SECOND DIVISION
HONGKONG
& SHANGHAI G.R. No. 146526
BANKING CORPORATION, LTD.
and CITIBANK, N.A.,
Petitioners, Present:
PUNO, J., Chairperson*
SANDOVAL-GUTIERREZ,**
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.
G.G. SPORTSWEAR
MANUFACTURING CORPORATION,
Respondent, Promulgated:
May 5, 2006
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D E C I S I O N
CORONA, J.:
The
doctrine of exhaustion of administrative remedies is a cornerstone of our
judicial system. The thrust of the rule on exhaustion of administrative
remedies is that the courts must allow the administrative agencies to carry out
their functions and discharge their responsibilities within the specialized
areas of their respective competence.[1]
This is a petition for review on certiorari[2]
from a decision of the Court of Appeals[3]
which reversed a decision of a hearing panel of the Securities and Exchange
Commission (SEC),[4]
and the appellate court’s resolution denying reconsideration.[5]
The
undisputed facts of the case follow.
On
August 29, 1997, respondent G.G. Sportswear (G.G.) filed a petition with the
SEC for a “Declaration of State of Suspension of Payments, for Approval of
Proposed Rehabilitation Plan and for Appointment of Management Committee,”
docketed as SEC Case No. 08-97-5752.[6]
On
September 3, 1997, the SEC hearing panel issued an order directing the
suspension of all actions, claims and proceedings against G.G. pending before
any court, tribunal, office, board, body and/or commission. The SEC hearing
panel likewise enjoined G.G. from disposing of any of its properties in any
manner except in the ordinary course of business and from making any payment
outside the legitimate and ordinary expenses of its business operation during
the pendency of the proceedings. The
hearing panel also scheduled a creditors’ meeting on October 29, 1997 and
directed the publication of a notice to this effect in a newspaper of general
circulation once a week for two (2) consecutive weeks.[7]
Three of respondent’s creditors,
Philippine Commercial and International Bank (PCIB), Dao Heng Bank and Standard
Chartered Bank filed an urgent motion for the immediate constitution of a
management committee. Another creditor,
FEB Leasing and Finance Corporation, on the other hand, filed a motion for
exclusion with manifestation. Despite notice, respondent’s representatives
failed to appear at the hearings, as well as at the scheduled creditors’
meeting.[8]
The hearing panel issued an order
dated October 30, 1997 dismissing respondent’s petition and lifting the
suspension order.[9]
Upon
motion, the hearing panel reconsidered its October 30, 1997 order and reset the
creditors’ meeting to December 12, 1997.
It also extended the suspension order for 30 days. Creditors PCIB, Dao Heng Bank and Standard
Chartered Bank questioned the jurisdiction of the hearing panel to have a
creditors meeting sans publication of the extended order of suspension.
Failing to get affirmative relief from the hearing panel, Dao Heng and Standard
Chartered elevated the matter to the SEC en banc by means of a petition
for certiorari with prayer for preliminary injunction. This was docketed as
SEC-AC No. 604. [10]
On
December 29, 1997, the hearing panel issued another order extending the
suspension to January 31, 1998.[11]
During
the hearings conducted on February 19, 1998 and April 17, 1998, respondent
presented as its lone witness Mainrado M. Laygo, its external auditor, to
substantiate the feasibility of its rehabilitation plans. Laygo’s
cross-examination was suspended due to respondent’s failure to attach to its
petition and/or to furnish the creditors with the requisite financial documents
and other records.[12]
It was then terminated for lack of material time.[13]
On February 26, 1998, the hearing
panel extended the suspension order one last time, to April 30, 1998.[14]
During the en banc hearings on
SEC-AC No. 604 regarding the injunction aspect of the petition, it was deduced
that respondent was merely suffering from liquidity problems rather than
insolvency. Respondent G.G. was therefore ordered to amend its petition and
limit the issue before the hearing panel to the propriety of the declaration of
suspension of payments. The SEC en
banc then enjoined the hearing panel from proceeding with SEC Case No.
08-97-5752 until after respondent had amended its petition accordingly.[15]
On
May 7, 1998, respondent filed its amended petition, which the hearing panel
admitted on November 11, 1998[16]
and set for hearing along with several motions filed by both respondent G.G. and
its creditors.
On
January 25, 1999, Solid Mills, Inc. and Unisol Industries Manufacturing Corporation
informed the hearing panel that respondent attempted to sell 500,000 pieces of
garments valued at US $1,500,000 to US Apparel and Collection Pte. Ltd., a
Singaporean company, but was enjoined by the High Court of Singapore upon
application by Dao Heng Bank in Suit No. 82 of 1999.[17] Respondent never informed the hearing panel
of this aborted transaction.
On
May 20, 1999, petitioner Hongkong & Shanghai Banking Corporation, Ltd. (HSBC)
manifested that it was exercising its right not to participate in the
proceedings in the amended petition.[18]
On July 26, 1999, respondent filed a
motion to withdraw its amended petition[19]
with a view to filing another one to include its sister corporation, Magic
Apparel Corporation (MAC), as co-petitioner.
This petition was docketed as SEC Case No. 17-99-6374.[20]
PCIB, Dao Heng Bank and Standard Charter Bank opposed the motion and prayed that
the amended petition be dismissed instead.[21]
In
an order dated August 18, 1999, the SEC hearing panel in SEC Case No.
17-99-6374 dismissed the joint petition
filed by respondent G.G. and its
sister company MAC.[22]
On September 9, 1999, respondent
filed a manifestation with the hearing panel that its amended petition be
maintained. The hearing panel resolved
to maintain the petition but, considering it on the merits, dismissed it.
On
October 13, 1999, respondent filed a “petition for certiorari, prohibition and
mandamus with a prayer for the issuance of a restraining order/injunction”[23]
with the Court of Appeals.
On May 31, 2000, the Court of Appeals
rendered the assailed decision reversing the SEC hearing panel and, on December
14, 2000, the assailed resolution denying reconsideration.
Hence,
the instant petition.
Petitioner
posits four arguments, namely:
I.
THERE WAS NO VALID GROUND FOR GG SPORTSWEAR TO DISPENSE WITH A MOTION FOR RECONSIDERATION.
II.
THERE
WAS NO VALID GROUND FOR GG SPORTSWEAR TO DISPENSE WITH AN APPEAL TO THE [SEC] EN
BANC.
III.
THE HEARING PANEL OF THE [SEC] DID NOT ACT WITH GRAVE
ABUSE OF DISCRETION IN DISMISSING THE PETITION.
IV.
GG SPORTSWEAR FAILED TO COMPLY WITH THE REQUIREMENTS
OF SECTION 5, RULE 7 OF THE RULES OF COURT.[24]
The
first three arguments can be compressed into one pivotal issue, namely, whether
or not the Court of Appeals should have dismissed respondent’s special civil
action for certiorari for failure to exhaust administrative remedies.
We
find for the petitioner.
The
remedies available to respondent were stated clearly enough in the 1999 SEC
Rules of Procedure. According to Rule VI,[25]
the proper remedy from an adverse decision of a hearing officer was an appeal
which, according to Rule XV,[26]
was to be made to the SEC en banc.
Respondent likewise had a remedy under Rule 43 of the 1997 Revised Rules
of Civil Procedure.[27]
Nowhere
in its petition did respondent explain why it did not appeal to the SEC en
banc. It simply attributed the
two-year delay of its case to the injunction imposed by the SEC en banc.
Nothing more.
The
exceptions to the doctrine of exhaustion of administrative remedies, as
enumerated in Province of Zamboanga del Norte v. Court of Appeals [28]
are: (1) when there is a violation of due process; (2) when the issue involved
is purely a legal question; (3) when the administrative action is patently
illegal amounting to lack or excess of jurisdiction; (4) when there is estoppel
on the part of the administrative agency concerned; (5) when there
is irreparable injury; (6) when the
respondent is a department secretary whose
acts as an alter ego of the President bears the implied and assumed
approval of the latter; (7) when to require exhaustion of administrative
remedies would be unreasonable; (8) when it would amount to a nullification of
a claim; (9) when the subject matter is a private land in land case
proceedings; (10) when the rule does not provide a plain, speedy and adequate
remedy, and (11) when there are circumstances indicating the urgency of
judicial intervention, and unreasonable delay would greatly prejudice the
complainant; (12) where no administrative review is provided by law; (13) where
the rule of qualified political agency applies and (14) where the issue of
non-exhaustion of administrative remedies has been rendered moot.
From among these exceptions,
respondent claims denial of due process by the hearing panel and grave abuse of
discretion on the part of the hearing panel amounting to lack or excess of
jurisdiction. The facts on record, however, do not bear out respondent’s
allegations. Respondent did not dispute
that the hearing panel extended the suspension order in its favor three times
for a total period of almost eight months. During this time, the panel provided
respondent more than ample opportunity to present its evidence. Neither did
respondent dispute the fact that the cross-examination of its witness, external
auditor Mainrado M. Laygo, was suspended during the hearing due to its own
failure to attach the requisite financial documents and records to its
petition, in violation of the SEC Policy Guidelines. When the cross-examination
was terminated, if anyone was deprived of due process, it was the creditors who
were unable to propound searching questions to respondent’s witness.
Respondent’s claim that it was not
given due process is therefore without basis.
Even more baseless is the argument
that an appeal to the SEC en banc was useless. Respondent itself, as a matter of fact, never
even raised such a ground in its petition; it was the Court of Appeals that erroneously
drew the conclusion that the SEC en banc could not supposedly provide
respondent with adequate relief.
According to the Court of Appeals, the reasons were based on its
understanding of respondent’s “perception.”[29]
In other words, there was no factual basis for such a conclusion.
In Union Bank v. Court of Appeals,[30]
petitioner Union Bank was likewise of the persuasion that the SEC en banc
would be unsympathetic to its pleas. In dismissing its petition for certiorari,
we said:
In this case, petitioner was actually not without
remedy to correct what it perceived and supposed was an erroneous assumption of
jurisdiction by the SEC, without having recourse immediately to the Court of
Appeals. Under Section 6(m) of P.D. No.
902-A, it has been expressly provided that “the decision, ruling or order of
any such Commissioner, bodies, boards, committees and/or officer may be
appealed to the Commission sitting en banc within thirty days after
receipt by the appellant of notice of such decision, ruling or order.” Such
procedure being available, could have been resorted to by petitioner which,
however, it chose to forego.
Furthermore, by taking up the matter with the SEC, it could still have
obtained an injunction which it similarly sought from the appellate court via
its petition for certiorari because the said body has been empowered by
Section 6(a) of P.D. No. 902-A “to issue preliminary or permanent
injunctions, whether prohibitory or mandatory, in all cases in which it has
jurisdiction…” Finally, petitioner itself hardly concealed the fact that it
distrusted altogether the whole mechanism of appeal to the SEC en banc,
which is why it did not find resort thereto imperative. Thus, it explicitly
stated that “it is a given that SEC will not reverse itself, therefore, any
reconsideration or appeal en banc would be a mere exercise of futility,
[particularly] when public respondent Associate Commissioner Fe Gloria is the
acting Chairperson of SEC.” What basis
does petitioner have in casting doubt on the integrity and competence of the
SEC en banc? This baseless, even reckless, reasoning hardly deserves an
iota of attention. It cannot justify a
procedural short-cut quite contrary to law.
If this were so, then the SEC en banc would not have been
empowered at all by the statute to take cognizance of appeals from its
subordinate units. But the lawmakers, having faith in a collegial body such as
the SEC en banc, precisely empowered it to act as such appellate body
cannot override the fact that the law mandates recourse thereto. (emphasis
ours)
The fact that the SEC was, at the
time respondent filed its special civil action for certiorari, empowered by PD
902-A[31]
to issue writs of injunction refuted respondent’s claim that urgency dictated
its decision to take its case straight to the Court of Appeals.
Furthermore, as earlier mentioned,
the SEC en banc enjoined the hearing panel from proceeding with SEC Case
No. 08-97-5752, pending amendment by respondent of its petition so as to limit
the issue before the hearing panel to the propriety of the declaration of
suspension of payments. Respondent never complained that the hearing panel
ignored that injunction. This clearly contradicts
the Court of Appeals’ statement that the hearing panel “would not respect
whatever directive the SEC en banc would issue.”[32]
It further puts into sharp relief the simple fact that respondent’s
suppositions (regarding the futility of an appeal to the SEC en banc) were
nothing but speculation.
Distrust of an administrative agency
alone, unsupported by concrete evidence, is not sufficient reason to dispense
with the doctrine of administrative remedies, which serves a very useful
purpose in ensuring the efficient and speedy disposal of cases. Once the courts
condone the circumvention of the mechanisms of administrative appeals on mere
suspicion of an agency’s integrity, the doctrine is as good as dead.
WHEREFORE, the instant petition is hereby GRANTED. The decision and resolution of the Court of
Appeals in CA-G.R. SP No. 55270 are hereby REVERSED. The decision of the SEC hearing panel dismissing
SEC Case No. 08-97-5752 is REINSTATED.
SO ORDERED.
Associate Justice
W E
C O N C U R:
(on leave)
Associate Justice
Chairperson
(No Part)
ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA
Acting Chairperson
Associate Justice
I attest that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
Acting Chairperson, Second Division
Pursuant to Article VIII, Section 13 of the Constitution
and the Division Chairman’s Attestation, I certify that the conclusions in the
above decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
ARTEMIO V. PANGANIBAN
Chief Justice
* On leave
** Acting Chairperson. No part
[1] Caballes v. Perez-Sison, G.R. No. 131759, March 23, 2004, 426 SCRA 98.
[2] Under Rule 45.
[3] CA Decision dated May 31, 2000 in CA-G.R. SP No. 55270, penned by Associate Justice Wenceslao I. Agnir and concurred in by Associate Justices Angelina Sandoval-Gutierrez (now Associate Justice of the Supreme Court) and Renato C. Dacudao of the Special Fifth Division of the Court of Appeals; Rollo, pp. 52-63.
[4] Order dated September 17, 2000 in SEC Case No. 08-97-5752, signed by Associate Commissioner Rosalinda U. Casiguran and Hearing Officer Marciano S. Bacalla; Rollo, p. 125-126.
[5] CA Resolution dated December 14, 2000 (affirming the May 31, 2000 Decision) in CA-G.R. No. SP No. 55270, penned by penned by Associate Justice Wenceslao I. Agnir and concurred in by Associate Justices Angelina Sandoval-Gutierrez (now Associate Justice of the Supreme Court) and Renato C. Dacudao of the Special Fifth Division of the Court of Appeals; Rollo, pp. 65-67.
[6] Rollo, pp. 68-75.
[7] Id., pp. 76-79.
[8] Id., p. 53.
[9] Id., pp. 80-81.
[10] Id., p. 54.
[11] Id., p. 82.
[12] Id., p. 22.
[13] Id., p. 54.
[14] Id., p. 440.
[15] Id., pp. 54-55.
[16] Id., pp. 91-92.
[17] Id., pp. 93-98.
[18] Id., pp. 101-103.
[19] Id., pp. 125-126.
[20] Id., pp. 107-121.
[21] Id., pp. 125-126.
[22] Id., pp. 123-124.
[23] Id., pp. 127-161.
[24] Rollo, pp. 28-29.
[25] SEC. 2. Finality of Decision. – The decision of the Hearing Officer, in the absence of appeal therefrom, shall become final and executory fifteen (15) days from the date of receipt thereof.
[26] SECTION 1. Appeal from the Resolution, Ruling or Order of the Hearing Officer. – Any decision, ruling or order of the Hearing Officer may be appealed by the aggrieved party to the Commission sitting En Banc within fifteen (15) days from receipt by the appellant of notice of such resolution, ruling or order.
[27] SECTION 1. Scope. – This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and Exchange Commission, Office of the President, Land Registration Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory Board, National Telecommunications Commission, Department of Agrarian Reform under Republic Act No. 6657, Government Service Insurance System, Employees Compensation Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law (emphasis ours).
SEC. 3. Where to appeal. – An appeal under this Rule may be taken to the Court of Appeals within the period and in the manner herein provided, whether the appeal involves questions of fact, of law, or mixed questions of fact and law.
[28] 396 Phil. 709 (2000), as quoted in SSS v. CA, G.R. No. 152058, September 27, 2004, 439 SCRA 239.
[29] Rollo, pp. 59-60.
[30] 352 Phil. 808 (1998).
[31] SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
a) To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the Rules of Court shall apply;
[32] Rollo, p. 60.