jurisdiction over the petition for injunction filed by respondents in the instant case.
Footnotes
1 SECURITIES CODE (2000).
2 Alliance for the Family Foundation, Philippines, Inc. v. Garin, 809 Phil. 897, 917 (2017) [Per J. Mendoza, Special Second Division].
3 Id., citing Cruz, Philippine Administrative Law, p. 29 (2007 Edition).
4 Id., citing Commissioner of Customs v. Hypermix Feeds Corporation, 680 Phil. 681, 689 (2012) [Per J. Sereno, Second Division], citing further Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary, 308 Phil. 63, 71 (1994) [Per J. Mendoza, Second Division].
5 Id., citing Cruz, Philippine Administrative Law, p. 67 (2007 Edition).
6 764 Phil. 267 (2015) [Per J. Peralta, Third Division].
7 Id. at 286-287, citing Gamboa v. Finance Secretary, 668 Phil. 1, 67 (2011) [Per J. Carpio, En Banc].
8 Id. at 287, citing United Coconut Planters Bank v. E Ganzon, Inc., 609 Phil. 104, 122 (2009) [Per J. Chico-Nazario, Third Division].
9 Id.
10 SECURITIES CODE (2000), sec. 5(d).
11 SECURITIES CODE (2000), sec. 5(f).
12 SECURITIES CODE (2000), sec. 5(g).
13 584 Phil. 489 (2008) [Per J. Ynares-Santiago, En Banc].
14 Id. at 511, citing Smart Communications, Inc. v. National Telecommunications Commission, 456 Phil. 145, 159 (2003) [Per J. Ynares-Santiago, First Division].
15 456 Phil. 145 (2003) [Per J. Ynares-Santiago, First Division].
16 Id. at 156-159.
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