HERNANI N. FABIA, vs.

COURT OF APPEALS
G.R. No. 132684, August 20, 2001

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
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.[9] 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.