7.pua vs. Citibank Digest

G.R. No.
180064 September 16, 2013

JOSE U. PUA and BENJAMIN HANBEN U. PUA, Petitioners, vs. CITIBANK, N. A., Respondent.
PERLAS-BERNABE, J.:
Nature: Petition for review on certiorari

Topic: Disclosure requirement
Doctrine: Any person who: (a) Offers to sell or sells a security in violation of Chapter III; or (b) Offers to
sell or sells a security, whether or not exempted by the provisions of this Code, by the use of any means
or instruments of transportation or communication, by means of a prospectus or other written or oral
communication, which includes an untrue statement of a material fact or omits to state a material fact…
shall be liable to the person purchasing such security from him…
Facts: Petitioners alleged that they had been depositors of Citibank Binondo Branch (Citibank
Binondo) since 1996.Sometime in 1999, Guada Ang, Citibank Binondo’s Branch Manager, invited Jose to
a dinner party at the Manila Hotel where he was introduced to several officers and employees of
Citibank Hongkong Branch (Citibank Hongkong). A few months after, Chingyee Yau (Yau), Vice-President
of Citibank Hongkong, came to the Philippines to sell securities to Jose. They averred that Yau required
Jose to open an account with Citibank Hongkong as it is one of the conditions for the sale of the
aforementioned securities. After opening such account, Yau offered and sold to petitioners numerous
securities issued by various public limited companies established in Jersey, Channel I sands. The offer,
sale, and signing of the subscription agreements of said securities were all made and perfected at
Citibank Binondo in the presence of its officers and employees. Later on, petitioners discovered that the
securities sold to them were not registered with the Securities and Exchange Commission (SEC)and that
the terms and conditions covering the subscription were not likewise submitted to the SEC for
evaluation, approval, and registration. Asserting that respondent’s actions are in violation of Republic
Act No.8799, entitled the "Securities Regulation Code" (SRC), they assailed the validity of the
subscription agreements and the terms and conditions thereof for being contrary to law and/or public
policy.
Issue: (as contended by respondent) W/N petitioners’ complaint should be first filed with the
SEC and not directly before the RTC.
(RTC denied respondent’s motion to dismiss)

(CA reversed and set aside the RTC’s Orders and dismissed petitioners’ complaint for violation of the
doctrine of primary jurisdiction)
Ruling: NO. Respondent erroneously relied on the Baviera ruling to support its position that all
complaints involving purported violations of the SRC should be first referred to the SEC. A careful
reading of the Baviera case would reveal that the same involves a criminal prosecution of a purported
violator of the SRC, and not a civil suit such as the case at bar.
Records show that petitioners’ complaint constitutes a civil suit for declaration of nullity of contract and
sums of money with damages, which stemmed from respondent’s alleged sale of unregistered
securities, in violation of the various provisions of the SRC and not a criminal case such as that involved
in Baviera.
Sections 56, 57, 58, 59, 60, 61, 62, and 63 of the SRC pertain to civil suits involving violations of the same
law. Among these, the applicable provisions to this case are Sections 57.1 and 63.1 of the SRC.
Pertinent Provisions:
SEC. 57. Civil Liabilities Arising in Connection With Prospectus, Communications and Reports. – 57.1. Any
person who: (a) Offers to sell or sells a security in violation of Chapter III; or (b) Offers to sell or sells a
security, whether or not exempted by the provisions of this Code, by the use of any means or
instruments of transportation or communication, by means of a prospectus or other written or oral
communication, which includes an untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements, in the light of the circumstances under which they were
made, not misleading (the purchaser not knowing of such untruth or omission), and who shall fail in
the burden of proof that he did not know, and in the exercise of reasonable care could not have known,
of such untruth or omission, shall be liable to the person purchasing such security from him, who may
sue to recover the consideration paid for such security with interest thereon, less the amount of any
income received thereon, upon the tender of such security, or for damages if he no longer owns the
security. x x x x
SEC. 63. Amount of Damages to be Awarded. – 63.1. All suits to recover damages pursuant to Sections
56, 57, 58, 59, 60 and 61 shall be brought before the Regional Trial Court which shall have exclusive
jurisdiction to hear and decide such suits. The Court is hereby authorized to award damages in an
amount not exceeding triple the amount of the transaction plus actual damages.

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G.R. No.

180064 September 16, 2013

Nature: Petition for review on certiorari

(RTC denied respondent’s motion to dismiss)

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