SEC v.

Interport Resources Corporation

GR No. 135808 October 6, 2008
J. Chico-Nazario

Nature: Petition for review on certiorari, under Rule 45 of the Rules of Court, of a decision of the Court of Appeals

Doctrines: No implementing rules were needed to render effective Sections 8, 30, and 36 of the Revised Securities Act;
nor was the PED Rules of Practice and Procedure invalid, prior to the enactment of the Securities Regulations Code, for
failure to provide parties with the right to cross-examine the witnesses presented against them. Thus, the respondents
maybe investigated by the appropriate authority under the proper rules of procedure of the Securities Regulations Code
for violations of Sections 8, 30, and 36 of the Revised Securities Act.

Facts:

1) 6 Aug 1994 – Board of Directors of IRC approved a Memorandum of Agreement (MoA) with Ganda Holdings
Berhad (GHB).
a. Under the MoA, IRC acquired 100% or the entire capital stock of Ganda Energy Holdings, Inc. (GEHI),
which would own and operate a 102 megawatt gas turbine power-generating barge.
b. Also stipulated is that GEHI would assume a five-year power purchase contract with National Power
Corp. At that time, GEHI’s power-generating barge was 97% complete and would go on-line by mid-Sept
1994.
c. In exchange, IRC will issue to GHB 55% of the expanded capital stock of IRC (amounting to 40.88 billion
shares – total par value of P488.44 million)
d. On the side, IRC would acquire 67% of the entire capital stock of Philippine Racing Club, Inc. (PRCI). PRCI
owns 25.724 hectares of real estate property in Makati.
e. Under the Agreement, GHB, a member of the Westmont Group of Companies in Malaysia, shall extend
or arrange a loan required to pay for the proposed acquisition by IRC of PRCI.
2) 8 Aug 1994 – IRC alleged that a press release announcing the approval of the agreement was sent through fax to
Philippine Stock Exchange (PSE) and the SEC, but that the fax machine of SEC could not receive it. Upon the
advice of SEC, IRC sent the press release on the morning of 9 Aug 1994.
3) SEC averred that it received reports that IRC failed to make timely public disclosures of its negotiations with
GHB and that some of its directors heavily traded IRC shares utilizing this material insider information.
4) 16 Aug 1994 – SEC Chairman issued a directive requiring IRC to submit to SEC a copy of its aforesaid MoA with
GHB and further directed all principal officers of IRC to appear at a hearing before the Brokers and Exchanges
Dept (BED) of SEC to explain IRC’s failure to immediately disclose the information as required by the Rules on
Disclosure of Material Facts by Corporations Whose Securities are Listed in Any Stock Exchange or
Registered/Licensed Under the Securities Act
5) IRC sent a letter to SEC, attaching copies of MoA and its directors appeared to explain IRC’s alleged failure to
immediately disclose material information as required under the Rules on Disclosure of Material Facts.
6) 19 Sept 1994 – SEC Chairman issued an Order finding that IRC violated the Rules on Disclosure when it failed to
make timely disclosure, and that some of the officers and directors of IRC entered into transactions involving IRC
shares in violation of Sec 30, in relation to Sec 36 of the Revised Securities Act.
7) IRC filed an Omnibus Motion (later an Amended Omnibus Motion) alleging that SEC had no authority to
investigate the subject matter, since under Sec 8 of PD 902-A, as amended by PD 1758, jurisdiction was conferred
upon the Prosecution and Enforcement Dept (PED) of SEC
8) IRC also claimed that SEC violated their right to due process when it ordered that the respondents appear before
SEC and show cause why no administrative, civil or criminal sanctions should be imposed on them, and thus,
shifted the burden of proof to the respondents. They filed a Motion for Continuance of Proceedings.
9) No formal hearings were conducted in connection with the Motions.
10) 25 Jan 1995 – SEC issued an Omnibus Order: creating a special investigating panel to hear and decide the case in
accordance with Rules of Practice and Procedure before the PED, SEC; to recall the show cause orders; and to
deny the Motion for Continuance for lack of merit.
 11) Respondents filed a petition before the CA questioning the Omnibus Orders and filed a Supplemental Motion
wherein they prayed for the issuance of a writ of preliminary injunction.
12) 5 May 1995 – CA granted their motion and issued a writ of preliminary injunction, which effectively enjoined SEC
from filing any criminal, civil or administrative case against the respondents.
13) 20 Aug 1998 – CA promulgated a Decision
a. Determined that there were no implementing rules and regulations regarding disclosure, insider
trading, or any of the provisions of the Revised Securities Acts which respondents allegedly violated.
b. It found no statutory authority for SEC to initiate and file any suit for civil liability under Sec 8, 30 and 36
of the Revised Securities Act, thus, it ruled that no civil, criminal or administrative proceedings may
possibly be held against the respondents without violating their rights to due process and equal
protection.
c. It further resolved that absent any implementing rules, the SEC cannot be allowed to quash the assailed
Omnibus Orders
d. Further decided that the Rules of Practice and Procedure before the PED did not comply with the
statutory requirements contained in the Administrative Code of 1997. Section 9, Rule V of the Rules of
Practice and Procedure before the PED affords a party the right to be present but without the right to
cross-examine witnesses presented against him, in violation of Sec 12(3), Chap 3, Book VII of the
Administrative Code.

Issues:
1. Do sections 8, 30, and 36 of the Revised Securities Act require the enactment of implementing rules to make them
binding and effective? No.

2. Does the right to cross-examination be demanded during investigative proceedings before the PED? No.

3. May a criminal case still be filed against the respondents despite the repeal of Sections 8, 30, and 36 of the Revised
Securities Act? Yes.

4. Did SEC retain the jurisdiction to investigate violations of the Revised Securities Act, re-enacted in the Securities
Regulations Code, despite the abolition of the PED? Yes.

5. Does the instant case prescribed already? No.

6. Is CA justified in denying SEC’s Motion for Leave to Quash SEC Omnibus Orders? Yes.

Ruling: The petition is impressed with merit.

* It should be noted that while the case was pending in SC, RA 8799 (Securities Regulation Code) took effect on 8 August
2000.
Section 8 of PD 902-A, as amended, which created the PED, was already repealed as provided for in Sec 76 of Securities
Regulation Code.
Thus, under the new law, the PED has been abolished, and the Securities Regulation Code has taken the place of the
Revised Securities Act.

On the merits:

1) Sections 8, 30, and 36 of the Revised Securities Act (RSA) do not require the enactment of implementing rules to
make them binding and effective.
 The mere absence of implementing rules cannot effectively invalidate provisions of law, where a reasonable
construction that will support the law may be given.
 Absence of any constitutional or statutory infirmity, which may concern Secs 30 and 36 of RSA, the provisions are
legal and binding.
  Every law has in its favour the presumption of validity. Unless and until a specific provision of the law is declared
invalid and unconstitutional, the same is valid and binding for all intents and purposes.
 The Court does not discern any vagueness or ambiguity in Sec 30 and 36 of RSA
o Sec 30 – Insider’s duty to disclose when trading
 Insiders are obligated to disclose material information to the other party or abstain from trading
the shares of his corporation. This duty to disclose or abstain is based on two factors:
1. the existence of a relationship giving access, directly or indirectly, to information intended to
be available only for a corporate purpose and not for the personal benefit of anyone
2. the inherent unfairness involved when a party takes advantage of such information knowing
it is unavailable to those with whom he is dealing.
 The intent of the law is the protection of investors against fraud, committed when an insider,
using secret information, takes advantage of an uninformed investor.
 In some cases, however, there may be valid corporate reasons for nondisclosure of material
information. Where such reasons exist, an issuer’s decision not to make any public disclosures is
not ordinarily considered as a violation of insider trading. At the same time, the undisclosed
information should not be improperly used for non-corporate purposes, particularly to
disadvantage other persons with whom an insider might transact, and therefore the insider must
abstain from entering into transactions involving such securities.
o Sec 36 – Directors, officers and principal stockholders
 A straightforward provision that imposes upon:
1.a beneficial owner of more than 10 percent of any class of any equity security or
2.a director or any officer of the issuer of such security
the obligation to submit a statement indicating his or her ownership of the issuer’s securities and
such changes in his or her ownership.
 Sections 30 and 36 of the RSA were enacted to promote full disclosure in the securities market and prevent
unscrupulous individuals, who by their positions obtain non-public information, from taking advantage of an
uninformed public.
 Sec 30 prevented the unfair use of non-public information in securities transactions, while Sec 36 allowed the
Sec to monitor the transactions entered into by corporate officers and directors as regards the securities of their
companies.
 The lack of implementing rules cannot suspend the effectivity of these provisions.

2) The right to cross-examination is not absolute and cannot be demanded during investigative proceedings before the
PED.
 Sec 4, Rule 1 of the PED Rules of Practice and Procedure, categorically stated that the proceedings before the
PED are summary in nature, not necessarily adhering to or following the technical rules of evidence obtaining in
the courts of law
 Rule V – Submission of documents, determination of necessity of hearing and disposition of case.
o A formal hearing was not mandatory, it was within the discretion of the Hearing Officer whether there
was a need for a formal hearing
o Since the holding of a hearing before the PED is discretionary, then the right to cross-examination could
not have been demanded by either party.
 Chapter 3, Book VII of the Administrative Code refers to “Adjudication” and does not affect the investigatory
functions of the agencies.
 The law creating PED empowers it to investigate violations of the rules and regulations promulgated by the SEC
and to file and prosecute such cases.
o It fails to mention any adjudicatory functions insofar as the PED is concerned. Thus, PED Rules of Practice
need not comply with the provisions of the Administrative Code on adjudication.
o The only powers which the PED was likely to exercise over the respondents were investigative in nature
 In proceedings before administrative or quasi-judicial bodies, such as NLRC and POEA, created under laws which
authorize summary proceedings, decisions may be reached on the basis of position papers or other documentary
evidence only. They are not bound by technical rules of procedure and evidence. It is enough that every litigant
 be given reasonable opportunity to appear and defend his right and to introduce relevant evidence in his favour,
to comply with the due process requirements.

3) The Securities Regulation Code (SRC) did not repeal Sections 8, 30, and 36 of the Revised Securities Act since said
provisions were re-enacted in the new law.
 when the repealing law punishes the act previously penalized under the old law, the act committed before the
re-enactment continues to be an offense and pending cases are not affected.
o Sec 8 of RSA, which previously provided for the registration of securities and the information that needs
to be included in the registration statements, was expanded under Sec 12 of the Securities Regulations
Code. Further details of the information required to be disclosed by the registrant are explained.
o Sec 30 of RSA has been re-enacted as Sec 27 of SRC, still penalizing an insider’s misuse of material and
non-public information about the issuer, for the purpose of protecting public investors
o Sec 23 of SRC was practically lifted from Sec 36 of RSA.
 The legislature had not intended to deprive the courts of their authority to punish a person charged with
violation of the old law that was repealed

4) The SEC retained the jurisdiction to investigate violations of the Revised Securities Act, re-enacted in the Securities
Regulations Code, despite the abolition of the PED.
 Sec 53 of SRC clearly provides that criminal complaints for violations of rules and regulations enforced or
administered by SEC shall be referred to the DOJ for preliminary investigation, while the SEC nevertheless retains
limited investigatory powers. SEC may still impose the appropriate administrative sanctions under Sec 54.

5) The instant case has not yet prescribed.

 Respondents point out that the prescription period applicable to offenses punished under special laws is 12
years. Since the offense was committed in 1994, they reasoned that prescription set in as early as 2006 and
rendered this case moot.
 It is an established doctrine that a preliminary investigation interrupts the prescription period. A preliminary
investigation is essentially a determination whether an offense has been committed, and whether there is
probable cause for the accused to have committed as offense.
6) The CA was justified in denying SEC’s Motion for Leave to Quash SEC Omnibus Orders dated 23 October 1995.
 Since it found other issues that were more important than whether or not the PED was the proper body to
investigate the matter, CA denied SEC’s motion for leave to quash SEC Omnibus Orders.

In all, the SC rules that no implementing rules were needed to render effective Sections 8, 30, and 36 of the Revised
Securities Act; nor was the PED Rules of Practice and Procedure invalid, prior to the enactment of the Securities
Regulations Code, for failure to provide parties with the right to cross-examine the witnesses presented against them.
Thus, the respondents maybe investigated by the appropriate authority under the proper rules of procedure of the
Securities Regulations Code for violations of Secs 8, 30, and 36 of the Revised Securities Act.

SC – petition granted

J. Tinga – concurring opinion

 Manipulative devices and deceptive practices, including insider trading, throw a monkey wrench right into the
heart of the securities industry – when someone trades in the market with unfair advantage in the form of highly
valuable secret inside information, all other participants are defrauded.

J. Carpio – dissenting opinion

 Proceedings referred to in Sec 2 of Act No. 3326 are judicial proceedings and not administrative proceedings.
Contrary to the majority opinion’s claim that “a preliminary investigation interrupts the prescriptive period,“ only
the institution of judicial proceedings can interrupt the running of the prescriptive period. The criminal charges
may proceed separately and independently of the administrative proceedings.
CEMCO HOLDINGS vs. NATIONAL LIFE INSURANCE CO. OF THE PHILS DIGEST
Chico-Nazario, J.

FACTS: Union Cement Corporation (UCC), a publicly-listed company, has two principal stockholders – UCHC, a non-listed
company, with shares amounting to 60.51%, and petitioner Cemco with17.03%. Majority of UCHC’s stocks were owned
by BCI with 21.31% and ACC with 29.69%. Cemco, on the other hand, owned 9% of UCHC stocks. In a disclosure letter,
BCI informed the Philippine Stock Exchange (PSE) that it and its subsidiary ACC had passed resolutions to sell to Cemco
BCI’s stocks in UCHC equivalent to 21.31% and ACC’s stocks in UCHC equivalent to 29.69%.

As a consequence of this disclosure, the PSE inquired as to whether the Tender Offer Rule under Rule 19 of the
Implementing Rules of the Securities Regulation Code is not applicable to the purchase by petitioner of the majority of
shares of UCC. The SEC en banc had resolved that the Cemco transaction was not covered by the tender offer rule.
Feeling aggrieved by the transaction, respondent National Life Insurance Company of the Philippines, Inc., a minority
stockholder of UCC, sent a letter to Cemco demanding the latter to comply with the rule on mandatory tender offer.
Cemco, however, refused.

Respondent National Life Insurance Company of the Philippines, Inc. filed a complaint with the SEC asking it to reverse its
27 July 2004 Resolution and to declare the purchase agreement of Cemco void and praying that the mandatory tender
offer rule be applied to its UCC shares.

The SEC ruled in favor of the respondent by reversing and setting aside its 27 July 2004Resolution and directed petitioner
Cemco to make a tender offer for UCC shares to respondent and other holders of UCC shares similar to the class held by
UCHC in accordance with Section 9(E), Rule 19 of the Securities Regulation Code.

On petition to the Court of Appeals, the CA rendered a decision affirming the ruling of the SEC. It ruled that the SEC has
jurisdiction to render the questioned decision and, in any event, Cemco was barred by estoppel from questioning the
SEC’s jurisdiction.

It, likewise, held that the tender offer requirement under the Securities Regulation Code and its Implementing Rules
applies to Cemco’s purchase of UCHC stocks. Cemco’s motion for reconsideration was likewise denied.

ISSUES:

1. Whether or not the SEC has jurisdiction over respondent’s complaint and to require Cemco to make a tender offer for
respondent’s UCC shares.

2. Whether or not the rule on mandatory tender offer applies to the indirect acquisition of shares in a listed company, in
this case, the indirect acquisition by Cemco of 36% of UCC, a publicly-listed company, through its purchase of the shares
in UCHC, a non-listed company.

HELD:

YES. In taking cognizance of respondent’s complaint against petitioner and eventually rendering a judgment which
ordered the latter to make a tender offer, the SEC was acting pursuant to Rule19(13) of the Amended Implementing
Rules and Regulations of the Securities Regulation Code, to wit:
“ 13. Violation If there shall be violation of this Rule by pursuing a purchase of equity shares of a public company at
threshold amounts without the required tender offer, the Commission, upon complaint, may nullify the said acquisition
and direct the holding of a tender offer. This shall be without prejudice to the imposition of other sanctions under the
Code.”
 The foregoing rule emanates from the SEC’s power and authority to regulate, investigate or supervise the activities of
persons to ensure compliance with the Securities Regulation Code, more specifically the provision on mandatory tender
offer under Section 19thereof. Moreover, petitioner is barred from questioning the jurisdiction of the SEC. It must be
pointed out that petitioner had participated in all the proceedings before the SEC and had prayed for affirmative relief.

2. YES. Tender offer is a publicly announced intention by a person acting alone or in concert with other persons to
acquire equity securities of a public company.

A public company is defined as a corporation which is listed on an exchange, or a corporation with assets exceeding
P50,000,000.00 and with 200 or more stockholders, at least 200 of them holding not less than 100 shares of such
company .

Stated differently, a tender offer isan offer by the acquiring person to stockholders of a public company for them to
tender their shares therein on the terms specified in the offer.

Tender offer is in place to protect minority shareholders against any scheme that dilutes the share value of their
investments. It gives the minority shareholders the chance to exit the company under reasonable terms, giving them the
opportunity to sell their shares at the same price as those of the majority shareholders. The SEC and the Court of
Appeals ruled that the indirect acquisition by petitioner of 36% of UCC shares through the acquisition of the non-listed
UCHC shares is covered by the mandatory tender offer rule. The legislative intent of Section 19 of the Code is to regulate
activities relating to acquisition of control of the listed company and for the purpose of protecting the minority
stockholders of a listed corporation. Whatever may be the method by which control of a public company isobtained,
either through the direct purchase of its stocks or through an indirect means, mandatory tender offer applies. As
appropriately held by the Court of Appeals:

The petitioner posits that what it acquired were stocks of UCHC and not UCC. By happenstance, as a result of the
transaction, it became an indirect owner of UCC. We are constrained, however, to construe ownership acquisition to
mean both direct and indirect. What is decisive is the determination of the power of control. The legislative intent
behind the tender offer rule makes clear that the type of activity intended to be regulated is the acquisition of control of
the listed company through the purchase of shares. Control may [be] effected through a direct and indirect acquisition
of stock, and when this takes place, irrespective of the means, a tender offer must occur. The bottom line of the law is to
give the shareholder of the listed company the opportunity to decide whether or not to sell in connection with a transfer
of control.

Power Homes Unlimited Corp. v. SEC

G.R. No. 164182 February 26, 2008
Power Homes Unlimited Corp. vs. SEC

Nature: Corporation Law

Facts:
Power Homes (P) was engaged in managing real estate properties for subdivision & allied purposes and in the purchase,
exchange, and/or sale of such through network marketing. Manero & Munsayac requested SEC (R) to investigate P’s
business since he attended a seminar conducted by P where the latter claimed to sell properties that were inexistent and
without any broker’s license & desires to know if network marketing is legitimate. P submitted to R copies of its
marketing course module and letters of accreditation/authority or confirmation from Crown Asia, Fil-Estate Network and
Pioneer 29 Realty Corporation after a conference held by R. R found P 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 R.A. No. 8799 (The Securities
Regulation Code), but failed to register them in violation of Sec. 8.1 of the same Act. R then issued a CDO to P to enjoin
the latter from engaging in the sale, offer or distribution of the securities.

Issue:
Whether P’s business constitutes investment contracts which should be registered with R before its sale or offer for sale
or distribution to the public.

Ruling:
Yes. The court ruled that P failed the Howey Test. It requires a transaction, contract, or scheme whereby a person:
(1) makes an investment of money
(2) in a common enterprise
(3) with the expectation of profits
(4) to be derived solely from the efforts of others.

Any investment contract covered by the Howey Test must be registered under the Securities Act, regardless of whether
its issuer was engaged in fraudulent practices. R.A. No. 8799 defines an Investment contract as a contract, transaction or
scheme whereby a person invests his money in a common enterprise and is led to expect profits not solely but primarily
from the efforts of others. In the case at bar, P’s business involves security contracts wherein an investor enrolls in P’s
program by paying US$234. This entitles him to recruit two (2) investors who pay US$234 each and out of which amount
he receives US$92. A minimum recruitment of four (4) investors by these two (2) recruits, who then recruit at least two
(2) each, entitles the principal investor to US$184 and the pyramid goes on.

Onapal v. CA / Ish
February 1, 1993
ONAPAL PHILIPPINES COMMODITIES, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS and SUSAN
CHUA, respondents.
CAMPOS, JR., J.

SUMMARY: Susan Chua entered into “Trading Contracts” with ONAPAL. She initially invested P500,000 and was guaranteed that she
could withdraw her investment any time. Later, Chua was made to give additional deposits. As she did not really know much about the
business, she decided to withdraw her investments, but ONAPAL’s officer Diaz told her that she could not do so as “some accounts
were hanging on the transactions.” She brought suit before the RTC to recover her investments. The RTC ruled that the Trading
Contract on “futures” is a specie of gambling and therefore null and void. ONAPAL was ordered to refund the amounts invested by
Chua. CA and SC affirmed.
DOCTRINE: The term "futures" has grown out of those purely speculative transactions in which there are nominal contracts to sell for
future delivery, but where in fact no delivery is intended or executed. The nominal seller does not have or expect to have a stock of
merchandise he purports to sell nor does the nominal buyer expect to receive it or to pay for the price. Instead of that, a percentage or
margin is paid, which is increased or diminished as the market rates go up and down, and accounted for to the buyer. This is simple
speculation, gambling or wagering on prices within a given time; it is not buying and selling and is illegal as against public policy.
FACTS:

Petitioner ONAPAL Philippines Commodities, Inc., a duly organized and existing corporation, was licensed as commission
merchant/broker by the SEC, to engage in commodity futures trading in Cebu City under Certificate of Registration No. CEB-
182.

On April 27, 1983, petitioner and private respondent Susan Chua concluded a "Trading Contract".
o Like all customers of the petitioner, private respondent was furnished regularly with "Commodities Daily Quotations"
showing daily movements of prices of commodity futures traded and of market reports indicating the volume of trade
in different future exchanges in Hongkong, Tokyo and other centers.
o Every time a customer enters into a trading transaction with petitioner as broker, the trading order is communicated
by telex to its principal, Frankwell Enterprises of Hongkong.
o If the transaction, either buying or selling commodity futures, is consummated by the principal, the petitioner issues a
document known as "Confirmation of Contract and Balance Sheet" to the customer.
o An order of a customer of the petitioner is supposed to be transmitted from Cebu to petitioner's office in Manila.
o From Manila, it should be forwarded to Hongkong and from there, transmitted to the Commodity Futures Exchange in
Japan.

According to private respondent Chua, ONAPAL’s Account Executive Elizabeth Diaz invited her to invest in the commodity
futures trading by depositing P500,000.
 o She was told she could withdraw her money any time.
o She did not know anything about the business and did not understand the risks involved.

Initially, Chua made a profit of P20,480 in three days.

Later, she was made to deposit P300,000 to “pay the difference” in prices.

Chua then realized that she was actually engaged in gambling.

This prompted her to ask for the withdrawal of her investment, but Diaz refused to let her do so.

Chua then filed a collection suit before the RTC to recover her investments.

RTC: Trading Contract is actually a specie of gambling. Null and void.

CA: Affirmed.

Hence, this petition.

ONAPAL contends that the Trading Contract is a commodity futures contract within the contemplation of §2 of the Revised
Securities Act.

Also, it is covered by the Revised Rules and Regulations on Commodity Futures Trading issued by the SEC:

"Commodity Futures Contract" shall refer to an agreement to buy or sell a specified quantity and grade of a commodity at a
future date at a price established at the floor of the exchange.

"Futures Commission Merchant/Broker" shall refer to a corporation or partnership, which must be registered and licensed as a
Futures Commission Merchant/Broker and is engaged in soliciting or in accepting orders for the purchase or sale of any
commodity for future delivery on or subject to the rules of the contract market and that, in connection with such solicitation or
acceptance of orders, accepts any money, securities or property (or extends credit in lieu thereof) to margin, guarantee or
secure any trade or contract that results or may result therefrom.


ONAPAL also invokes Art. 1462 of the Civil Code, thus:

The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or
goods to be manufactured, raised or acquired by the seller after the perfection of the contract of sale, in this Title called "future
goods".

There may be a contract of sale of goods, whose acquisition by the seller depends upon a contingency which may or may not
happen.

History of “futures” contracts


In the late 1880's, trading in futures became rampant in the purchase and sale of cotton and grain in the United States, giving
rise to unregulated trading exchanges known as "bucket shops".

These were common in Chicago and New York City where cotton from the South and grain from the Mid-west were constantly
traded in.

Under the rules of the trading exchanges, weekly settlements were required if there was any difference in the prices of the
cotton between those obtaining at the time of the contract and at the date of delivery so that under the contract made by the
purchaser, if the price of cotton had advanced, he would have received in cash from the seller each week the advance (increase) in
price and if cotton prices declined, the purchaser had to make like payments to the seller. In the terminology of the exchange, these
payments are called "margins".

Where the broker represented the buyer in buying and

selling cotton for future delivery with himself extending credit margins, and some of the transactions were closed at a profit
while the others at a loss, payments being made of the difference in prices arising out of their rise or fall above or below the
contract price, and the facts showed that no actual delivery of cotton was contemplated, such contracts are of the kind commonly
called "futures".

Futures contracts without intending delivery

 The term "futures" has grown out of those purely speculative transactions in which there are nominal contracts to sell for future
delivery, but where in fact no delivery is intended or executed.
 The nominal seller does not have or expect to have a stock of merchandise he purports to sell nor does the nominal buyer
expect to receive it or to pay for the price. Instead of that, a percentage or margin is paid, which is increased or diminished as
the market rates go up and down, and accounted for to the buyer.
 This is simple speculation, gambling or wagering on prices within a given time; it is not buying and selling and is illegal as
against public policy.

ISSUE #1:
 WoN the Trading Contract is a valid futures contract. (NO)
RATIO #1:
 The contract signed by private respondent purports to be for the delivery of goods with the intention that the difference
between the price stipulated and the exchange or market price at the time of the pretended delivery shall be paid by the loser
to the winner.
 The evidence of the plaintiff tend to show that in her transactions with the defendant, the parties never intended to make or
accept delivery of any particular commodity but the parties merely made a speculation on the rise or fall in the market of the
contract price of the commodity, subject of the transaction, on the pretended date of delivery so that if the forecast was correct,
one party would make a profit, but if the forecast was wrong, one party would lose money.
  According to ONAPAL, there was proof that the parties intended a delivery since par. 10 of the rules for commodity trading
amply provides for actual delivery of the commodity subject of the transaction.
 SC upholds the CA. Court is convinced that there was no actual delivery intended.
o
ONAPAL employee’s testimony is to the effect that all the defendant's customers were mere speculators who merely
forecast the rise or fall in the market of the commodity, subject of the transaction, below or above the contract price
on the pretended date of delivery and, in fact, the defendant even discourages its customers from taking or accepting
delivery of any commodity by making it hard, if not impossible, for them to make or accept delivery of any commodity.
o
Par. 10 invoked by ONAPAL even requires the customer to apply for the necessary licenses and documents with the
proper government agency for the importation and exportation of any particular commodity.
 As a contract in printed form, prepared by petitioner and served on private respondent, for the latter's signature, the trading
contract bears all the indicia of a valid trading contract because it complies with the Rules and Regulations on Commodity
Futures Trading as prescribed by the SEC.
 BUT when the transaction which was carried out to implement the written contract deviates from the true import of the
agreement as when no such delivery, actual or constructive, of the commodity or goods is made, and final settlement is made
by payment and receipt of only the difference in prices at the time of delivery from that prevailing at the time the sale is made,
the dealings in futures become mere speculative contracts in which the parties merely gamble on the rise or fall in prices.
 The contract falls within the ambit of Art. 2018, Civil Code:

If a contract which purports to be for the delivery of goods, securities or shares of stock is entered into with the intention that
the difference between the price stipulated and the exchange or market price at the time of the pretended delivery shall be
paid by the loser to the winner, the transaction is null and void. The loser may recover what he has paid.

 Under Article 2018, the private respondent is entitled to refund from the petitioner what she paid.

DISPOSITION: Affirmed.

ROBERTO V. SAN JOSE v. JOSE MA. OZAMIZ, GR No. 190590, 2017-07-12

Facts:

San Jose was elected Corporate Secretary of Philcomsat Holdings Corporation (PHC)

Petitioners argue that since the maJonty of the stocks of PHC is owned by corporations sequestered by the PCGG, the
case concerns assets of sequestered corporations, and thus the Sandiganbayan is the proper court with jurisdiction.

Issues:

whether the CA erred in remanding the case back to the RTC after finding that the complaint was within the jurisdiction
of the RTC.

Ruling:

The mere fact that a corporation's shares of stocks are owned by a sequestered corporation does not, by itself,
automatically categorize the matter as one involving sequestered assets, or matters incidental to or related to
transactions involving sequestered corporations and/or their assets.

To be clear, jurisdiction of a court is conferred by law and the jurisdiction of the Sandiganbayan in relation to sequestered
property is conferred by Presidential Decree (PD) No. 1606, as amended by RA No. 8249... c. Civil and criminal cases filed
pursuant to and in connection with Executive Order Nos. 1, 2, 14 and 14-A, issued in 1986.

In turn, these Executive Orders refer to the recovery by the PCGG of the ill gotten wealth of former President Ferdinand E.
Marcos, his relatives, dummies, and other agents.

Petitioners' insistence that the RTC has no jurisdiction over the case seems to be based on the interpretation of the
phrase "all incidents arising from, incidental to, or related to such cases necessarily fall likewise under the
Sandiganbayan's exclusive and original jurisdiction." Unfortunately, this is an erroneous interpretation because the term
"cases," as referred to in the said paragraph, pertains to "the Funds, Moneys, Assets, and Properties Illegally Acquired or
Misappropriated by Former President Ferdinand Marcos, Mrs. Imelda Romualdez Marcos, their Close Relatives,
Subordinates, Business Associates, Dummies, Agents, or Nominees." In this case, there is no question on any illegally
acquired or misappropriated property by former President Marcos or his agents. This case does not relate to the
recovery of ill-gotten wealth or any property that needs to be sequestered or assets that have already been placed under
sequestration. Thus, the subject matter of this case does not arise from, or is incidental to, or is related to the Executive
Orders cited in the law that would vest jurisdiction with the Sandiganbayan.

We find that the CA was correct in remanding the case back to the RTC. As earlier discussed, the case merely involves a
simple intra-corporate dispute. Such cases are within the jurisdiction of the RTC. While PD No. 902-A conferred original
and exclusive jurisdiction over intra-corporate disputes to the Securities and Exchange Commission,[24] this was
transferred to the appropriate RTC under RA No. 8799