Securities Cases

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Hall v. Geiger Jones Co. - 242 U.S. 539 (1917)

Syllabus

Case

U.S. Supreme Court

Hall v. Geiger Jones Co., 242 U.S. 539 (1917)

Hall v. Geiger Jones Company*

Nos. 438-440

Argued October 16, 17, 1916

Decided January 22, 1917

242 U.S. 539

Syllabus

The Ohio "Blue Sky Law," Supplement to Page & Adams' Ann.Gen.Code of Ohio, 1916, vol.

2, 6373-1 to 6373-24, examined as to its constitutionality and upheld.

In the exercise of the power to prevent fraud and imposition, Hutchinson Ice Cream Co. v.

Iowa, ante,242 U. S. 153,a state may forbid dealing in stocks and other securities within

its borders without a license, and subject the business to executive supervision.

The liability of a business to regulation is not necessarily dependent upon its liability to be

abolished under the police power.

Under the so-called "Blue Sky Law" of Ohio, dealers within its provisions (including

companies floating their own issues) are not licensed to sell stocks and other securities

unless an executive officer designated is satisfied of the good business repute of the

applicants and their agents, and licenses, when issued, may be revoked by him uponascertaining that the licensees are of bad business repute, have violated any provision of

the act, or have engaged, or are about to engage, under favor of their licenses, in

illegitimate business or fraudulent

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transactions; his findings, however, are made subject to judicial review. Heldthat the

powers thus conferred are not arbitrary, but consistent with due process under the

Fourteenth Amendment. Gundling v. Chicago,177 U. S. 183.

The fact that the statute designates a particular court to review the executive findings does

not affect its validity.

It is to be presumed that the executive officer will act properly in the public interest, and

not wantonly or arbitrarily.

Whether there is a constitutional liberty to buy securities on one's own judgment of value

without governmental interposition to protect from bad bargains will not be determined at

the suit of parties whose rights are involved only from the standpoint of sellers, but

Quaerewhether the state power does not extend to such guardianship over buyers.

The equal protection clause of the Fourteenth Amendment leaves the states at liberty to

regulate those activities which they deem conspicuous sources of existing evils without

embracing others which, but for this distinction, would fall in the same class.

A state law designed to prevent fraud in the selling of securities, which affects securities

coming from other states only in requiring that persons dealing in them within the state

shall be first licensed, shall file information concerning them and be subject in such dealing

to executive supervision, is not invalid as a direct burden on interstate commerce.

Quaereas to when and under what circumstances securities transported into a state may be

held to have lost their interstate character?

230 F. 233 reversed.

These cases were heard together in the district court and there disposed of in one opinion.

They were argued and submitted together here. The bills of complaint attacked from

different angles the so-called Blue Sky Law of the State of Ohio, which provides:

"Sec. 6373-1. Except as otherwise provided in this act, no dealer shall, within this state,

dispose or offer to dispose of any stock, stock certificates, bonds, debentures, collateral

trust certificates, or other similar instruments (all hereinafter termed 'securities') evidencing

title to or interest in property, issued or executed by any private or quasipublic corporation,

copartnership, or association

Page 242 U. S. 541
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(except corporations not for profit) or by any taxing subdivision of any other state, territory,

province, or foreign government, without first being licensed so to do as hereinafter

provided."

"Sec. 6373-2. . . . The term 'dealer,' as used in this act shall be deemed to include any

person or company, except national banks, disposing or offering to dispose, of any such

security, through agents or otherwise, and any company engaged in the marketing or

flotation of its own securities either directly or through agents or underwriters or any stock

promotion scheme whatsoever, except:"

"(a) An owner, not the issuer of the security, who disposes of his own property, for his own

account; when such disposal is not made in the course of repeated and successive

transactions of a similar character by such owner, or a natural person, other than the

underwriter of the security, who is a bona fideowner of the security and disposes of his own

property for his own account . . ."

"As used in this act, the term 'company' shall include any corporation, copartnership, or

association, incorporated or unincorporated, and whenever and wherever organized; . . ."

The Geiger-Jones Company is an Ohio corporation, licensed to do the business of buying

and selling investment securities, and of buying and selling the stocks and bonds of

industrial corporations. It has a regularly established clientage, it alleges, of about 11,000

persons residing in the State of Ohio and other states, and has sold and there are now

outstanding in the hands of persons to whom it has sold, securities of about twenty totwenty-five million dollars par value, and has stockholders in Ohio and other states. That

the securities above referred to consist of securities of over twenty corporations of Ohio and

other states and foreign countries. That it is still selling such

Page 242 U. S. 542

securities and is and has been engaged in intrastate, interstate, and foreign commerce.

The appellee, Don C. Coultrap, in No. 439, repeats the allegations made by Geiger-Jones

Company, with enumeration of some of the companies in whose stocks and securities that

corporation is engaged in dealing, and alleges that he is the owner and holder of its stocks

and of the stocks of other companies, and is engaged in buying and selling and offering to

sell such stocks in the State of Ohio and in the State of Pennsylvania, and in the course of

such transactions travels back and forth between those states and conducts a

correspondence from Pennsylvania to Ohio, and receives certificates evidencing the

ownership of stock from the State of Ohio, and sends them from Pennsylvania to Ohio.


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William R. Rose, one of the appellees in No. 440, alleges himself to be a citizen of Ohio and

engaged in that state in the business of buying and selling investment securities, and

particularly the stocks and bonds of industrial corporations, and that he has built up and

maintained a large and profitable business and an enviable reputation.

The RiChard Auto Manufacturing Company, the other appellee, is a corporation of West

Virginia, but has its principal place of business in Cleveland, Ohio, and has a contract to

manufacture and is ready to manufacture automobiles under certain patents obtained by

Francois RiChard as soon as and not until the stock of the company can be put upon the

market and a sufficient amount realized therefrom for such purposes.

That on September 25, 1914, and prior thereto, Rose was actively engaged in buying and

selling stocks and bonds of industrial corporations and investment securities in general, and

particularly the stock of the RiChard Auto Manufacturing Company, of which company he

was the secretary, and for which business he had unusual aptitude and was able to

prosecute more successfully "than any

Page 242 U. S. 543

other man whose services were available to said corporation."

That, on September 25th, he was arrested upon an affidavit filed by one H.R. Young, a

subordinate and deputy of the state Superintendent of Banks and Banking for the State of

Ohio, under whose immediate direction and control he was then acting. Rose, upon being

taken before a magistrate, waived examination and was "bound over to the grand jury" of

Cuyahoga County, which jury subsequently returned an indictment against him for violation

of the law.

The grievance alleged in Nos. 438 and 439 is that, under the laws of the state, the Attorney

General is threatening to give an opinion to Hall, the superintendent of Banks and Banking,

that the law is valid and that it is the duty of Hall to cancel appellees' license, and that this

will result in irreparable injury to appellees and to their security holders from the publicity

they will obtain. And it is apprehended that Hall will act on such advice, believing that he is

bound by the opinion of the Attorney General.

The statute is attached to the bills, and is asserted to be unconstitutional, invalid, and void,

and the particulars are enumerated to be that it will deprive appellees of their property

without due process of law, deny them the equal protection of the laws, impose burdens on

interstate commerce, confer executive powers, delegate such powers and legislative


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powers, in violation of the Constitution of Ohio. Appellees consider themselves remediless

except in equity, and pray injunctions interlocutory and permanent.

The complaint of Rose and the Auto Company is that Hall, Superintendent of Banks and

Banking, is actively engaged in the prosecution of the proceedings against Rose, and has,

together with the prosecuting attorney, interfered with, interrupted, and completely

prevented Rose from carrying on his business in the State of Ohio, and especially in

attempting upon his part to dispose of and

Page 242 U. S. 544

sell the stock of the Auto Company, and that the Prosecuting Attorney and the Sheriff of

Cuyahoga County, unless restrained, will assist and actively cooperate with Hall, to the

great and irreparable injury of both Rose and the Auto Company.

The charge is amplified by details which it is unnecessary to give, and the law is charged to

be unconstitutional in the same particulars as those enumerated by the Geiger-Jones

Company.

Injunctions temporary and perpetual are prayed.

The district court in the Geiger-Jonescase considered that it was without power to enjoin

the Attorney General, but decided that it could and should, under the charges of the bill,

restrain Hall from further action under the law, the restraint to continue until the hearing

and determination of the applications of the respective complainants for interlocutoryinjunctions.

The applications subsequently came to be heard before three judges, and Hall and all of his

employees and subordinates were enjoined from attempting to enforce the provisions of the

law. There was an exception in No. 440, as follows:

". . . except such proceedings as may be deemed proper in any criminal action pending

against said complainants or either of them when the complaint in this cause was filed."

The injunctions in all the cases were to continue until final decision of further order of the

court. The court declared the law to be obnoxious to all of the charges made by the

respective complainants against it. 230 F. 233.

Page 242 U. S. 548


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G.R. Nos. L-46076 and L-46077 June 12, 1939

THE PEOPLE OF THE PHILIPPINES,plaintifff-appellee,vs.JACOB ROSENTHAL and NICASIO OSMEA,defendants-appellants.

Claro M. Recto and Hilado, Lorenzo and Hilado for appellant Rosenthal.Jose M. Casal for appellant Osmea.Office of the Solicitor-General Tuason for appellee.

LAUREL, J.:

Appellants, Jacob Rosenthal and Nicasio Osmea, were charged in the Court of First Instance of Manilawith having violated Act No. 2581, commonly known as the Blue Sky Law, under the followinginformations:

CASE NO. 52365

That in or about and during the period comprised between October 1, 1935 and January 22,1936, both dates inclusive, in the City of Manila, Philippine Islands, and within the jurisdiction ofthis court, the said Nicasio Osmea and Jacob Rosenthal, two of ten promoters, organizers,founders and incorporators of, the former being, in addition, one of the members of the board ofdirectors of, the O.R.O. Oil Co., Inc., a domestic corporation organized under the laws of thePhilippines and registered in the mercantile registry of the Bureau of Commerce, with centraloffice in the said city, the main objects and purposes of which were "to mine, dig for, or otherwiseobtain from earth, petroleum, rock and carbon oils, natural gas, other volatile mineral substancesand salt, and to manufacture, refine, prepare for market, buy, sell and transport the same in crudeor refined condition", and the capital thereof in their articles of incorporation, the accused hereinincluded, consisting of 3,000 shares without par value, 400 shares of which having beensubscribed by the said accused at 200 shares each and paid partly by them at the price of onlyP5 per share, according to the said agreement which shares were speculative securities,because the value thereof materially depended upon proposed promise for future promotion and

development of the oil business above mentioned rather than on actual tangible assets andconditions thereof, did then and there, with deliberate intent of evading the provisions of sections2 and 5 of the said Act No. 2581, and conspiring and confederating together and helping eachother, willfully, unlawfully and feloniously trade in, negotiate and speculate with, their sharesaforesaid, by making personally or through brokers or agents repeated and successive sales ofthe said shares at a price ranging from P100 to P300 per share, as follows:

The accused Nicasio Osmea sold 163 shares to nine different parties, and the accused JacobRosenthal sold 21 shares to seven others, without first obtaining the corresponding written permitor license from the Insular Treasurer of the Commonwealth of the Philippines, as by law required.

CASE NO. 52366

That in or about and during the period comprised between October 1, 1935, and January 22,1936, both dates inclusive, in the City of Manila, Philippine Islands, and within the jurisdiction ofthis court, the said Nicasio Osmea and Jacob Rosenthal, two of the ten promoters, organizers,founders and incorporators of, the former being, in addition, one of the members of the board ofdirectors of, the South Cebu Oil Co., Inc., a domestic corporation organized under the laws of thePhilippines and registered in the mercantile registry of the Bureau of Commerce, with centraloffice in the said city, the main objects and purposes of which were "to mine, dig for, or otherwiseobtain from earth, petroleum, rock or carbon oils, natural gas, other volatile mineral substancesand salt, and to manufacture, refine, prepare for market, buy, sell and transport the same in crude


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and refined condition", and the capital stock of which, as per agreement of all the incorporatorsthereof in their articles of incorporation, the accused herein included, consisting of 2,800 shareswithout par value, 200 shares of which having been subscribed by the accused Nicasio Osmea,and 100 shares of which having been subscribed by the accused Jacob Rosenthal and paid byboth at the price of only P5 per share, according to the said agreement, which shares werespeculative securities, because the value thereof materially depended upon proposed promise offuture promotion and development of the oil business above mentioned rather than on actualtangible assets and conditions thereof, did then and there, with deliberate intent of evading theprovisions of sections 2 and 5 of Act No. 2581, and conspiring and confederating together andhelping one another, willfully, unlawfully and feloniously trade in, negotiate and speculate with,their shares aforesaid, by making personally or through brokers or agents repeated andsuccessive sales of the said shares at a price ranging from P100 to P300 per share, as follows:

The accused Nicasio Osmea sold 185 shares to nine different parties, and the accused JacobRosenthal sold 12 shares to seven others, without first obtaining the corresponding written permitor license form the Insular Treasurer of the Commonwealth of the Philippines, as by law provided.

Upon motion of Jacob Rosenthal, the Court of First Instance of Manila granted him separate trialalthough, when the cases were called for hearing, the court acceded to the motion of the prosecution that

the two cases be tried jointly inasmuch as the evidence to be adduced by the government therein was thesame, without prejudice to allowing the defendants to present their proof separately. After trial, the lowercourt, on March 22, 1937, in separate decisions, found the defendants guilty as charged in theinformations. In case No. 52365 Jacob Rosenthal was sentenced to pay a fine of P500, with subsidiaryimprisonment in case of insolvency, and to pay one-half of the costs; Nicasio Osmea was sentenced topay a fine of P1,000, with subsidiary imprisonment in case of insolvency, and to pay one-half of the costs.In case No. 52366 Jacob Rosenthal was sentenced to pay a fine of P500, with subsidiary imprisonment incase of insolvency, and to pay one-half of the costs; Nicasio Osmea was sentenced to pay a fine ofP2,000, with subsidiary imprisonment in case of insolvency, and to pay one-half of the costs. Thedefendants duly perfected their appeal from these judgments and the cases were originally elevated tothe Court of Appeals but, upon motion of the Solicitor-General, the same were forwarded to this court inview of the fact that the constitutionality of Act No. 2581 has been put in issue by appellants. Twoseparate briefs have been filed by Rosenthal and Osmea. In the brief for appellant Rosenthal thefollowing "joint assignment of errors" is made:

1. In declaring that according to the report of the geologist contracted by the O.R. Oil Co. and theSouth Cebu Oil Co. to explore the properties leased to said companies, "no habia ningunaindicacion de que hubiese petroleo en aquellos terrenos", when in truth what the report statedwas that in so far as the O.R.O. Oil Co. land was concerned, the territory covered by the lease iffull of possibilities; and with respect to the South Cebu Oil Co. lease, that no further investigationsand expenses be made "unless favorable test results are obtained on the northern lease."

2. In declaring that the exploration leases were, subsequent to the findings of the geologist,cancelled by the government, implying thereby that as no oil was found in said lands, the leaseswere cancelled; when in truth the cancellation was based on supposed violation of thoseprovisions of the corporation law prohibiting the setting up of interlocking directorates.

3. In declaring that the defendant, of his 200 shares of stock in the O.R.O. Oil Co., sold twenty-one shares to different persons and on different dates, one share having been sold directly to oneE.F. Pimley; five, thru a firm of brokers known as Mackay & McCormick, to Arthur Hoyer, Wm.Scheunig, and Modesto Bautista, in the proportion of two, two and one, respectively; and fifteenshares directly to Henry J. Belden, R.T. Fitzimmons and D.P. O'Brien, in the proportion of fiveshares to each of themwhen in truth only that to E.F. Pimley was sold to the latter by thedefendant, while those eventually transferred to Hoyer, Scheunig and Bautista were sold directlyto the said firm Mackay & McCormick, which bought them on its own risk and account, and the


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remaining fifteen transferred to Belden, O'Brien, and Fitzimmons were loaned by Rosenthal toNicasio Osmea, who was not until now either returned those shares or paid their value.

4. In also declaring that of his 100 shares of stock in the South Cebu Oil Co., the defendant soldtwelve to various persons and on different dates, when in truth only one of these shares was soldby the defendant to E.F. Pimley, and the remaining eleven, two of which were transferred to

Arthur Hoyer, two to William Scheunig, one to Jose de la Fuente, one to Crispin Llamado, one toA.M. Opisso, and four to Ines Galano, were sold and transferred, in one single transaction, to thesaid firm of brokers directly, which firm bought said shares on its own risk and account.

5. In declaring that the shares sold to Mackay & McCormick were brought by the latter on credit atP250 each, to be resold by it at P300 each, and that out of the proceeds of the sale of theseshares the defendant received the price agreed upon between him and the said brokerage firm,or P250 per share, when in truth and in fact there was no agreement between the parties as towhether the said firm was to sell said shares to others or whether those shares were to be keptand retained by it on its own risk and account.

6. In declaring that the corporations had not begun exploration work on the territory covered bytheir leases, and that they had no tangible properties.

7. In declaring that while the defendant needed no permit to sell his own stock, the corporationsas issuer being the ones bound to obtain the permit required by the Blue Sky Law, neverthelesshe (the defendant) was guilty of a violation of said law because the possession of the shares heldand sold by him was not in good faith, in that his acquisition thereof was not made in the ordinaryand normal course of the business of the corporations, but that said shares were purchased toindirectly promote the enterprise for which the corporations were formed; the said defendanthaving paid in full to the corporations the value of said shares of stock.

8. In holding as proven that the possession of the defendant of his own stock, which he paid for infull, was not a possession in good faith, because he, as an incorporator (fundador), should haveknown that no permit in writing had been issued the corporations by the Insular Treasurer for thesale of said stock.

9. In overruling the objection to the admission of Exhibit 1-b, and in holding that a permit had notbeen issued by the Insular Treasurer for the sale of the stocks of the corporations.

10. In holding that there were repeated and successive sales made by the defendant Rosenthalof his own shares of stock.

11. In holding that although the defendant was the absolute owner of the stock he sold, hisrepeated and successive sales of such stock prove that this claim of ownership (esta pretensionde propriedad) was but a means employed by him to sell said stock at prices very much higherthan those he paid for them.

12. In holding that said stock was sold by the defendant without the required permit having beenfirst issued by the Insular Treasurer, and that the sale was effected as if such permit had beenactually issued (como si en realidad pudieran venderse por haberse expedido tal permiso).

13. In holding that as a result of an investigation conducted by the City Fiscal, the defendantrefunded to Belden, O'Brien and Fitzimmons and others the amount they paid for the stock theypurchased.


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14. In holding that the opinion given by the Chief of the Insurance Division of the Office of theInsular Treasurer to the effect that the defendant could sell the said stock without a permit as longas no false representations were made by the said defendant, can not and does not exempt thelatter from criminal responsibility even though no false representations whatsoever were made bythe aforesaid defendant.

15. In holding that theprima faciepresumption in section 8 of the law to the effect that the claimof ownership is not bona fidewhen repeated and successive sales of such stock are effected, hasbeen totally destroyed by the fact that said stock absolutely belongs to the defendant, and in notfurther holding that because of such absolute ownership the defendant could have legallydisposed of such stock in as many sales as he saw fit without any permit from the InsularTreasurer.

16. In not holding that the Blue Sky Law contravenes the constitutional provisions of the JonesAct in so far as such law constitutes an undue delegation of legislative powers to the InsularTreasurer, and in so far as it does not afford equal protection before the law.

17. In not absolving the defendant.

In the brief for appellant Osmea the following "relacion conjunta de errores" is in turn submitted:

1. Al no sobreseer esta causa despues de promulgada la Ley No. 83 del Commonwealth, noobstante haberse llamado su atencion al hecho de que esta Ley derogaba la Ley No. 2581 de laLegislatura Filipina, bajo cuyas disposiciones ha sido procesado el acusado.

2. Al condenar al acusado por infraccion de la "Blue Sky Law", no obstante reconocerse en ladecision que consta en las pruebas que el acusado Osmea no ha of recido en venta ninguna deaquellas acciones, ni ha hecho manifestaciones falsas a nadie para poder venderlas, y que lamayor parte, si no todos los que las compraron, estaban satisfechos de la inversion de su dineroen la adquisicion de tales acciones.

3. Al condenar al acusado por haber vendido acciones especulativas sin licencia, cuando no seprobo: (a) que las acciones de la O.R.O. Oil Co., Inc., y de la South Cebu Oil Co., Inc., eranespeculativas por su naturaleza, y (b) que el acusado Osmea carecia de licencia paravenderlas.

4. Al declarar que la posesion por el acusado Osmea de sus acciones de la O.R.O. Oil Co., Inc.,y de la South Cebu Oil Co., Inc., no era de buena fe y que no las habia adquirido por su propiacuenta sino para la promocion indirecta de un provecto de negocio o empresa especulativa.

5. Al no declarar que la "Blue Sky Law" es contraria a las normas constitucionales que gozaba altiempo de su promulgacion : (1) porque contiene en sus disposiciones una delegacion indebidade facultades legislativas; (2) porque es vaga e incierte en sus disposiciones y, por tanto, nula; y(3) porque infringe el derecho de igual proteccion ante la ley, viola la libertad de contratacion y

contraviene el derecho de adquirir, gozar y disponer libremente de la propriedad privada, siendosu promulgacion, por tanto, un acto de opresion y de verdadera tirania.

6. Al no absolveral acusado Nicasio Osmea..

To meet the foregoing errors assigned by the appellants, plaintiff-appellee contends:

(a) That the enactment of Commonwealth Act No. 83 did not have the effect of relievingappellants from criminal liability.


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(b) That the appellants acted as promoters of the O.R.O. Oil Co. and the South Cebu Oil Co.

(c) That the shares of the two corporations are speculative in nature.

(d) That the appellants sold their shares in said corporations without permit or knowing that thelatter did not have the permit required by law.

(e) That the appellants are not entitled to the exemption provided in section 8 of the Blue Sky Law(Act No. 2581).

(f) That the Blue Sky Law is valid and constitutional.

Most of the errors assigned by the appellants deal with questions of fact. This is particularly true withreference to errors one, two, three, four, five, six, seven, eight, nine, ten, eleven, twelve and thirteen ofappellant Jacob Rosenthal, and error four of appellant Nicasio Osmea. There is no material discrepancyregarding the facts, and we shall proceed to consider the legal questions propounded, which are in themain set forth by the Solicitor-General in his brief.

It is contended by the appellants that Act No. 2581 is unconstitutional on three grounds. (1) That itconstitutes an undue delegation of legislative authority to the Insular Treasurer: (2) that it does not affordequal protection before the law; and (3) that it is vague and ambiguous.

Under section 2 of Act No. 2581, every person, partnership, association, or corporation attempting to offerto sell in the Philippines speculative securities of any kind or character whatsoever, is under obligation tofile previously with the Insular Treasurer the various documents and papers enumerated therein and topay the required tax of twenty pesos. Certain securities listed in section 3 are exempted from theoperation of the Act. Section 5 imposes upon the Insular Treasurer the mandatory duty to examine thestatements and documents thus filed and the additional duty to make or cause to be made, if deemedadvisable by him, a detailed examination of the affairs of the applicant. Section 5 also provides that"whatever the said Treasurer of the Philippine Islands is satisfied, either with or without the examinationherein provided, that any person, partnership, association or corporation is entitled to the right to offer itssecurities as above defined and provided for sale in the Philippine Islands, he shall issue to such person,partnership, association or corporation a certificate or permit reciting that such person, partnership,association or corporation has complied with the provisions of this Act, and that such person, partnership,association or corporation, its brokers or agents are entitled to offer the securities named in saidcertificate or permit for sale"; that "said Treasurer shall furthermore have authority, whenever in hisjudgment it is in the public interest, to cancel said certificate or permit", and that "an appeal from thedecision of the Insular Treasurer may be had within the period of thirty days to the Secretary of Finance."

Appellants argue that, while Act No. 2581 empowers the Insular Treasurer to issue and cancel certificatesor permits for the sale of speculative securities, no standard or rule is fixed in the Act which can guidesaid official in determining the cases in which a certificate or permit ought to be issued, thereby makinghis opinion the sole criterion in the matter of its issuance, with the result that, legislative powers beingunduly delegated to the Insular Treasurer, Act No. 2581 is unconstitutional. We are of the opinion that theAct furnishes a sufficient standard for the Insular Treasurer to follow in reaching a decision regarding theissuance or cancellation of a certificate or permit. The certificate or permit to be issued under the Act mustrecite that the person, partnership, association or corporation applying therefor "has complied with theprovisions of this Act", and this requirement, construed in relation to the other provisions of the law,means that a certificate or permit shall be issued by the Insular Treasurer when the provisions of Act No.2581 have been complied with. Upon the other hand, the authority of the Insular Treasurer to cancel acertificate or permit is expressly conditioned upon a finding that such cancellation "is in the publicinterest." In view of the intention and purpose of Act No. 2581 to protect the public against "speculativeschemes which have no more basis than so many feet of blue sky" and against the "sale of stock in fly-by-night concerns, visionary oil wells, distant gold mines, and other like fraudulent exploitations", we


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incline to hold that "public interest" in this case is a sufficient standard to guide the Insular Treasurer inreaching a decision on a matter pertaining to the issuance or cancellation of certificates or permits. As weobserved in the case of People vs. Fernandez and Trinidad (G.R. No. 45655, June 15, 1938), "siendo elobjecto de la ley el evitar especulaciones ruinosas, es claro que el interes publico, es, y debe ser la razonen que el Tesorero Insular deba basar sus resoluciones." And the term "public interest" is not without asettled meaning.

Appellant insists that the delegation of authority to the Commission is invalid because the statedcriterion is uncertain. That criterion is the public interest. It is a mistaken assumption that this is amere general reference to public welfare without any standard to guide determinations. Thepurpose of the Act, the requirement it imposes, and the context of the provision in question showthe contrary. . . . (New York Central Securities Corporation vs.U.S.A., 287 U.S., 12, 24, 25; 77Law. ed., 138, 145, 146.) (See alsoSchenchter Poultry Corporation vs.U.S., 295 U.S., 495; 540;79 Law. ed., 1570, 1585; Ferrazzini vs.Gsell, 34 Phil., 697, 711, 712.)

In this connection, we cannot overlook the fact that the Act No. 2581 allows an appeal from the decisionof the Insular Treasurer to the Secretary of Finance. Hence, it cannot be contended that the InsularTreasurer can act and decide without any restraining influence.

The theory of the separation of powers is designed by its originators to secure action and at the sametime to forestall over action which necessarily results from undue concentration of powers, and therebyobtain efficiency and prevent despotism. Thereby, the "rule of law" was established which narrows therange of governmental action and makes it subject to control by certain legal devices. As a corollary, wefind the rule prohibiting delegation of legislative authority, and from the earliest time American legalauthorities have proceeded on the theory that legislative power must be exercised by the legislativealone. It is frankness, however, to confess that as one delves into the mass of judicial pronouncements,he finds a great deal of confusion. One thing, however, is apparent in the development of the principle ofseparation of powers and that is that the maximum of delegatus non potest delegare or delegata potestasnon potest delegare,attributed to Bracton (De Legibus et Consuetudinious Angliae, edited by G.E.Woodbine, Yale University Press [1922], vol. 2, p.167) but which is also recognized in principle in theRoman Law (D.17.18.3), has been made to adapt itself to the complexities of modern governments,giving rise to the adoption, within certain limits, of the principle of "subordinate legislation", not only in the

United States and England but in practically all modern governments. The difficulty lies in the fixing of thelimit and extent of the authority. While courts have undertaken to lay down general principles, the safest isto decide each case according to its peculiar environment, having in mind the wholesome legislativepurpose intended to be achieved.

Counsel for appellant Jacob Rosenthal also argues that the Insular Treasurer possesses "thediscretionary power to determine when a security is a speculative security and when it is not" because "heis given the power to compel any corporation, association or partnership already functioning, to surrenderto him for examination its books and accounts enumerated in section 2, 'whenever he has reasonableground to believe that the securities being sold or offered for sale are of a speculative character.'" Itshould be observed, however, that section 1 of Act No. 2581 defines and enumerates what are"speculative securities" and all the other provisions of the Act must be read and construed in conjunctionand harmony with said section.

Laws of the different states of the American Union similar in nature to Act No. 2581 were assailed onconstitutional grounds somewhat analogous to those involved in the case at bar, but the decisions of boththe state courts and the Supreme Court of the United States have upheld their constitutionality. In thecase of Hall vs.Geiger-Jones Co. (242 U.S., 539), the contention was made that the Blue Sky Law ofOhio, which requires the commissioner before granting a license to "be satisfied of the good repute inbusiness of such applicant and named agents", and which empowers said commissioner to revoke thelicense or refuse to renew it upon ascertaining that the licensee "is of bad business repute; has violatedany provisions of this act or has engaged, or is about to engage, under favor of such license, inillegitimate business or in fraudulent transactions", is unconstitutional because the law has failed to give a


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standard to guide or determine the decision of the commissioner leaves "room for the play and action ofpurely personal and arbitrary power", but the Supreme Court of the United States overruled thecontention and held:

Besides it is certainly apparent that if the conditions are within the power of the State to impose,they can only be ascertained by an executive officer. Reputation and character are quite tangible

attributes, but there can be no legislative definition of them that can automatically attach to oridentify individuals possessing them, and necessarily the aid of some executive agency must beinvoked. The contention of appellees would take from government one of its most essentialinstrumentalities, of which the various national and state commissions are instances. But thecontention may be answered by authority. In Gundling vs.Chicago (177 U.S., 183), an ordinanceof the City of Chicago was passed on which required a license of dealers in cigarettes and as acondition of the license that the applicant, if a single individual, all of the members of the firm, if aco-partnership, and any person or persons in charge of the business, if a corporation, should beof good character and reputation, and the duty was delegated to the mayor of the city todetermine the existence of the conditions. The ordinance was sustained. To this case may beadded Red "C" Oil Manufacturing Co. vs.North Carolina (222 U.S., 380, 394, and cases cited);Mutual Film Corporation vs.Industrial Commission of Ohio (236 U.S., 230); Brazee vs.Michigan(241 U.S., 340, 341). See alsoReetz vs.Michigan, (188 U.S., 505); Lieberman vs.Van de Carr(199 U. S., 552). (Pp. 553, 554.)

In the case of Leach vs.Daugherty (238 P., 160), where the contention was advanced that section 6 ofthe Corporate Securities Act of California which authorized the corporation commissioner to refuse togrant a broker's certificate, if he is not satisfied of the "good business reputation of the applicant", isunconstitutional because "no rules, regulations, or specifications are set forth in the said CorporateSecurities Act defining what shall constitute 'good business reputation,'" it was ruled that "Consideringsuch objection, it would appear that the leading case of Hall vs.Geiger-Jones Co. (242 U.S., 539; 37 Sup.Ct., 217; 61 Law. ed., 480; L.R.A., 1917F, 514; Ann. Cas. 1917C, 643), is so conclusively against thepetitioner's contention that little room is left for argument", and that "it is well-settled principle of law in thisstate that by legislative act a commission or board may be empowered to ascertain the existence of facts,upon the finding of which may depend the right to continue in the practice of a profession or a regulatedbusiness."

In the case of G.F. Redmond & Co. vs.Michigan Securities Commission (222 Mich., 1; 192 N.W., 688), inwhich it was argued that the provision in section 11955 of the Compiled Laws of 1915 (Michigan Blue SkyLaw), authorizing the commission to revoke a license for "good cause" upon notice to the dealer and ahearing duly had, is unconstitutional because the term "good cause" is so vague and indefinite that thelaw practically vested upon the commission arbitrary powers, the court said:

The term "good cause" for revocation, as employed in the statute, relates so clearly to theconduct of the licensed business, within the limits fixed by law, as to negative any arbitrary officialaction, and is so comprehensive of unlawful, irregular, fraudulent, unauthorized, and forbiddenbusiness management and transactions conducted as to demand no more particular specificationof its meaning and its application.

Must the law map out , for the guidance of the licensee, a code of ethics and post danger signalsagainst inhibited and dishonest practices? The defendant had no right to have the conduct of itsbusiness charted by specifications of forbidden practices involving revocation of the license. Thegeneral scope and expressed purpose of the law, together with open and fair dealing, entered thelicense, and transgression thereof constituted good cause for revocation thereof. (P. 689.)

In the case of State ex rel.Central Steam Heat & Power Co. vs.Gettle (Wis. [1928], 220 N.W., 201),where it was argued that the requirement of the Wisconsin Blue Sky Law (St. 1925, sec. 184.09 [3]; Law1927, c. 444) that the Railroad Commission shall find that the "financial condition, plan of operation, andthe proposed undertakings of the corporation are such as to afford reasonable protection to the


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purchasers of the securities to be issued", is unconstitutional for the reason that (1) the Legislature has nopower to regulate the issuance of securities in order to protect the investing public; (2) the Legislaturedoes not provide a standard to control the commission; (3) the statute is so indefinite and uncertain in itsmeaning as to be incapable of administration; and (4) the statute delegates to the railroad commissionlegislative power, the court said:

This is but a usual provision found in the many so-called Blue Sy Laws, the constitutionality ofwhich has been upheld by the courts generally. The constitutionality of similar provisions hasbeen so thoroughly considered by this court that further discussion thereof is unnecessary. Thefollowing cases abundantly establish the constitutionality of this provision. (State exrel.Minneapolis, St. Paul & Sault Ste. Marie Railway Company vs.Railroad Commission ofWisconsin, 137 Wis., 80; 117 N.W., 846; Appleton Water Works Co.vs.Railroad Commission ofWisconsin, 154 Wis., 121; 142 N.E., 476; 47 L.R.A. [N.S.], 770; Ann. Cas. 1915B, 1160; State exrel.City of Milwaukee vs.Milwaukee Electric Railway & Light Co., 169 Wis., 183; 172 N.W., 230;City of Milwaukee vs.Railroad Commission of Wisconsin, 183 Wis., 498; 196 N.W., 853;Wisconsin Southern Ry. Co. vs.Railroad Commission of Wisconsin, 185 Wis., 313; 201 N.W.,244; Kretuzervs.Westfahl, 187 Wis., 463; 204 N.W., 595.)

Another ground relied upon by appellants in contending that Act No. 2581 is unconstitutional is that it

denies equal protection of the laws because the law discriminates between an owner who sells hissecurities in a single transaction and one who disposes of them in repeated and successive transactions.In disposing of this contention we need only refer to the case of Hall vs.Geiger-Jones Co., supra, whereinthe Supreme Court of the United States held:

"Discriminations are asserted against the statute which extend, it is contended, to denyingappellees the equal protection of the laws. Counsel enumerates them as follows:

"Prominent among such discriminations are . . . between an owner who sells his securities in asingle transaction and one who disposes of them in successive transactions; . . . "

We cannot give separate attention to the asserted discriminations. It is enough to say that theyare within the power of classification which a state has. A state "ay direct its law against what it

deems the evil as it actually exists without covering the whole field of possible abuses, and it maydo so none the less that the forbidden act does not differ in kind from those that are allowed . . ..If a class is deemed to present a conspicuous example of what the legislature seeks to prevent,the 14th Amendment allows it to be dealt with although otherwise and merely logically notdistinguishable from others not embraced in the law.

Counsel for appellant Nicasio Osmea further alleges that Act No. 2581 is unconstitutional on the groundthat it is vague and uncertain. A similar contention has already been overruled by this court in the caseofPeople vs. Fernandez and Trinidad, supra. An Act will be declared void and inoperative on the groundof vagueness and uncertainty only upon a showing that the defect is such that the courts are unable todetermine, with any reasonable degree of certainty, what the legislature intended. The circumstance thatthis court has no more than one occasion given effect and application to Act. No. 2581 (Valhalla HotelConstruction Co. vs.Carmona, 44 Phil., 233; People vs.Nimrod McKinney, 47 Phil., 792;

People vs.Fernandez and Trinidad, supra) decisively argues against the position taken by appellantOsmea. In this connection we cannot pretermit reference to the rule that "legislation should not be heldinvalid on the ground of uncertainty if susceptible of any reasonable construction that will support andgive it effect. An Act will not be declared inoperative and ineffectual on the ground that it furnishes noadequate means to secure the purpose for which it is passed, if men of common sense and reason candevise and provide the means, and all the instrumentalities necessary for its execution are within thereach of those intrusted therewith." (25 R.C.L., pp. 810, 811.)


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Reaffirming our view in People vs. Fernandez and Trinidad, supra, we hold that Act No. 2581 is valid andconstitutional.

Taking up now the question raised with reference to the speculative nature of the shares of the ). O.R.O.Oil Co. and the South Cebu Oil Co., we find that section 1, paragraph (b) of Act No. 2581, in definingspeculative securities, provides:

. . . The term "speculative securities" as used in this Act shall be deemed to mean and include:

x x x x x x x x x

(b) All securities the value of which materially depend upon proposed or promised futurepromotion or development rather than on present tangible assets and conditions.

At the beginning, and at the time of the issuance of the shares of the O.R.O. Oil Co. and the South CebuOil Co., all that these companies had were their exploration leases. Beyond this, there was nothingtangible. The value of those shares depended upon future development and the uncertainty of "striking"oil. The shares issued under these circumstances are clearly speculative because they depended uponproposed or promised future promotion or development rather than on present tangible assets and

conditions.

Appellants next contend that in view of the repeal of Act No. 2581 by Commonwealth Act. No. 83, theyhave been relieved of criminal responsibility. Assuming that the former Act has been entirely andcompletely abrogated by the latter Act a point we do not have to decide this fact does not relieveappellants from criminal responsibility. "It has been the holding, and it must again be the holding, thatwhere an Act of the Legislature which penalizes an offense repeals a former Act which penalized thesame offense, such repeal does not have the effect of thereafter depriving the courts of jurisdiction to try,convict and sentence offenders charged with violations of the old law." (People vs.Concepcion, 44 Phil.,126, 132; Ong Chang Wing and Kwong Fok vs.U.S., 218 U.S., 272; 40 Phil., 1046; U.S. vs.Cuna, 12Phil., 241; U.S. vs.Aron, 12 Phil., 778; U.S. vs.Tonga, 15 Phil., 43; U.S. vs.Molina, 17 Phil., 582.)

Appellants further contend that they come under the exception provided in section 8 of Act No. 2581. Thissection provides:

This Act shall not apply to the holder of any speculative security who is not the issuer thereof, norto the person who has acquired the same for his own account in the usual and ordinary course ofbusiness and not for the direct or indirect promotion of any enterprise or scheme within thepurview of this Act, unless such possession is in good faith. Repeated and successive sales ofany speculative securities shall beprima facieevidence that the claim of ownership is not bonafide, but is a mere shift, device or plot to evade the provisions of this Act. Such speculators shallincur the penalty provided for in section seven of this Act.

Under this section, there are clearly two classes of persons to whom the law is not applicable: (1) Personswho hold speculative securities but who are not the issuers thereof; and (2) persons who have acquired

the same for their own account in the usual and ordinary course of business and not for the direct orindirect promotion of any enterprise or scheme within the purview of this Act, provided (the law uses theterm "unless") such possession is in good faith.

Passing upon the questions of fact necessarily involved in the application of section 8 of Act No. 2581,the trial court in case No. 52365 makes the following findings with reference to Nicasio Osmea:

. . . El acusado Osmea no ha adquirido por su propia cuenta en el curso ordinario y corriente delos negocios en la O.R.O. Oil Co. Las acciones por el vendidas, pues las adquirio mediante


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suscripcion como uno de los fundadores de dicha corporacion, pero si para la promocionindirecta de un proyecto de negocio o empresa para el cual se habia organizado le corporacion,habiendo pagado totalmente el importe de dichas acciones a la misma corporacion; ni tampocolas poseia de buena fe, puesto que como fundador y miembro de la junta directiva de dichacorporacion debia saber que no se habia expedido por el Tesorero Insular ningun permiso porescrito a al corporacion para la venta de dichas acciones. Y las ventas sucesivas y repetidas deesas acciones que tenia en la misma corporacion, aunque tales acciones eran suyas porhaberlas el obtenido de la corporacion mediante suscripcion y pago del importe correspondienteprueban que esta pretension de propiedad ha sido solamente un medio de que se ha valido paravender tales acciones a precios mucho mayores que el importe por por haberse expedido talpermiso.

The same findings, mutatis mutandis, are made in case No. 52366 against the same appellant, andagainst Jacob Rosenthal in the two cases. Even if we could, we do not feel justified in disturbing thefindings of the trial court. The good faith set up by appellant Rosenthal for having acted on the advice ofone Garcia, an officer in the Insular Treasury, and the subsequent devolution by him of amounts collectedfrom some of the purchasers of the shares may be considered as a circumstance in his favor in theimposition of the penalty prescribed by law but does not exempt him from criminal responsibility.(People vs.McCalla, 63 Cal. App., 783; 220 Pac., 436; 367 U.S., 585; 69 Law. ed., 799; 45 Sup. Ct., 461;People vs.Fernandez and Trinidad, supra.)

The judgments of the lower court are affirmed, with the modification that the fines are reduced as toaccused Jacob Rosenthal from P500 to P200 in each case, and as to accused Nicasio Osmea, fromP1,000 to P500 in case No. 52365 and from P2,000 to P1,000 in case No. 52366, with subsidiaryimprisonment for both in case of insolvency, and costs. So ordered.

Avancea, C.J., Villa-Real, Imperial, Diaz, Concepcion, and Moran, JJ., concur.


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PEOPLE OF THE PHILIPPINES,Petitioner,

-versus-

DANTE TAN,

Respondent.

G.R. No. 167526

Present:

CARPIO,J., Chairperson,

PERALTA,

BERSAMIN,*

ABAD, and

MENDOZA,JJ.

Promulgated:

July 26, 2010

x-----------------------------------------------------------------------------------------x

D E C I S I O N

PERALTA, J.:

Before this Court is a petition for review on certiorari,[1]under Rule 45 of the Rules of Court, seeking to set

aside the June 14, 2004 Resolution[2]and February 24, 2005 Resolution[3]of the Court of Appeals (CA), in CA-G.R.

SP No. 83433.

The facts of the case are as follows:

On December 21, 2000, two Informations for violation of Rule 36 (a)-1,[4]in relation to Sections 32 (a)-

1[5]and 56[6]of the Revised Securities Act, were filed by petitioner People of the Philippines against respondent

Dante Tan in the Regional Trial Court (RTC) of Pasig City, Branch 153. They were docketed as Criminal Cases

Nos. 119831 and 119832.

The Information[7]in Criminal Case No. 119831 reads:

That on December 10, 1998, or thereabout, in the City of Pasig, Metro Manila, Philippines,

and within the jurisdiction of this Honorable Court, the above-named accused being the beneficial

owner of 84,030,000 Best World Resources Corporation shares, a registered security sold pursuant

to Sections 4 and 8 of the Revised Securities Act, which beneficial ownership constitutes 18.6% of

the outstanding shares of the company, way above the 10% required by law to be reported, and

covered by Certificate Nos. DT-UK 55485704 and DT-UR 55485776, did then and there willfully,

unlawfully and criminally fail to file with the Securities and Exchange Commission and with the

Philippine Stock Exchange a sworn statement of the amount of all BWRC shares of which he is

the beneficial owner, within ten (10) days after he became such beneficial owner, in violation of

the Revised Securities Act and/or the rules and regulations prescribed and pursuant thereto.
http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn1http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn1http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn1http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn2http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn2http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn2http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn3http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn3http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn4http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn4http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn4http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn6http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn6http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn6http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn8http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn8http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn8http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn8http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn7http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn6http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn4http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn3http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn2http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/167526.htm#_ftn1


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CONTRARY TO LAW.[8]

The Information[9]in Criminal Case No. 119832 reads:

That on June 18, 1999, or thereabout, in the City of Pasig, Metro Manila, Philippines, and

within the jurisdiction of this Honorable Court, the above-named accused being the beneficialowner of 75,000,000 Best World Resources Corporation shares, a registered security which has

been sold pursuant to Sections 4 and 8 of the Revised Securities Act, which beneficial ownership

constitutes 18.6% of the outstanding shares of the company, way above the 10% required by law

to be reported, did then and there willfully, unlawfully and criminally fail to file with the

Securities and Exchange Commission and with the Philippine Stock Exchange a sworn statement

of the amount of all BWRC shares of which he is the beneficial owner, within ten (10) days after

he became such beneficial owner, in violation of the Revised Securities Act and/or the rules and

regulations prescribed pursuant thereto.

CONTRARY TO LAW.[10]

After arraignment, respondent pleaded not guilty[11]to both charges and the trial ensued.

On November 24, 2003, petitioner made its formal offer of evidence,[12]consisting of Exhibits A to E

with sub-exhibits, Exhibits K-1, K-10 and K-11, Q, R, S, T and W with sub-exhibits, and Exhibit

X.

On December 11, 2003, the RTC issued an Order[13]admitting Exhibits A, B, W and X, but denied

admission of all the other exhibits on the grounds stated therein.

Aggrieved, petitioner filed a Motion for Reconsideration, but it was denied by the RTC in an

Order[14]dated January 27, 2004.

In the meantime, on December 18, 2003, respondent filed an Omnibus Motion for Leave to File Demurrer

to Evidence[15]and to admit the attached Demurrer to Evidence.

On January 29, 2004, the RTC issued another Order[16]granting respondents Motion for Leave to File the

Demurrer and forthwith admitted respondents attached Demurrer. The RTC also ordered petitioner to file an

opposition.
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On February 18, 2004, petitioner filed its Opposition[17]to the Demurrer to Evidence. Respondent then filed a

Reply.[18]

On March 16, 2004, the RTC issued an Order[19]

granting respondents Demurrer to Evidence, the dispositive

portion of which reads:

WHEREFORE, finding the Demurrer to Evidence filed by accused Dante Tan to be

meritorious, the same is GRANTED.

SO ORDERED.[20]

On April 12, 2004,[21]petitioner filed a Petition for Certiorari[22]before the CA assailing the December 11,

2003, January 27, 2004, and March 16, 2004 Orders of the RTC.

On June 14, 2004, the CA issued a Resolution denying the petition, the dispositive portion of which reads:

WHEREFORE, in the context of all the foregoing considerations, it would be futile to

take further action on the herein petition, which is therefore DISMISSED outright for evident want

of merit.

SO ORDERED.[23]

In denying the petition, the CA ruled that the dismissal of a criminal action by the grant of a Demurrer to

Evidence is one on the merits and operates as an acquittal, for which reason, the prosecution cannot appeal

therefrom as it would place the accused in double jeopardy.[24]

Aggrieved, petitioner filed a Motion for Reconsideration, which was, however, denied by the CA in a

Resolution dated February 24, 2005.

Hence, herein petition, with petitioner raising the lone assignment of error, to wit:

RESPONDENT COURT GRAVELY ERRED IN PRECLUDING THE PEOPLE FROM

PROSECUTING ITS CASES AGAINST DANTE TAN.[25]

The petition has no merit.
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Notwithstanding the RTCs grant of respondents Demurrer to Evidence, petitioner contends that the CA

erred in applying the rules on double jeopardy. Specifically, petitioner argues that double jeopardy does not apply in

cases decided by the trial court without jurisdiction and in violations of petitioners right to due process .[26]

InPeople v. Sandiganbayan,[27]this Court explained the general rule that the grant of a demurrer to evidence

operates as an acquittal and is, thus, final and unappealable, to wit:

The demurrer to evidence in criminal cases, such as the one at bar, is "filed after the

prosecution had rested its case," and when the same is granted, it calls "for an appreciation of the

evidence adduced by the prosecution and its sufficiency to warrant conviction beyond reasonable

doubt, resulting in a dismissal of the case on the merits,tantamount to an acquittal of the

accused."Such dismissal of a criminal case by the grant of demurrer to evidence may not be

appealed, for to do so would be to place the accused in double jeopardy. The verdict being one of

acquittal, the case ends there.[28]

The elements of double jeopardy are (1) the complaint or information was sufficient in form and substance to

sustain a conviction; (2) the court had jurisdiction; (3) the accused had been arraigned and had pleaded; and (4) the

accused was convicted or acquitted, or the case was dismissed without his express consent.[29]

These elements are present here: (1) the Informations filed in Criminal Cases

Nos. 119831 and119832 against respondent were sufficient in form and substance to sustain a conviction; (2) the

RTC had jurisdiction over Criminal Cases Nos. 119831 and 119832; (3) respondent was arraigned and entered a

plea of not guilty; and (4) the RTC dismissed Criminal Cases Nos. 119831 and 119832 on a demurrer to evidence on

the ground of insufficiency of evidence which amounts to an acquittal from which no appeal can be had.

The rule on double jeopardy, however, is not without exceptions. In People v. Laguio, Jr.,[30]this Court stated

that the only instance when double jeopardy will not attach is when the RTC acted with grave abuse of discretion,

thus:

x x x The only instance when double jeopardy will not attach is when the trial court

acted with grave abuse of discretion amounting to lack or excess of jurisdiction, such as where

the prosecution was denied the opportunity to present its case or where the trial was a sham .

However, while certiorari may be availed of to correct an erroneous acquittal, the petitioner in such

an extraordinary proceeding must clearly demonstrate that the trial court blatantly abused its

authority to a point so grave as to deprive it of its very power to dispense justice.[31]
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After an extensive review of previous Court decisions relevant to herein petition, this Court finds that the

abovementioned exception is inapplicable to the factual milieu herein. This Court finds that the RTC did not abuse

its discretion in the manner it conducted the proceedings of the trial, as well as its grant of respondents demurrer to

evidence.

Grave abuse of discretion defies exact definition, but it generally refers to "capricious or whimsical

exercise of judgment as is equivalent to lack of jurisdiction." The abuse of discretion must be patent and gross as to

amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in

contemplation of law, as where the power is exercised in an arbitrary and despotic manner by reason of passion and

hostility.[32]

In Galman v. Sandiganbayan,[33]this Court ruled that the prosecution was denied due process of law when

the trial was but a mock trial, to wit:

More so does the rule against the invoking of double jeopardy hold in the cases at bar

where as we have held, the sham trial was but a mock trial where the authoritarian president

ordered respondents Sandiganbayan and Tanodbayan to rig the trial and closely monitored the

entire proceedings to assure the predetermined final outcome of acquittal and total absolution as

innocent of all the respondents-accused.[34]

In addition, inPeople v. Bocar,[35]this Court ruled that there is no double jeopardy when the prosecution

was not allowed to complete its presentation of evidence by the trial court, to wit:

It is evident from the brief transcript of the proceedings held on July 7, 1967 that the parties

were not placed under oath before they answered the queries of the respondent Judge (pp. 11-17,

rec.). Verily, no evidence in law had as yet been entered into the records of the case before

respondent Court. Respondent Court's issuance of the questioned dismissal order was arbitrary,

whimsical and capricious, a veritable abuse of discretion which this Court cannot permit.

Moreover, it is clear from the same transcript that the prosecution never had a chance tointroduce and offer its evidence formally in accordance with the Rules of Court (pp. 11-17, rec.).

Verily, the prosecution was denied due process.

Where the prosecution is deprived of a fair opportunity to prosecute and prove its case, its

right to due process is thereby violated. x x x[36]
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Likewise, inPeople v. Judge Albano,[37]this Court held that there is no double jeopardy when the trial court

preemptively dismissed the case, thus:

The trial court exceeded its jurisdiction when it practically held that the prosecution failed

to establish the culpability of the accused in a proceeding which does not even require the

prosecution to do so. It acted with grave abuse of discretion, tantamount to lack of jurisdiction, whenit preemptively dismissed the cases and, as a consequence thereof, deprived the prosecution of its

right to prosecute and prove its case, thereby violating its fundamental right to due process." With

this violation, its Orders, dated 28 October 1976 and 20 December 1976, are therefore null and void.

Likewise, for being null and void, said orders cannot constitute a proper basis for a claim of double

jeopardy.[38]

In Saldana v. Court of Appeals,[39]this Court ruled that the prosecutions right to due process is violated

when the trial court aborted its right to complete its presentation of evidence, thus:

The order of the Court of Appeals reinstating the criminal case for further hearing by thetrial court does not violate the rule on double jeopardy. One of the elements of double jeopardy is a

competent court. The trial court in this case was ousted from its jurisdiction when it violated the

right of the prosecution to due process by aborting its right to complete the presentation of its

evidence. Hence, the first jeopardy had not been terminated. The remand of the case for further

hearing or trial is merely a continuation of the first jeopardy. It does not expose the accused to a

second jeopardy. x x x[40]

Thus, the question to be resolved, given the factual molding of herein petition, is did the RTC violate

petitioners right to due process? On this note, this Court rules that petitioner was given more than ample

opportunity to present its case as gleaned from the factual antecedents which led to the grant of respondents

demurrer.

On September 18, 2001, petitioner completed its presentation of evidence and, on the day after, filed its

formal offer of evidence. On January 21, 2002, respondent filed an opposition to petitioners formal offer. Instead of

filing a reply as directed by the RTC, petitioner filed a Motion to Withdraw Prosecutions Formal Offer of

Evidence and to Re-open Presentation of Evidence.[41]Said motion was granted by the RTC and petitioner thus

continued its presentation of evidence.

On January 28, 2003, petitioner ended its presentation of additional witnesses and was then ordered by the

RTC to formally offer its exhibits. On February 26, 2003, petitioner filed a request for marking of certain documents

and motion to admit attached formal offer of evidence.[42]The motion was initially denied by the RTC, but on
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motion for reconsideration the same was granted by the RTC. The RTC, thus, ordered petitioner to file anew its

formal offer of evidence. Finally, on November 24, 2003, petitioner filed its Formal Offer of Evidence .[43]

After respondent filed its Demurer to Evidence, the RTC, in an Order dated January 29, 2004, directed

petitioner to file its opposition thereto. On February 18, 2004, petitioner filed its Opposition [44]to the demurrer.

Based on the foregoing, it is clear that the RTC never prevented petitioner from presenting its case. Unlike

inBocar and Saldanawhere the prosecution was prevented from completing its presentation of evidence, petitioner

was given the opportunity to present its case, formally offer its evidence and oppose respondents demurrer. It even

bears to point out that the RTC even allowed petitioner to withdraw its formal offer of evidence after having initially

rested its case and then continue its presentation by introducing additional witnesses. Thus, no grave abuse can be

attributed to the RTC as petitioners right to due process was not violated. Even Galmanfinds no application to the

case at bar as clearly such trial cannot be considered a sham based on the abovementioned considerations.

Petitioner argues that the RTC displayed resolute bias when it chose to grant respondents demurrer to

evidence notwithstanding that it had filed a Motion to Hold in Abeyance the Resolution of Accused Dante Tans

Demurrer to Evidence and The Prosecutions Opposition Thereto.[45] Petitioner contends that instead of acting on

the motion, the RTC peremptorily granted respondents demurrer to evidence which prevented petitioner from

its intention to file a petition for certiorari to question the December 11, 2003 and January 27, 2004 Orders of the

RTC.

While it would have been ideal for the RTC to hold in abeyance the resolution of the demurrer to evidence,

nowhere in the rules, however, is it mandated to do so. Furthermore, even if this Court were to consider the same as

an error on the part of the RTC, the same would merely constitute an error of procedure or of judgment and not an

error of jurisdiction as persistently argued by petitioner. Errors or irregularities, which do not render the proceedings

a nullity, will not defeat a plea of antrefois acquit.[46]We are bound by the dictum that whatever error may have been

committed effecting the dismissal of the case cannot now be corrected because of the timely plea of double

jeopardy.[47]To reiterate, the only instance when double jeopardy will not attach is when the trial court acted with

grave abuse of discretion amounting to lack or excess of jurisdiction which cannot be attributed to the RTC simply

because it chose not to hold in abeyance the resolution of the demurrer to evidence. Consequently, petitioners
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attempt to put in issue the December 11, 2003 and January 27, 2004 Orders of the RTC which denied admission of

certain documentary exhibits in evidence must fail. As correctly manifested by the CA, the said Orders have already

been overtaken by the March 16, 2004 Order, which already granted respondents demurrer to evidence. Hence, this

Court would be violating the rules on double jeopardy if the twin orders were to be reviewed after a finding that the

CA did not commit any grave abuse of discretion in granting the demurrer to evidence.

Lastly, even if this Court were to review the action taken by the RTC in granting the demurrer to evidence, no

grave abuse can be attributed to it as it appears that the 29-page Order granting the demurrer was arrived at after due

consideration of the merits thereto. As correctly observed by the CA, the RTC extensively discussed its position on

the various issues brought to contention by petitioner. One of the main reasons for the RTCs decision to grant the

demurrer was the absence of evidence to prove the classes of shares that the Best World Resources Corporation

stocks were divided into, whether there are preferred shares as well as common shares, or even which type of shares

respondent had acquired, thus:

To secure conviction for the violations of RSA Secs. 32 (a-1) and 36 (a), it is necessary

to prove the following: (1) the BW Resources Corporation (BW) has equity securities registered

under the Revised Securities Act; [2] that the equity securities of BW Resources Corporation are

divided into classes, and that these classes are registered pursuant to the Revised Securities Act; (3)

the number of shares of BW Resources Corporation (authorized the number of shares of BW

Resources (authorized capital stock) and the total number of shares per class of stock; (4) the

number of shares of a particular class of BW stock acquired by the accused; (5) the fact of the exact

date, the accused [becomes] the beneficial owner of ten (10%) percent of a particular class of BW

shares; and (6) the fact, the accused failed to disclose his ten (10%) percent ownership within ten

days from becoming such owner.

It is very clear from the evidence formally offered, that the foregoing facts were

not proven or established. These cases were for Violations of RSA Rule 32 (a)-1 and Section 56

of Revised Securities Act, however, it is very surprising that the prosecution never presented in

evidence the Article of Incorporation of BW Resources Corporation. This document is very

vital and is the key to everything, including the conviction of the accused. Without the Article

of Incorporation, the Court has no way of knowing the capitalization authorized capital stock

of the BW Resources Corporation, the classes of shares into which its stock is divided and the

exact holdings of Dante Tan in the said corporation. Its not being a prosecutions evidence

renders impossible the determination of the ten (10%) percent beneficial ownership of accused

Dante Tan, as there is no focal point to base the computation of his holdings, and the exact

date of his becoming an owner of ten (10%) percent.[48]

There is no showing that the conclusions made by the RTC on the sufficiency of the evidence of the

prosecution at the time the prosecution rested its case, is manifestly mistaken. Assuming, however, that there is an

error of judgment on the denial of admission of certain exhibits of the prosecution and the appreciation of the
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prosecutions case, there is to this Courts mind, no capricious exercise of judgment that would overcome the

defense of double jeopardy.

Withal, it bears to stress that the fundamental philosophy behind the constitutional proscription against

double jeopardy is to afford the defendant, who has been acquitted, final repose and safeguard him from government

oppression through the abuse of criminal processes.[49]While petitioner insists that the RTC acted with grave abuse

of discretion, this Court finds that none can be attributed to the RTC. Consequently, the CA did not err when it

affirmed the assailed Orders of the RTC.

On a final note, this Court is aware of this Courts Third Division Decision dated April 2 1, 2009

entitledDante Tan v. People of the Philippines[50]wherein respondent argued that his right to a speedy trial was

violated by the prosecution. This Court denied the petition and ruled for the remand of the case to the RTC for

further proceedings. It must be pointed out that said decision involves Criminal Case No. 119830,[51]which is

distinct and separate from Criminal Case No. 119831 and Criminal Case No. 119832 which are the subject matter of

herein petition. Thus, the resolution of the case at bar is without prejudice to the proceedings that are being

conducted in Criminal Case No. 119830 at whatever stage it may be.

WHEREFORE, premises considered, the petition is DENIED. The June 14, 2004 Resolution and February

24, 2005 Resolution of the Court of Appeals, in CA-G.R. SP No. 83433 are AFFIRMED.

SO ORDERED.
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