Power Homes Unlimited Corporation v SEC

FACTS:
 Petitioner is a domestic corporation duly registered with public respondent SEC on
October 13, 2000 under SEC Reg. No. A200016113. Its primary purpose is:
o To engage in the transaction of promoting, acquiring, managing, leasing,
obtaining options on, development, and improvement of real estate properties
for subdivision and allied purposes, and in the purchase, sale and/or exchange of
said subdivision and properties through network marketing.
 Respondent Noel Manero requested public respondent SEC to investigate petitioner’s
business. He claimed that he attended a seminar conducted by petitioner where the
latter claimed to sell properties that were inexistent and without any broker’s license.
 Romulo E. Munsayac, Jr. also inquired from public respondent SEC whether petitioner’s
business involves "legitimate network marketing."
 After finding petitioner to be engaged in the sale or offer for sale or distribution of
investment contracts, which are considered securities under Sec. 3.1 (b) of Republic Act
(R.A.) No. 8799 (The Securities Regulation Code),5 but failed to register them in violation
of Sec. 8.1 of the same Act,6 public respondent SEC issued a CDO (Cease and Desist
Order).
 Petitioner moved for the lifting of the CDO, which public respondent SEC denied for lack
of merit.
 Aggrieved, petitioner went to the Court of Appeals imputing grave abuse of discretion
amounting to lack or excess of jurisdiction on public respondent SEC for issuing the
order. It also applied for a temporary restraining order, which the appellate court
granted.
 The Court of Appeals denied petitioner’s motion for reconsideration;10 hence, this
petition for review.

ISSUE:
 Whether or not public respondent SEC followed due process in the issuance of the
assailed CDO.
 Whether or not petitioner’s business constitutes an investment contract which should
be registered with public respondent SEC before its sale or offer for sale or distribution
to the public.

RULING:
 Yes, the court hold that petitioner was not denied due process.
 The records reveal that public respondent SEC properly examined petitioner’s business
operations when it (1) called into conference three of petitioner’s incorporators, (2)
requested information from the incorporators regarding the nature of petitioner’s
business operations, (3) asked them to submit documents pertinent thereto, and (4)
visited petitioner’s business premises and gathered information thereat.
 All these were done before the CDO was issued by the public respondent SEC.
 A formal trial or hearing is not necessary to comply with the requirements of due
process. Its essence is simply the opportunity to explain one’s position.
 Public respondent SEC abundantly allowed petitioner to prove its side.

 Yes, Under section 8. Requirement of Registration of Securities. – 8.1. Securities shall

not be sold or offered for sale or distribution within the Philippines, without a
registration statement duly filed with and approved by the Commission. Prior to such
sale, information on the securities, in such form and with such substance as the
Commission may prescribe, shall be made available to each prospective purchaser.
 Public respondent SEC found the petitioner "as a marketing company that promotes and
facilitates sales of real properties and other related products of real estate developers
through effective leverage marketing."
 Hence, the court rule that the business operation or the scheme of petitioner
constitutes an investment contract that is a security under R.A. No. 8799. Thus, it must
be registered with public respondent SEC before its sale or offer for sale or distribution
to the public.
 As petitioner failed to register the same, its offering to the public was rightfully
enjoined by public respondent SEC. The CDO was proper even without a finding of
fraud. As an investment contract that is security under R.A. No. 8799, it must be
registered with public respondent SEC, otherwise the SEC cannot protect the investing
public from fraudulent securities.
 The petition is DENIED.
 SEC v Howey Co

FACTS:
 The respondents, W. J. Howey Company and Howey-in-the-Hills Service, Inc.
(collectively, “Howey Company”), are Florida corporations under direct common control
and management.
 Howey, who was the owner of a sizable citrus plantation, sought out investors to join his
business enterprise. Howey would put in place a land sale agreement with the investor
for a small piece of the grove and have them sign a service agreement for the cultivation
of that property.
 When endorsing this agreement, Howey used a number of agencies of interstate
commerce but failed to register the contracts and securities with the SEC. Due to
Howey's establishment of unregistered securities sales, the Securities Act of 1933 was
violated, prompting the SEC to file a lawsuit seeking an injunction against the use of
interstate commerce.
 The trial judge rejected the injunction and stated that no sales of securities were made
as part of the contract agreement.
 The appeals court upheld the ruling.

ISSUE:
Whether or not the transactions complained of "investment contracts" within the meaning of
the Securities Act of 1933?

RULING:
 Yes, following an examination of the record, the Court found evidence that the
respondents had participated in activities that qualified as investment contracts under
the Securities Act of 1993.
 An investment contract was a contract, transaction, or scheme whereby a person put
money in a joint venture and was led to believe that the only source of profits would
come from the promoter or a third party. It made no difference whether the shares in
the company were represented by official certificates or by nominal interests in the
tangible property used by the company.
 All the components of a commercial operation looking to make a profit were present in
the case before the court.
 Respondents oversaw, controlled, and ran the business; investors contributed the
funding and participated in the profits.
 Hence, the failure of the respondents to abide by the statutory and administrative rules
in making their offerings violated the Securities Act of 1993.
 The decision of the CA was REVERSED.
 LUIS MARCOS P. LAUREL v HON. ZEUS C. ABROGAR

FACTS:
 Petitioner, Laurel was charged with theft under Article 308 of the Revised Penal Code.
 It was alleged that on or about September 10-19, 1999, the accused, conspiring and
confederating together and all of them mutually helping and aiding one another, with
intent to gain and without the knowledge and consent of the Philippine Long Distance
Telephone (PLDT), did then and there willfully, unlawfully and feloniously take, steal and
use the international long distance calls belonging to PLDT.
 Respondents allegedly conducted International Simple Resale (ISR), which is a method
of routing and completing international long distance calls using lines, cables,
antennae, and/or air wave frequency which connect directly to the local or domestic
exchange facilities of the country where the call is destined, effectively stealing this
business from PLDT while using its facilities in the estimated amount of P20,370,651.92
to the damage and prejudice of PLDT, in the said amount.
 Accused Laurel filed a "Motion to Quash (with Motion to Defer Arraignment)" on the
ground that the factual allegations in the Amended Information do not constitute the
felony of theft under Article 308 of the Revised Penal Code. He averred that the Revised
Penal Code, or any other special penal law for that matter, does not prohibit ISR
operations. He claimed that telephone calls with the use of PLDT telephone lines,
whether domestic or international, belong to the persons making the call, not to PLDT.
 PLDT on the other hand argued that the movant unlawfully took personal property
belonging to it, as follows: 1) intangible telephone services that are being offered by
PLDT and other telecommunication companies, i.e., the connection and interconnection
to their telephone lines/facilities; 2) the use of those facilities over a period of time; and
3) the revenues derived in connection with the rendition of such services and the use of
such facilities.
 The RTC issued an Order denying the Motion to Quash the Amended Information.
 Laurel then filed a Petition for Certiorari with the CA, assailing the Order of the RTC.

ISSUE:
Whether or not the petitioner is guilty of theft of personal property.

RULING:
 No, in the Philippines, Congress has not amended the Revised Penal Code to include
theft of services or theft of business as felonies.
 Instead, it approved a law, Republic Act No. 8484, otherwise known as the Access
Devices Regulation Act of 1998.
 Among the prohibited acts enumerated in Section 9 of the law are the acts of obtaining
money or anything of value through the use of an access device, with intent to defraud
or intent to gain and fleeing thereafter; and of effecting transactions with one or more
access devices issued to another person or persons to receive payment or any other
thing of value.
 Under Section 11 of the law, conspiracy to commit access devices fraud is also a crime.
 However, the petitioner is not charged of violation of R.A. 8484.
 Hence, the petition was GRANTED.