Political Law

People of the Philippines vs Jacob Rosenthal

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G.R. Nos. L-46076 to L-46077 – 68 Phil. 328 – Political Law – Basic Principles; Separation of Powers – Delegation of Power; Undue Delegation of Legislative Powers – Sufficient Standard Test; Public Interest as Sufficient Standard

Jacob Rosenthal and Nicasio Osmeña were founders and shareholders of the ORO Oil Company. Later, Rosenthal and Osmeña were found guilty of selling their shares to individuals without actual tangible assets. Their shares were merely based on speculations and future gains. This is in violation of Sections 2 and 5 of Act No. 2581.

Section 2 provides that every person, partnership, association, or corporation attempting to offer to sell in the Philippines speculative securities of any kind or character whatsoever, is under obligation to file previously with the Insular Treasurer the various documents and papers enumerated therein and to pay the required tax of twenty-pesos.

Section 5, on the other hand, provides that “whenever the said Treasurer of the Philippine Islands is satisfied, either with or without the examination herein provided, that any person, partnership, association or corporation is entitled to the right to offer its securities 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 order the securities named in said certificate or permit for sale”; that “said Treasurer shall furthermore have authority, when ever in his judgment it is in the public interest, to cancel said certificate or permit”, and that “an appeal from the decision of the Insular Treasurer may be had within the period of thirty days to the Secretary of Finance.”

Rosenthal argued that Act 2581 is unconstitutional because no standard or rule is fixed in the Act which can guide said official in determining the cases in which a certificate or permit ought to be issued, thereby making his opinion the sole criterion in the matter of its issuance, with the result that, legislative powers being unduly delegated to the Insular Treasurer.

ISSUE: Whether or not there is undue delegation of power to the Internal Treasurer.

HELD: No. The Supreme Court ruled that the Act furnishes a sufficient standard for the Insular Treasurer to follow in reaching a decision regarding the issuance or cancellation of a certificate or permit. The certificate or permit to be issued under the Act must recite that the person, partnership, association or corporation applying therefor “has complied with the provisions 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 a certificate or permit is expressly conditioned upon a finding that such cancellation “is in the public interest.”

In view of the intention and purpose of Act No. 2581 – to protect the public against “speculative schemes 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”, – the SC held that “public interest” in this case is a sufficient standard to guide the Insular Treasurer in reaching a decision on a matter pertaining to the issuance or cancellation of certificates or permits.

Rosenthal insists that the delegation of authority to the Commission is invalid because the stated criterion is uncertain. That criterion is the public interest. It is a mistaken assumption that this is a mere general reference to public welfare without any standard to guide determinations. The purpose of the Act, the requirement it imposes, and the context of the provision in question show the contrary.

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