FACTS
Price Richardson Corporation (Price Richardson) was a Philippine corporation incorporated on December 7, 2000. Its stated primary purpose was to provide administrative services, including clerical, bookkeeping, mailing, and billing services. On October 17, 2001, its former employee, Michelle S. Avelino, executed a sworn statement before the NBI Interpol Division alleging that Price Richardson was engaged in “boiler room” operations, wherein the company allegedly sold nonexistent stocks to investors using high-pressure sales tactics.
On November 15, 2001, upon the application of the NBI Interpol Division and the SEC, the RTC of Makati City issued three search warrants against Price Richardson and Capital International for alleged violations of Section 28 of the Securities Regulation Code. The warrants were served on November 16, 2001, resulting in the seizure of office equipment, documents, and other materials. On December 4, 2001, the SEC filed a complaint before the Department of Justice against Price Richardson, its incorporators and directors, Consuelo Velarde-Albert, and Gordon Resnick for violations of Sections 26.3 and 28 of R.A. No. 8799, as well as Article 315(1)(b) of the Revised Penal Code.
The SEC alleged that Price Richardson was neither licensed nor registered to engage in the business of buying and selling securities in the Philippines or to act as a salesman or associated person of a broker or dealer. It further alleged that the seized documents and equipment showed that Price Richardson sought clients for the purchase and sale of securities. Velarde-Albert, its Director for Operations, and Resnick, its Associated Person, were alleged to have acted as brokers or salesmen without registration. The incorporators and directors were likewise charged based on their alleged responsibility for corporate management.
On March 13, 2002, the State Prosecutor dismissed the complaint for lack of probable cause, finding insufficient evidence that Price Richardson actually engaged in unauthorized trading of securities. The SEC's motion for reconsideration was denied, and its subsequent Petition for Review before the DOJ was likewise denied. The Court of Appeals later affirmed the DOJ's determination, finding no grave abuse of discretion. The SEC then elevated the matter to the Supreme Court, arguing that there was sufficient evidence to establish probable cause against the respondents.
ISSUE
The first issue was whether courts may review the prosecutor's determination of probable cause. The Court had to determine whether the DOJ gravely abused its discretion in affirming the dismissal of the SEC's complaint for lack of probable cause. The Court distinguished the executive determination of probable cause, which determines whether an information should be filed, from the judicial determination of probable cause, which determines whether a warrant of arrest should issue.
The second issue was whether there was probable cause to indict Price Richardson Corporation, Consuelo Velarde-Albert, and Gordon Resnick for violations of Sections 26.3 and 28 of the Securities Regulation Code and Article 315(1)(b) of the Revised Penal Code. Section 26.3 prohibits acts, transactions, practices, or courses of business in connection with the purchase or sale of securities that operate or would operate as fraud or deceit upon any person. Section 28.1 prohibits a person from engaging in the business of buying or selling securities in the Philippines as a broker or dealer, or acting as a salesman or associated person, unless registered with the SEC.
HELD
The Supreme Court PARTIALLY GRANTED the petition. It AFFIRMED the Court of Appeals and DOJ resolutions insofar as they found no grave abuse of discretion in dismissing the complaints against Consuelo Velarde-Albert and Gordon Resnick for violations of the Securities Regulation Code and for estafa. However, the Court found that the dismissal of the complaint against Price Richardson Corporation for violations of Sections 26.3 and 28 of the Securities Regulation Code was attended by grave abuse of discretion amounting to lack or excess of jurisdiction. That dismissal was therefore ANNULLED and SET ASIDE.
The Court explained that the determination of probable cause for purposes of filing an information is primarily an executive function entrusted to the public prosecutor and the Secretary of Justice. Courts generally may not interfere with that determination. An exception exists when the prosecutor's determination is attended by grave abuse of discretion, which means a whimsical and capricious exercise of judgment amounting to lack of jurisdiction. Grave abuse may exist when the prosecutor disregards or overlooks evidence sufficient to establish a reasonable ground to believe that a crime was committed and that the respondent probably committed it.
Applying this standard, the Court found sufficient basis to establish probable cause against Price Richardson Corporation. The SEC had presented a certification showing that Price Richardson had never been issued a secondary license to act as a broker or dealer in securities, investment house, or dealer in government securities, and was not authorized to engage in or solicit investments from clients. The SEC also submitted complaints and letters from persons who claimed to have purchased securities through Price Richardson. One complainant identified Price Richardson as having sold him shares of Hugo International Telecom, Inc., while another stated that Price Richardson contacted him to purchase shares of Hugo International Telecom, Inc. and GeoAlert. Price Richardson itself admitted that its employees in the Philippines called persons located abroad to inform them about securities available in other countries and determine whether those persons wanted to purchase them. The Court held that these facts were sufficient to support a reasonable belief that Price Richardson was probably guilty of the offenses charged.
The Court, however, found insufficient basis to indict Velarde-Albert and Resnick. The SEC failed to identify specific acts committed by either respondent that could constitute participation in the alleged violations. The evidence showed that they were not registered as brokers, salesmen, or associated persons, but that fact alone did not establish that they actually acted in those capacities in the alleged securities transactions. The Court also reiterated the principle that a corporation has a personality separate and distinct from its officers, directors, and shareholders; to hold corporate officers or shareholders criminally liable for corporate acts, there must be a showing that they actively participated in or had the power to prevent the wrongful act.
Accordingly, the Court sustained the dismissal of the complaints against Velarde-Albert and Resnick, but set aside the dismissal of the complaint against Price Richardson Corporation for violations of Sections 26.3 and 28 of the Securities Regulation Code. The Court thus allowed the criminal proceedings against Price Richardson for those violations to proceed, while leaving undisturbed the dismissal of the charges against the two individual respondents.
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