G.R. No. L-62648 November 22, 1985
MARIA LUISA FLOR C. BAÑEZ, SPOUSES PETRONILO ESTEVES AND LUISA ESTEVES AND CONSUELO M. CAULBOY, petitioners, vs. DIMENSIONAL CONSTRUCTION TRADE AND DEVELOPMENT CORPORATION AND THE REGIONAL TRIAL COURT, BRANCH XLV, URDANETA, PANGASINAN, respondents.

FACTS

Petitioners filed a collection suit against respondent Dimensional Construction Trade and Development Corporation in the Court of First Instance (now RTC) to recover sums due under various promissory notes. After being served with summons, the corporation failed to file any responsive pleading. The trial court subsequently declared it in default, received petitioners’ evidence ex-parte, and submitted the case for decision.
Before judgment could be rendered, the corporation filed an omnibus motion to annul proceedings and dismiss the case. It argued that the Securities and Exchange Commission (SEC) possessed exclusive jurisdiction under P.D. 902-A, alleging the case involved devices or schemes amounting to fraud detrimental to the public or stockholders. Petitioners opposed, contending the defaulting defendant had no right to be heard and that their simple collection suit fell within regular court jurisdiction.

ISSUE

Whether the trial court committed grave abuse of discretion in dismissing the collection case for lack of jurisdiction in favor of the SEC.

RULING

Yes, the trial court committed grave abuse of discretion. The Supreme Court reversed the dismissal order. The legal logic centers on the nature of the action as pleaded. Petitioners’ complaint was a straightforward action for collection of sums due under matured promissory notes. It contained no allegation whatsoever of fraud, misrepresentation, or any intra-corporate scheme that would bring it under the exclusive jurisdiction of the SEC pursuant to Section 5 of P.D. 902-A. Jurisdiction is determined by the allegations in the complaint, not by defensive assertions.
Paradoxically, it was the defaulting defendant that injected the issue of fraud, a tactical move the Court viewed as a deliberate attempt to negate the effects of the default order and unduly delay the proceedings. The promissory notes indicated the funds were investments to be returned, not payments for stock subscriptions; thus, petitioners were not shareholders, and the case did not involve an intra-corporate controversy. Citing Sunset View Condominium Corp. vs. Campos, the Court ruled that collection suits by non-shareholders are not within the SEC’s exclusive jurisdiction. Requiring referral to the SEC after years of litigation, especially where the defendant presented no meritorious defense, would be a useless exercise. The trial court was ordered to render judgment based on the evidence already adduced.