SECOND DIVISION
G.R. No. 197032, July 26, 2017
SECURITIES AND EXCHANGE COMMISSION, Petitioner, v. PRICE RICHARDSON CORPORATION, CONSUELO VELARDE-ALBERT, AND GORDON RESNICK, Respondents.
D E C I S I O N
LEONEN, J.:
The determination of probable cause for purposes of filing an information is lodged with the public prosecutor. It is not reviewable by courts unless it is attended by grave abuse of discretion.
This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, praying that the Court of Appeals Decision2 dated May 26, 2011 and the Department of Justice Resolutions dated April 12, 20053 and July 5, 20064 be reversed and set aside.5 The Court of Appeals affirmed the assailed Resolutions of the Department of Justice, which denied the Petition for Review filed by the Securities and Exchange Commission (petitioner).6 Petitioner prays for the filing of an Information against Price Richardson Corporation, Consuelo Velarde-Albert, and Gordon Resnick (respondents) for violating Sections 26.3 and 28 of the Securities Regulation Code.7
Respondent Price Richardson Corporation (Price Richardson) is a Philippine corporation duly incorporated under Philippine laws on December 7, 2000.8 Its primary purpose is "[t]o provide administrative services which includes but is not limited to furnishing all necessary and incidental clerical, bookkeeping, mailing and billing services."9
On October 17, 2001, its former employee, Michelle S. Avelino, (Avelino) executed a sworn affidavit at the National Bureau of Investigation's Interpol Division,10 alleging that Price Richardson was "engaged in boiler room operations, wherein the company sells non[-]existent stocks to investors using high pressure sales tactics."11 Whenever this activity was discovered, the company would close and emerge under a new company name.12 Pertinent portions of her sworn statement read:
Q03: State your reason why you are here at the NBI Interpol? A: I am here to give a statement about the "boiler room" operation of PRICE RICHARDSON CORPORATION. Q04: What do you mean by "boiler room"? A: A boiler room is a company which sells non-existent stocks to investors by using high pressure sales tactics. They had no intention of paying the duped investors and when their operation ha[s] been discovered this company would close and would spring up under a new name. I know this for a fact because I used to work before with New Millennium Market Research, Inc. which was shut down after the duped victims reported to authorities [its] illegal activities. New Millennium Market Research, Inc. eventually became Price Richardson. Boiler Room operation is an illegal activity considering that the company has no license from the Securities and Exchange Commission to deal on securities or stocks. Q05: Why do you know that Price Richardson is a "boiler room"? A: I used to work there as a telemarketer from September 3, 2001 to October 15, 2001. Q06: As telemarketer at Price Richardson what do you do? A: Our supervisor would give "leads" for me to call. "Leads" are names of prospective investors. Upon contracting a prospective investor, I would read a prepared "script" or presentation of the company's profile and the services it offers. If the prospect is interested, I will write all the information about this person and would forward the same to our supervisor JOVY AGUDO. All our leads or prospects are foreigners. Q07: As a telemarketer, how many calls do you make in a day and how many investors do you qualify? [A:] I average 100 calls a day and I can qualify an average of six (6) would[-]be investors daily. . . . . Q10: After you qualify a prospective investor, what happens next? A: The company will send him a newsletter and then the salesman would contact him and [use] high-pressure sales tactics to make a sale of non-existent stocks. The salesmen would use the data and information gathered by the telemarketers and would make reference to the calls or initial contact made by telemarketers. If the investor agreed, the salesman would give him instructions on how to send the money to the company. Usually, the payment is made through telegraphic transfers. After the payment has been received, a confirmation receipt would then be sen[t] by the courier to the investor indicating therein the name of the company where the alleged investment was made, the number of shares, the amount per share, the tax and commissions paid. However, no hard copy of the stocks or certificates will be issued for in truth and in fact there was no actual sale or transfer of stocks or certificates for they are non-existent. In the event that the investor would then sell his certificates or stocks, the salesman would try to convince the investor not to sell in order not to release the money. Eventually, the company would disappear and would spring up under a new name. Q11: Who are these salesmen? A: The salesmen are all foreigners of various nationalities. They used also a prepared script to induce the prospective client to invest. . . . . Q13: Do you know if these salesmen are licensed stockbrokers duly authorized by the Securities and Exchange Commission? A: They are not licensed by the Securities and Exchange Commission. They are tourists here in the country and they used aliases to hide their identities.13
07. Q: You said that CAPITAL INTERNATIONAL CONSULTANTS CORP. has just merged with Price Richardson Inc., can you elaborate on this?
A: Yes, just this September, we have been informed of the [merge]. In fact we have been instructed to use the name of Price Richardson in our calls starting September 2001.
. . . .
09. Q: Can you describe the process in, as you said – "qualify clients as possible investors"?
A: I make overseas calls to individuals listed in our Client Leads. The "Client Leads" contains a list of the names of the top-level personnel of international companies, it includes their address and telephone numbers. From these leads, we select clients to call and offer them a free subscription of our "Financial News Letter".
. . . .
11. Q: What does these "Financial News Letter" contain?
A: It contains the current status of the worldwide stock market.
12: Q: So what happens when a client agrees to subscribe in your news letter?
A: We then check from our list if the information we have regarding their address and telephone numbers [is] correct. This is to check their mail preference - where they would like us to send the news letter.
13. Q: What happens after that?
A: Those who agree to receive the subscription are considered as qualified clients. We then fill out a "SALES LEAD" card, which reflects the information of the client. We then forward these cards to the marketing department, consisting of the encoders and other telemarketers. These people are the ones who send the newsletters and transaction receipts to clients. Their office is located at the Price Richardson Office, 31st Floor Citibank Tower, Paseo De Roxas, Makati. It is from these cards that our foreigner salesmen could get possible investors. These possible investors would then be sold with non-existent stocks.
. . . .
15. Q: So are you saying that CAPITAL INTERNATIONAL CONSULTANTS CORP and/or PRICE RICHARDSON, Inc. is engaged in the illegal trading of stocks to clients?
A: Yes. When I applied for the job, I was briefed by ANNE BENWICK, the Operations Manager, about the nature of their [b]usiness. She said that the company is engaged in trading stocks, and my job as a Telemarketer would be to "qualify clients" who might become possible investors. I am also aware of the nature of their business since I have been employed in a similar company.17
[C]omplainant SEC failed to adduce evidence showing respondent Price's alleged unauthorized trading. While it is true that based on the certification issued by the SEC, respondent-corporation has no license to buy or sell securities, it does not, however, follow, that said corporation had indeed engaged in such business. It is imperative for complainant to prove the respondent-corporation's affirmative act of buying and selling securities to constitute the offense charged. It cannot be established on the expedient reason that a corporation is not license[d] or authorize[d] to trade securities. He who alleges a positive statement has the burden of proving the same.
The various "confirmation of trade" receipts . . . taken singly, does not prove violation of Sections 26.3 and 28 of the Securities Regulation Code. Far from proving the offense charged, those confirmation of trade could very well mean that indeed respondent Price was merely "providing administrative services of furnishing all necessary and incidental clerical, bookkeeping, mailing and billing services" pursuant to its primary purpose as embodied in its articles of incorporation. There is no evidence that indeed anyone transacted business much less purchased or sold securities with any of the respondents acting as broker or dealer in securities. In other words, the burden of proving that respondents made various offers to sell unregistered securities; that the offers were accepted; and, that agreements of sale were reached and consummated, has not been dislodged by the complainant. Independent proof of the various stages of a sale transaction is necessary to show violation of Sections 26.3 and 28 of the Securities Regulation Code.39
Probable cause, for purposes of filing a criminal information, has been defined as such facts as are sufficient to engender a well-founded belief that a crime has been committed and that the private respondent is probably guilty thereof. It is such a state of facts in the mind of the prosecutor as would lead a person of ordinary caution and prudence to believe or entertain an honest or strong suspicion that a thing is so. The term does not mean "actual or positive cause;" nor does it import absolute certainty. It is merely based on opinion and reasonable belief. Thus, a finding of probable cause does not require an inquiry into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or omission complained of constitutes the offense charged.90
RULE 112
Preliminary Investigation
Section 1. Preliminary Investigation Defined; When Required. — Preliminary investigation is an inquiry or proceeding to determine whether there is sufficient ground to engender a well-founded belief that a crime has been committed and the respondent is probably guilty thereof, and should be held for trial.
[Preliminary investigation] is not the occasion for the full and exhaustive display of their evidence. The presence or absence of the elements of the crime is evidentiary in nature and is a matter of defense that may be passed upon after a full-blown trial on the merits.
In fine, the validity and merits of a party's defense or accusation, as well as admissibility of testimonies and evidence, are better ventilated during trial proper than at the preliminary investigation level.93 (Citations omitted)
ARTICLE III
Bill of Rights
. . . .
Section 2. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized. (Emphasis supplied)
SECURITIES REGULATION CODE
Section 26. Fraudulent Transactions. – It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale of any securities to:
. . . .
26.3. Engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person.
. . . .
Section 28. Registration of Brokers, Dealers, Salesmen and Associated Persons. – 28.1. No person shall engage in the business of buying or selling securities in the Philippines as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as such with the Commission.REVISED PENAL CODE
ARTICLE 315. Swindling (Estafa). — Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by:
. . . .
4th. By arresto mayor in its medium and maximum periods, if such amount does not exceed 200 pesos, provided that in the four cases mentioned, the fraud be committed by any of the following means:
. . . .
1. With unfaithfulness or abuse of confidence, namely:(b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the offender in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having received such money, goods, or other property.
a) A company brochure consisting of 8 pages which declares that it is a financial consultant geared towards portfolio investment advice and other financial services to investors . . . b) Detailed Quotes of OWTNF Otis-Winston Ltd. shares downloaded from the Bloomberg.com website which indicates its price, return, fundamentals and other matters . . . c) Confirmation of Trade issued by the respondent to its client MR. PETER VAN DER HAEGEN which indicates that he bought on Oc[to]ber 16, 2001 750 Otis-[W]inston Ltd at $4.15 price per share for $3,112.50. . . d) Confirmation of Trade issued by the respondent to MR. RENNY NAIR who bought 500 shares of Hugo International (HGOI) at $5.75 per share for which he paid $2,932.50 . . . and Telegraphic Transfer from Oman U.A.E. Exchange Centre & Co. LLC made by Mr. Nair to PRICE RICHARDSON to the latter's bank account No. 103-719221-0 in China Banking Corporation in the amount of $2932.50 . . . e) Confirmation of Trade issued by the respondent to MR. JOHANNES DE KORTE who bought 500 shares of Otis-Winston Ltd (OWTNF) at $5.05 per share for which he paid $2,575.50 . . . f) Confirmation of Trade issued by the respondent to MR. JUERGEN GEIGER who bought 2500 shares of Hugo International at $4.65 per share for which he paid $11,857.50 . . . g) Confirmation of Trade issued by the respondent to MR. ZULKEPLI HAMID who bought 2000 shares of OWTNF at $5.05 per share for which he paid $10,302. . . h) Telegraphic Transfers issued by China Banking Corporation to Union Bank of California International NY with Price Richardson as the Order Party and M.L. Vitale as the beneficiary in the amount of $2000 and Citibank Belgium as the Beneficiary Bank . . . i) Confirmation of Trade issued by the respondent to MR. Junzo Watanabe who bought 2500 shares of OWTNF at $3.90 per share and sold 1500 Geoalert (GEOA) shares for which he paid $3,525 . . . j) First Hawaiian Bank check issued by Junzo Watanabe payable to the Order of Price Richardson[.] 113
The SEC has submitted the complaint of Mr. Don Sextus Nilantha, a citizen of Sri Lanka who clearly named Price Richardson as selling him 1000 shares of Hugo Intl. Telecom, Inc. sometime in April 2001. At such time, and until today, Price Richardson was not authorized to act as traders or brokers o[f] securities in the Philippines.
Furthermore, there are other complainants against Price Richardson who deserve to have their complaints aired and tried before the proper court. Mr. Johannes Jacob Van Prooyen filed a complaint against Price Richardson with the National Bureau of Investigation . . . In the said complaint, Mr. Van Prooyen clearly pointed to Price Richardson as the ones who contacted him on June 12, 2001 to buy 2000 shares of Hugo Intl. Telecom, Inc. and on July 10, 2001 to buy 2000 shares of GeoAlert. At no time at such relevant dates was Price Richardson licensed to act as traders or brokers of securities in the Philippines.
Mr. Bjorn L. Nymann of Oslo, Norway wrote about Price Richardson to this very same Department of Justice, which letter was received on July 9, 2002. In his letter Mr. Nymann admitted dealing with Price Richardson. He admitted to having bought 3000 shares of Hugo Intl. Telecom, Inc. . . . Although Mr. Nymann is not a complaining witness against Price Richardson, his letter is relevant as at no time at such relevant date was Price Richardson licensed to act as traders or brokers of securities in the Philippines.114
If this Honorable Court were to consider the set-up of Price Richardson, it was as if it engaged in outsourced operations wherein persons located in the Philippines called up persons located in foreign locations to inform them of certain securities available in certain locations, and to determine if they wanted to buy these securities which are offered in a different country.115
[T]here is no sufficient evidence to substantiate SEC's allegation that individual respondents, Connie Albert and Gordon Resnick, acted as broker, salesman or associated person without prior registration with the Commission. The evidence at hand merely proves that the above-named respondents were not licensed to act as broker, salesman or associated person. No further proof, however, was presented showing that said respondents have indeed acted as such in trading securities. Although complainant SEC presented several confirmation of trade receipts and documents intended to establish respondents Albert and Resnick illegal activities, the said documents, standing alone as heretofore stated, could not warrant the indictment of the two respondents for the offense charged.116
Endnotes:
1Rollo, pp. 355-388.
2 Id. at 391-399. The Decision, docketed as CA-G.R. SP No. 96258, was penned by Associate Justice Florito S. Macalino and concurred in by Associate Justices Juan Q. Enriquez, Jr. and Ramon M. Bato, Jr. of the Sixth Division, Court of Appeals, Manila.
3 Id. at 400-404. The Resolution was penned by Secretary Raul M. Gonzalez.
4 Id. at 405-406. The Resolution was penned by Secretary Raul M. Gonzalez.
5 Id. at 383.
6 Id. at 399, 400 and 403.
7 Id. at 383, Petition for Review.
8 Id. at 407, Certificate of Incorporation.
9 Id. at 408, Articles of Incorporation.
10 Id. at 392, Court of Appeals Decision.
11 Id.
12 Id.
13 Id. at 424-425, Michelle S. Avelino's Sworn Statement.
14 Id. at 392, Court of Appeals Decision.
15 Id.
16 Id.
17 Id. at 428-429, Janet C. Rillo's Sworn Statement.
18 The National Bureau of Investigation Interpol Division was represented by Agent Jeralyn Jalagat.
19 The Securities and Exchange Commission was represented by Atty. Elmira Alconaba.
20 SECURITIES CODE, sec. 28.1 provides:
Section 28. Registration of Brokers, Dealers, Salesmen and Associated Persons. – 28.1. No person shall engage in the business of buying or selling securities in the Philippines as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as such with the Commission.
21Rollo, p. 392.
22 Id.
23 Id. at 392 and 536.
24 REV. PEN. CODE, art. 315, sec. 1(b) provides:
Article 315. Swindling (Estafa). — Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by:
. . . .
4th. By arresto mayor in its medium and maximum periods, if such amount does not exceed 200 pesos, provided that in the four cases mentioned, the fraud be committed by any of the following means
1. With unfaithfulness or abuse of confidence, namely:
. . . .(b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the offender in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same, even though such obligation be totally or partially guaranteed by a bond; or by denying having received such money, goods, or other property.
25 SECURITIES CODE, sec. 26.3 provides:
Section 26. Fraudulent Transactions. – It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale of any securities to:
. . . .
26.3. Engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person.
26Rollo, pp. 392-393 and 535.
27 Id. at 535-537.
28 Id. at 391-392.
29 Id. at 536.
30 Id. at 536-537.
31 Id. at 537.
32 Id.
33 Id.
34 Id.
35 Id. at 537-538.
36 Id. at 538.
37 Id. at 535-542. The Resolution was recommended for approval by the Task force on Securities Chairman, Senior State Prosecutor Miguel F. Gudio. It was approved by Assistant Chief State Prosecutor Nilo C. Mariano.
38 Id. at 393-394 and 540.
39 Id. at 538-539.
40 Id. at 539.
41 Id. at 539-540.
42 Id. at 540.
43 Id.
44 Id. at 394; rollo, p. 613, Complaint-Affidavit of Johannes Jacob Van Prooyen; rollo, pp. 674-675, Complaint-Affidavit of Don Sextus Nilantha.
45 Id.
46 Id.
47 Id. at 543-553.
48 Id. at 579-582. The Resolution was recommended for approval by Assistant Chief State Prosecutor Nilo C. Mariano and was approved by Chief State Prosecutor Jovencito R. Zuño.
49 Id. at 583-605.
50 Id. at 400-404.
51 Id. at 606-612.
52 Id. at 405-406.
53 Id. at 632-660.
54 Id. at 658.
55 Id. at 391-399.
56 Id. at 399.
57 Id.
58 Id. at 398.
59 Id.
60 Id.
61 Id.
62 Id.
63 Id.
64 Id. at 399.
65 Id. at 355-388.
66 Id. at 383.
67 Id. at 371-376.
68 Id. at 379-382.
69 Id. at 383.
70 Id. at 709-726.
71 Id. at 711-712.
72 Id. at 712-715.
73 Id. at 721-723.
74 Id. at 717.
75 Id. at 719.
76 Id. at 736-742.
77 Id. at 775-779.
78 Id. at 738 and 776-777.
79 Id. at 776.
80 Id. at 797-810.
81 Id. at 807.
82 Id. at 808.
83 Id. at 807-808.
84 Id. at 813.
85 Id. at 1062-1093.
86 Id. at 823-835.
87 Id. at 884-897.
88 Id. at 908-922.
89 512 Phil. 145 (2005) [Per J. Callejo, Sr, Second Division].
90 Id. at 159, citing Baytan v. COMELEC, 444 Phil. 812, 818 (2003) [Per J. Carpio, En Banc].
91See ABS-CBN Corporation v. Gozon, G.R. No. 195956, March 11, 2015, 753 SCRA 1, 32 [Per J. Leonen, Second Division].
92 499 Phil. 36 (2005) [Per J. Carpio Morales, Third Division].
93 Id. at 49-50.
94Corpuz v. Del Rosario, 653 Phil. 36, 38 (2010) [Per J. Del Castillo, First Division]; Unilever v. Tan, 725 Phil. 486, 492 (2014) [Per J. Brion, Second Division]; Mendoza v. People, et al., 733 Phil. 603, 610 (2014) [Per J. Leonen, Third Division], citing People v. Castillo, et al., 607 Phil. 754, 764 (2009) [Per J. Quisumbing, Second Division]; People v. Borje, Jr., 479 Phil. 719, 726-727 (2014) [Per J. Peralta, Third Division]; De Lima v. Reyes, G.R. No. 209330, January 11, 2016, 779 SCRA 1, 19 [Per J. Leonen, Second Division]; Napoles v. De Lima, G.R. No. 213529, July 13, 2016, 9-10 [Per J. Leonen, Second Division]; Maza v. Turla, G.R. No. 187094, February 15, 2017, 14 [Per J. Leonen, Second Division].
95Unilever v. Tan, 725 Phil. 486, 492 (2014) [Per J. Brion, Second Division].
96Mendoza v. People, et al., 733 Phil. 603, 609 (2014) [Per J. Leonen, Third Division].
97 Id. at 610, citing People v. Castillo, et al., 607 Phil. 754, 764-765 (2009) [Per J. Quisumbing, Second Division].
98 Id. at 611.
99Unilever v. Tan, 725 Phil. 486, 493 (2014) [Per J. Brion, Second Division].
100Mendoza v. People, et al., 733 Phil. 603, 612 (2014) [Per J. Leonen, Third Division], citing People v. Court of Appeals, 361 Phil. 401, 421 (1999) [Per J. Panganiban, Third Division].
101 Id. at 609-610.
102 Id. at 610, citing People v. Castillo, et al., 607 Phil. 754, 764-765 (2009) [Per J. Quisumbing, Second Division].
103 RULES OF COURT, Rule 112, sec. 6(a) provides:
Rule 112. Preliminary Investigation
. . . .
Section 6. When Warrant of Arrest May Issue. — (a) By the Regional Trial Court. — Within ten (10) days from the filing of the complaint or information, the judge shall personally evaluate the resolution of the prosecutor and its supporting evidence. He may immediately dismiss the case if the evidence on record clearly fails to establish probable cause. If he finds probable cause, he shall issue a warrant of arrest, or a commitment order if the accused has already been arrested pursuant to a warrant issued by the judge who conducted the preliminary investigation or when the complaint or information was filed pursuant to section 7 of this Rule. In case of doubt on the existence of probable cause, the judge may order the prosecutor to present additional evidence within five (5) days from notice and the issue must be resolved by the court within thirty (30) days from the filing of the complaint of information. (Emphasis supplied)
104See Mendoza v. People, et al., 733 Phil. 603, 604-605 (2014) [Per J. Leonen, Third Division].
105Mendoza v. People, et al., 733 Phil. 603, 608 (2014) [Per J. Leonen, Third Division].
106Asetre, et al. v. Asetre, et al., 602 Phil. 840, 852-853 (2009) [Per J. Quisumbing, Second Division].
107Valderrama v. People, et al., G.R. No. 220054, March 27, 2017 [Per J. Leonen, Second Division], citing Republic v. Caguioa, 704 Phil. 315, 333 (2013) [Per J. Brion, Second Division]. See also Unilever v. Tan, 725 Phil. 486, 493-494 (2014) [Per J. Brion, Second Division], and Asetre, et al. v. Asetre, et al., 602 Phil. 840, 853 (2009) [Per J. Quisumbing, Second Division].
108Unilever v. Tan, 725 Phil. 486, 495 (2014) [Per J. Brion, Second Division]
109 Id.
110Rollo, p. 481.
111 Id.
112 Id.
113 Id. at 448-450, Complaint-Affidavit.
114 Id. at 607-608.
115 Id. at 921.
116 Id. at 539-540.
117ABS-CBN Corporation v. Gozon, G.R. No. 195956, March 11, 2015, 753 SCRA 1, 78-79 [Per J. Leonen, Second Division].