In The Matter of Pedro Ong vs. PAIC Securities Corp.

[SEC-AC NO. 104. March 13, 1980.] IN THE MATTER OF PEDRO ONG , complainant-appellee, vs . PAIC SECURITIES CORPORATION , respondent - appellant . PAIC SECURITIES CORPORATION , petitioner , vs. BEN R. CRISTOBAL and PEDRO ONG , respondents . O R D E R Before this Commission is a Petition for Certiorari to Annul the Order of Respondent Hearing Officer in UNNUMBERED SEC CASE, entitled Pedro Ong vs. PAIC Securities Corporation, dated June 6, 1979 , ordering petitioner-appellant to deliver to respondent-appellee certificates of stock for 11,700,000 shares in Taurus Minerals and 500,000 shares in Pioneer Natural Resources and to remit the principal sum of P89,242.93 with interest thereon at twelve (12%) per cent per annum from receipt of the Order until fully paid, and an Appeal from the Order of Respondent Hearing Officer dated November 29, 1978 denying petitioner-appellant's opposition and counter-motion and affirming the Order of June 6, 1978. cdll The present proceedings stemmed from a complaint filed by Respondent-Appellee Ong against petitioner-appellant PAIC Securities Corporation, on August 9, 1977, alleging, inter alia, that: On April 28, 1977, respondent-appellee had with petitioner-appellant, a credit balance of P89,242.93 and a security position consisting of 500,000 shares of Pioneer Natural Resources and 11,700,000 shares of Taurus Minerals; that notwithstanding repeated demands for payment of the amount and delivery of aforesaid shares, petitioner-appellant failed and refused to deliver the same. Respondent-appellee then prayed that the latter be ordered: a) to deliver to respondent-appellee certificates of stock for 11,700,000 shares of Taurus Minerals and 500,000 shares of Pioneer Natural Resources; b) to pay the principal sum of P89,242 . 93 with interest thereon at the legal rate of 12% per annum, and c) to pay attorney's fees in the amount of P10,000.00, plus costs of suit . On August 11, 1977, the Commission, through the Chief, Brokers and Exchanges Department, sent a letter to petitioner-appellant PAIC requesting the latter for comments or answer to the complaint within ten (10) days from receipt thereof. On September 2, 1977, petitioner-appellant PAIC filed a formal written answer to the complaint. Thereafter, an investigation was conducted by Respondent Hearing Officer, upon termination of which, the case was submitted for resolution, subject to the simultaneous filing of memoranda by the parties. On January 12, 1978, respondent-appellee Ong filed his memorandum and on January 13, 1978, petitioner-appellant PAIC also filed its memorandum incorporating therein a formal Motion to Dismiss praying that the complaint be discussed on two grounds, namely: a) that respondent-appellee Ong failed to show proof of violation of this Commission's Rules and Regulations and b) that this Commission has no jurisdiction over the subject matter of the complaint . On June 6, 1978, Respondent Hearing Officer issued an Order denying petitioner-appellant's Motion to Dismiss and ordering the same to deliver certificates of stock and to pay respondent-appellee Ong the amounts prayed for in the complaint. On July 26, 1978, respondent-appellee Ong filed a motion for execution of the Order of June 6, 1978, upon receipt of a copy of which, petitioner-appellant PAIC, filed its Opposition to the Motion for Execution with Counter Motion on August 4, 1978. On August 11, 1978, hearing was conducted on both motions, in the course of which, Respondent Hearing Officer gave respondent-appellee Ong a chance to reply to petitioner-appellant's Opposition to Motion for Execution with Counter-Motion and granting petitioner-appellant PAIC an opportunity to file a supplement to its Opposition and Counter-Motion. The next day, August 12, 1978, respondent-appellee filed his Reply to the Opposition and Opposition to Counter-Motion. Thereafter, on August 16, 1978, petitioner-appellant PAIC filed its Supplement to its Opposition and Counter-Motion. On November 29, 1978, Respondent Hearing Officer issued an Order denying petitioner-appellant's Opposition to Motion for Execution with counter-motion and affirming the Order of June 6, 1978. On December 1, 1978, Respondent Hearing Officer issued another Order, granting a Writ of Execution. On December 14, 1978, petitioner-appellant filed a motion to set aside and recall Order of December 1, 1978 and Motion to Quash Writ of Execution issued on the same date. Four days later, on December 18, 1978, Respondent Appellee Ong filed an opposition thereto. On the same date, Respondent-Hearing Officer issued a Supplemental Order recalling the Order of December 1, 1978 and suspending enforcement of the Writ of Execution to afford PAIC the opportunity to raise the issue of jurisdiction to a higher authority. LexLib Petitioner-Appellant PAIC, therefore, instituted the present action for certiorari, seeking the nullification of the order of the respondent hearing officer dated June 6, 1978 and a reversal of the order of the same respondent hearing officer dated November 29, 1978, on appeal. In its Petition-Appeal, PAIC submitted to this Commission, for its resolution, a single issue The jurisdiction of this body to adjudicate an action for specific performance arising out of contractual relations between a stockbroker (PAIC) and a customer (Pedro Ong) by ordering the payment of a sum of money (P89,242.93) and a delivery of a personal property (stock certificates). PAIC argues that cases and/or actions, the nature of which involve the specific performance of obligations arising from contracts or agreements, are well beyond this Commission's power and authority to resolve, the same being lodged exclusively in the ordinary courts of justice. As it is, the question decisive of the present petition-appeal is whether there is an express provision of law or Presidential Decree conferring upon this body the jurisdiction to try and decide an action for specific performance of contractual obligations. Accordingly, it is indispensable to examine all such pertinent laws and decrees relative to the grant or denial of such an authority. Presidential Decree 902-A reiterating the policy of the Government has stated the following: "WHEREAS, in line with the government's policy of encouraging investments, both domestic and foreign, and more active public participation in the affairs of private corporations and enterprises, through which desirable activities may be pursued for the promotion of economic development and to promote a wider and more meaningful equitable distribution of wealth, there is a need for an agency of the government to be invested with ample, powers to protect such investment and the public." Related to such policy the PD further provides: "SECTION 3. 'The Commission shall have absolute jurisdiction, supervision and control over all corporations, partnerships or associations, who are the grantees or primary franchise and/or a license or permit issued by the government to operate in the Philippines; . . ." It is very clear that P.D. 902-A confers upon the Commission such absolute jurisdiction and control over corporations (including stockbroker firms like PAIC) to encourage active participation in the affairs of private corporations by way of investment in the stock market. To consider the argument of PAIC that the Commission should act on the complaint only ADMINISTRATIVELY and not under its judicial and adjudicative powers under P.D. 902-A would clearly run counter to the manifest intent of the law. To hold otherwise would make the Commission impotent in achieving the ends for which P.D. 902-A was decreed. Under the present decree, not only is the adjudicatory powers of the Commission reaffirmed but more is given to the Commission than that. As stated in Section 5 of said decree: "SECTION 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decree, it shall have original and exclusive jurisdiction to hear and decide cases involving: a) Devices or schemes employed by or any acts of the Board of Directors, business associations, its officers or parties, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of association or organizations registered with the Commission. . . ." PAIC, in the light of the foregoing provisions, contends that from the entire records of the case there exists no allegation, proof, evidence or even gratuitous statement that the act complained of involves devices or schemes employed by PAIC or its officers which amount to fraud or misrepresentation." PAIC's contention however may be easily refuted by Exhibit "C" (letter of PAIC to P. Ong dated June 20, 1977) which reads: "xxx xxx xxx "The difference between the amount claimed and the amount actually due represents the credit balance of Eugene Ong which was transferred to your (P. Ong) account only for the purpose of closing the account of the latter (Eugene Ong) at the time when legal actions were being filed by other brokers against Eugene Ong. "The transfer therefore only serves to protect the Company from relinquishing the credit balance of Eugene Ong the release of which was held pending the settlement of the past due accounts under his agency." "xxx xxx xxx" This statement in Exhibit "C" was amplified by the testimony of David Huang, the General Manager of PAIC to wit: "ATTY. BRILLANTES: On February 1977, the credit balance of Eugene Ong was transferred to the account of his father. Are you aware of this transaction? MR. HUANG: Yes. I spoke with Eugene Ong why he was requesting us to move it over and inasmuch as we had agreed, I said okay, no problems. ATTY. BRILLANTES: You did not object to the transfer of the accounts of Eugene Ong to his father? MR. HUANG: Basically, because we are understanding in terms of the funds which is I believe about P70,000 something, not being withdrawn and still stands. There was no agreement that they will withdraw it. For us, if to tell you the truth inasmuch as Eugene Ong and Pedro Ong are concerned, the transactions we . . . basically looked as one account if at all, it is the father . . . ATTY. CRISTOBAL: Is it your conception or is it the conception of your company that the account of the father is the same account of the son? MR. HUANG: Let us put it this way. Inasmuch as Eugene Ong was the agent, he is the one responsible for the accounts And as far as that is concerned, it was the transfer from his account to another account." (T.S.N. December 6, 1977 pp. 16-20) From this express admission by no less than the General Manager of PAIC, there existed a scheme to hide the credit balance of its agent, Eugene Ong, from possible claims of other brokers against the latter. Along this line, David Huang further testified: "ATTY. CRISTOBAL: Why is it then, I am surprised here right in your answer, it appears something like this. There is a letter here although it is not stated here, signed by Mrs. Erly Erasmo, states 'The difference between the amount claimed and the amount actually due represents the credit balance of Eugene Ong which was transferred to your account,' this is the letter to Pedro Ong, 'only for the purpose of closing the account of the latter at the time when legal actions were being filed by other brokers against Eugene Ong.' How could you reconcile this with your statement now? Just to clarify matters. xxx xxx xxx MR. HUANG: Basically, you are talking or you might say incinario (scenario) for where we were working under certain constraint. As far as Eugene Ong is concerned, in our particular instance, we know he has several accounts to settle. We also know that while being in the Exchange (stock) every day we also knew that several other brokers may be starting to file charges against Eugene Ong as with certain people within the Makati Stock Exchange. So like I said, in my earlier statement I spoke with Eugene Ong two or three times and that was our conversation and that led to our agreement to transfer from his account to the account of Pedro Ong." LLphil (T.S.N. December 6, 1977, pp. 22-27) While we concur with the findings of the Hearing Officer that "under the credit memo of complainant Pedro Ong dated February 12, 1977 with PAIC Securities, Exhibit "E", respondent corporation (PAIC) has credited PEDRO ONG the sum of P74,493.68 with a security position of 11,700,000 Taurus Minerals without any restriction or qualification," and is "further corroborated by the subsidiary ledger of Pedro Ong, Exhibit "A", whereby the latter was shown to have a credit balance of P89,242.93 cash and security position of 11,700,000 Taurus Minerals and 500,000 Pioneer Natural Resources with respondent (PAIC) for the period from February 12, 1977 to April 18, 1977" we cannot help but notice the manifest intention of PAIC to manipulate this particular transaction to conceal the funds and stocks of its agent and customer (Eugene Ong), just to make them inaccessible to other brokers who might have some legal claims against Eugene Ong, who was admittedly the agent of PAIC. This action of PAIC certainly falls within the meaning intended by Section 5(a) of P.D. 902-A. Being so, the jurisdiction of this Commission on the matter cannot be assailed. Furthermore, to sustain the position of PAIC would amount to a condonation of any violation of the provisions of Rule b-16, SEC Rules and Regulations, which provide: "16. Loaning, pledging, commingling and disposal of customer's free securities. Securities on which a broker has not extended any credit to a customer, including those securities which are in excess of the margin requirements, shall be kept separate for the particular customer who owns them and shall not be loaned, pledged or commingled with other securities owned by the broker himself or by other customers, or otherwise disposed of as his own, unless he shall have first obtained a separate authorization in writing from such customer permitting the lending, pledging, commingling, or disposal of such securities. No general form of customer's agreement with the broker, even though it includes specifically the right to lend or otherwise dispose of said securities shall be deemed sufficient compliance with this rule, but such right shall and must be evidenced by a separate authorization in writing. In case such securities should be loaned, pledged, or otherwise disposed of as his own by the broker shall report to the latter within five (5) days after the loan, pledge or disposal, stating the name or names of the person or persons to whom they were loaned or pledged or disposed of and the amount for which they were loaned or at which they were disposed of and the date of maturity of the loan." Moreover, the Commission, " in order to effectively exercise such jurisdiction, " has the power to " exercise such other powers as implied, necessary or incidental to the carrying out of the express powers granted to the Commission or to achieve the objectives and purpose of this Decree ." Certainly, the Commission, in the exercise of its absolute control, has an uncurtailed power to hear, try, decide and forthwith adjudicate matters necessarily connected with corporate functions of every corporation. As ruled by the Supreme Court in the case of Pacis versus Averia, thus: "Should Section 44(c) of the Judiciary Act of 1948 give way to the provisions of the Tariff Code , or vice-versa? In our opinion, in this particular case, the Court of First Instance should yield to the jurisdiction of the Collector of Customs, the jurisdiction of the Collector of Customs is provided for in Republic Act 1937 which took effect on July 1, 1957, much later than the Judiciary Act of 1948. It is axiomatic that a later law prevails over a prior statute (Herman vs. Radio Corporation of the Philippines, G.R. No. 26802, July 15, 1927, 50 Phil. 490; Pampanga Sugar Mills vs. Trinidad 279 U.S. 211, 73 L. ed. 667). Moreover, on grounds of public policy, it is more reasonable to conclude that the legislator intended to divest the Court of First Instance of the prerogative to replevin a property which is a subject of a seizure and forfeiture proceedings for violation of the Tariff and Customs Code . Otherwise, actions for forfeiture of property for violations of Customs laws could easily be undermined by the simple device of replevin (this ruling was reiterated in the case of Romualdez, Jr. vs. Arca, G.R. No. L-20516, November 15, 1967) The case of Pedro Ong against PAIC is not just a " simple money claim and specific performance " arising from a contractual obligation. It emanates from stock transactions between a stock broker (PAIC) and its customer (P. Ong). Such a relation is coupled with public interest; and it is the main thrust of SEC's function to uphold the interest of the buying public everytime they deal with the stock exchange, through their stockbrokers. And definitely, any action arising from the stock operation of a stockbroker comes within the absolute jurisdiction and control of this Commission. We could not subscribe to the theory that this Commission should only have regulatory and administrative findings on the matter at hand. It will not only defeat the legislative intent of the law, but such an action would likely lead to multiplicity of suits which we should seek to avoid. What PAIC would want us to do is to pass an administrative decision on the matter and thereafter, let the "monetary claim and delivery of the personal properties" be litigated with the proper civil courts in an ordinary civil action. To sustain PAIC would traverse the consistent rule of our jurisprudence against a "split-jurisdiction" and multiplicity of suits, a situation which is repugnant and obnoxious to the administration of justice (Gonzales vs. Province of Iloilo, G.R. No. L-24663, March 31, 1971, citing Republic vs. Central Surety & Ins. Co., G.R. No. L-27802, October 26, 1968; Talisay-Silay Milling Co. vs. CIR, G.R. No. L-21582, November 29, 1966; Rheem of the Philippines vs. Ferrer, G.R. No. L-22979, January 27, 1967; De Leon vs. Salvador and Bernabe vs. Cruz, G.R. No. L-30871 & L-31603, December 28, 1970; Com. of Customs vs. Cloribel, G.R. No. L-20266, January 31, 1967). One more thing, PAIC contends that this Commission never found PAIC guilty of any violation of its rules and regulations, by the mere fact that no fine was imposed, its license not suspended and/or revoked. Being so, then the order to pay P. Ong of the amount claimed and the delivery of the shares of stock has no basis, in fact and in law. It would appear that PAIC wants the Commission to impose a fine, suspend and/or revoke its license as a show of guilt. These acts, we feel, are not necessary to show PAIC's guilt If the Hearing Officer did not impose a fine, and the other sanctions of law, it does not mean that there was no violation. If at all, the Hearing Officer was of a judicious belief that the ordering of PAIC to pay the money claim and the delivery of the stocks to P. Ong were sufficient remedies for the aggrieved party. On the foregoing premises, we are constrained to conclude that the Commission has jurisdiction to try, hear, decide and adjudicate money claims and delivery of personal properties when these matters necessarily arise from or are incidental to the stock operations of a stock broker corporation. This Commission cannot tolerate the abdication of its power and authority, when the exercise of such power is essential to the effective accomplishment of the purpose or purposes for which the Commission was conceived and established. And upon no one does this obligation of absolute control over all corporations originally and exclusively rest with more binding force and effect than the Securities and Exchange Commission. WHEREFORE, the PETITION/APPEAL of PAIC is hereby DISMISSED. Considering that the decision of the Hearing Officer dated June 6, 1978 has long been final and executory, let the records of this case be remanded to the Hearing Officer for the immediate enforcement of the Writ of Execution issued on December 1, 1978. SO ORDERED. (SGD.) ANGEL L. LIMJOCO, JR. Chairman (SGD.) JULIO A. SULIT, JR. (SGD.) SIXTO T. J. DE GUZMAN, JR Associate Commissioner Associate Commissioner