POWER HOMES UNLIMITED CORPORATION, petitioner,

vs.
SECURITIES AND EXCHANGE COMMISSION AND NOEL MANERO, respondents.

DECISION

PUNO, C.J.:

This petition for review seeks the reversal and setting aside of the July 31, 2003 Decision1 of the Court of
Appeals that affirmed the January 26, 2001 Cease and Desist Order (CDO)2 of public respondent Securities
and Exchange Commission (SEC) enjoining petitioner Power Homes Unlimited Corporation’s (petitioner)
officers, directors, agents, representatives and any and all persons claiming and acting under their authority,
from further engaging in the sale, offer for sale or distribution of securities; and its June 18, 2004
Resolution3 which denied petitioner’s motion for reconsideration.

The 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:

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.4

On October 27, 2000, 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.

On November 21, 2000, one Romulo E. Munsayac, Jr. inquired from public respondent SEC whether
petitioner’s business involves "legitimate network marketing."

On the bases of the letters of respondent Manero and Munsayac, public respondent SEC held a conference
on December 13, 2000 that was attended by petitioner’s incorporators John Lim, Paul Nicolas and Leonito
Nicolas. The attendees were requested to submit copies of petitioner’s marketing scheme and list of its
members with addresses.

The following day or on December 14, 2000, petitioner submitted to public respondent SEC copies of its
marketing course module and letters of accreditation/authority or confirmation from Crown Asia, Fil-Estate
Network and Pioneer 29 Realty Corporation.

On January 26, 2001, public respondent SEC visited the business premises of petitioner wherein it gathered
documents such as certificates of accreditation to several real estate companies, list of members with web
sites, sample of member mail box, webpages of two (2) members, and lists of Business Center Owners who
are qualified to acquire real estate properties and materials on computer tutorials.

On the same day, 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 that reads:

WHEREFORE, pursuant to the authority vested in the Commission, POWER HOMES UNLIMITED,
CORP., its officers, directors, agents, representatives and any and all persons claiming and acting
under their authority, are hereby ordered to immediately CEASE AND DESIST from further engaging
in the sale, offer or distribution of the securities upon the receipt of this order.

In accordance with the provisions of Section 64.3 of Republic Act No. 8799, otherwise known as the
Securities Regulation Code, the parties subject of this Cease and Desist Order may file a request for
the lifting thereof within five (5) days from receipt.7

On February 5, 2001, petitioner moved for the lifting of the CDO, which public respondent SEC denied for
lack of merit on February 22, 2001.

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.
On May 23, 2001, the Court of Appeals consolidated petitioner’s case with CA-G.R. [SP] No. 62890
entitled Prosperity.Com, Incorporated v. Securities and Exchange Commission (Compliance and
Enforcement Department), Cristina T. De La Cruz, et al.

On June 19, 2001, petitioner filed in the Court of Appeals a Motion for the Issuance of a Writ of Preliminary
Injunction. On July 6, 2001, the motion was heard. On July 12, 2001, public respondent SEC filed its
opposition. On July 13, 2001, the appellate court granted petitioner’s motion, thus:

Considering that the Temporary Restraining Order will expire tomorrow or on July 14, 2001, and it
appearing that this Court cannot resolve the petition immediately because of the issues involved
which require a further study on the matter, and considering further that with the continuous
implementation of the CDO by the SEC would eventually result to the sudden demise of the
petitioner’s business to their prejudice and an irreparable damage that may possibly arise, we
hereby resolve to grant the preliminary injunction.

WHEREFORE, let a writ of preliminary injunction be issued in favor of petitioner, after posting a
bond in the amount of P500,000.00 to answer whatever damages the respondents may suffer
should petitioner be adjudged not entitled to the injunctive relief herein granted.8

On August 8, 2001, public respondent SEC moved for reconsideration, which was not resolved by the Court
of Appeals.

On July 31, 2003, the Court of Appeals issued its Consolidated Decision. The disposition pertinent to
petitioner reads:9

WHEREFORE, x x x x the petition for certiorari and prohibition filed by the other petitioner
Powerhomes Unlimited Corporation is hereby DENIED for lack of merit and the questioned Cease
and Desist Order issued by public respondent against it is accordingly AFFIRMED IN TOTO.

On June 18, 2004, the Court of Appeals denied petitioner’s motion for reconsideration;10 hence, this petition
for review.

The issues for determination are: (1) whether public respondent SEC followed due process in the issuance of
the assailed CDO; and (2) whether 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.

On the first issue, Sec. 64 of R.A. No. 8799 provides:

Sec. 64. Cease and Desist Order. – 64.1. The Commission, after proper investigation or
verification, motu proprio or upon verified complaint by any aggrieved party, may issue a cease and
desist order without the necessity of a prior hearing if in its judgment the act or practice, unless
restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable
injury or prejudice to the investing public.

We 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. Trite to state, 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.

The second issue is whether the business of petitioner involves an investment contract that is considered
security11and thus, must be registered prior to sale or offer for sale or distribution to the public pursuant to
Section 8.1 of R.A. No. 8799, viz:

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." It
also described the conduct of petitioner’s business as follows:

The scheme of the [petitioner] corporation requires an investor to become a Business Center Owner
(BCO) who must fill-up and sign its application form. The Terms and Conditions printed at the back
of the application form indicate that the BCO shall mean an independent representative of Power
Homes, who is enrolled in the company’s referral program and who will ultimately purchase real
property from any accredited real estate developers and as such he is entitled to a referral
bonus/commission. Paragraph 5 of the same indicates that there exists no employer/employee
relationship between the BCO and the Power Homes Unlimited, Corp.

The BCO is required to pay US$234 as his enrollment fee. His enrollment entitles him to recruit two
investors who should pay US$234 each and out of which amount he shall receive US$92. In case
the two referrals/enrollees would recruit a minimum of four (4) persons each recruiting two (2)
persons who become his/her own down lines, the BCO will receive a total amount of US$147.20
after deducting the amount of US$36.80 as property fund from the gross amount of US$184. After
recruiting 128 persons in a period of eight (8) months for each Left and Right business groups or a
total of 256 enrollees whether directly referred by the BCO or through his down lines, the BCO who
receives a total amount of US$11,412.80 after deducting the amount of US$363.20 as property
fund from the gross amount of US$11,776, has now an accumulated amount of US$2,700
constituting as his Property Fund placed in a Property Fund account with the Chinabank. This
accumulated amount of US$2,700 is used as partial/full down payment for the real property chosen
by the BCO from any of [petitioner’s] accredited real estate developers.12

An investment contract is defined in the Amended Implementing Rules and Regulations of R.A. No. 8799 as
a "contract, transaction or scheme (collectively ‘contract’) whereby a person invests his money in a common
enterprise and is led to expect profits primarily from the efforts of others."13

It behooves us to trace the history of the concept of an investment contract under R.A. No. 8799. Our
definition of an investment contract traces its roots from the 1946 United States (US) case of SEC v. W.J.
Howey Co.14 In this case, the US Supreme Court was confronted with the issue of whether
the Howey transaction constituted an "investment contract" under the Securities Act’s definition of
"security."15 The US Supreme Court, recognizing that the term "investment contract" was not defined by the
Act or illumined by any legislative report,16 held that "Congress was using a term whose meaning had been
crystallized"17 under the state’s "blue sky" laws18 in existence prior to the adoption of the Securities
Act.19 Thus, it ruled that the use of the catch-all term "investment contract" indicated a congressional intent
to cover a wide range of investment transactions.20 It established a test to determine whether a transaction
falls within the scope of an "investment contract."21 Known as 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.22 Although the
proponents must establish all four elements, the US Supreme Court stressed that the Howey Test "embodies
a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable
schemes devised by those who seek the use of the money of others on the promise of profits." 23 Needless to
state, 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.

After Howey came the 1973 US case of SEC v. Glenn W. Turner Enterprises, Inc. et al.24 In this case, the
9th Circuit of the US Court of Appeals ruled that the element that profits must come "solely" from the efforts
of others should not be given a strict interpretation. It held that a literal reading of the requirement "solely"
would lead to unrealistic results. It reasoned out that its flexible reading is in accord with the statutory
policy of affording broad protection to the public. Our R.A. No. 8799 appears to follow this flexible concept
for it defines an investment contract as a contract, transaction or scheme (collectively "contract") 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. Thus, to be a security subject to regulation by the SEC, an investment contract
in our jurisdiction must be proved to be: (1) an investment of money, (2) in a common enterprise, (3) with
expectation of profits, (4) primarily from efforts of others.

Prescinding from these premises, we affirm the ruling of the public respondent SEC and the Court of Appeals
that the petitioner was engaged in the sale or distribution of an investment contract. Interestingly, the facts
of SEC v. Turner25 are similar to the case at bar. In Turner, the SEC brought a suit to enjoin the violation of
federal securities laws by a company offering to sell to the public contracts characterized as self-
improvement courses. On appeal from a grant of preliminary injunction, the US Court of Appeals of the
9th Circuit held that self-improvement contracts which primarily offered the buyer the opportunity of earning
commissions on the sale of contracts to others were "investment contracts" and thus were "securities"
within the meaning of the federal securities laws. This is regardless of the fact that buyers, in addition to
investing money needed to purchase the contract, were obliged to contribute their own efforts in finding
prospects and bringing them to sales meetings. The appellate court held:

It is apparent from the record that what is sold is not of the usual "business motivation" type of
courses. Rather, the purchaser is really buying the possibility of deriving money from the
sale of the plans by Dare to individuals whom the purchaser has brought to Dare. The promotional
aspects of the plan, such as seminars, films, and records, are aimed at interesting others in the
Plans. Their value for any other purpose is, to put it mildly, minimal.

Once an individual has purchased a Plan, he turns his efforts toward bringing others into
the organization, for which he will receive a part of what they pay. His task is to bring
prospective purchasers to "Adventure Meetings."

The business scheme of petitioner in the case at bar is essentially similar. An investor enrolls in petitioner’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.

We reject petitioner’s claim that the payment of US$234 is for the seminars on leverage marketing and not
for any product. Clearly, the trainings or seminars are merely designed to enhance petitioner’s business of
teaching its investors the know-how of its multi-level marketing business. An investor enrolls under the
scheme of petitioner to be entitled to recruit other investors and to receive commissions from the
investments of those directly recruited by him. Under the scheme, the accumulated amount received by the
investor comes primarily from the efforts of his recruits.

We therefore 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 strict
regulation of securities is founded on the premise that the capital markets depend on the investing public’s
level of confidence in the system.

IN VIEW WHEREOF, the petition is DENIED. The July 31, 2003 Decision of the Court of Appeals, affirming
the January 26, 2001 Cease and Desist Order issued by public respondent Securities and Exchange
Commission against petitioner Power Homes Unlimited Corporation, and its June 18, 2004 Resolution
denying petitioner’s Motion for Reconsideration are AFFIRMED. No costs.

SO ORDERED.

[12] G.R. No. 164197 January 25, 2012

SECURITIES AND EXCHANGE COMMISSION, Petitioner,

vs.
PROSPERITY.COM, INC., Respondent.

This case involves the application of the Howey test in order to determine if a particular transaction is
an investment contract.

The Facts and the Case

Prosperity.Com, Inc. (PCI) sold computer software and hosted websites without providing internet
service. To make a profit, PCI devised a scheme in which, for the price of US$234.00 (subsequently
increased to US$294), a buyer could acquire from it an internet website of a 15-Mega Byte (MB)
capacity. At the same time, by referring to PCI his own down-line buyers, a first-time buyer could earn
commissions, interest in real estate in the Philippines and in the United States, and insurance
coverage worth ₱50,000.00.

To benefit from this scheme, a PCI buyer must enlist and sponsor at least two other buyers as his own
down-lines. These second tier of buyers could in turn build up their own down-lines. For each pair of
down-lines, the buyer-sponsor received a US$92.00 commission. But referrals in a day by the buyer-
sponsor should not exceed 16 since the commissions due from excess referrals inure to PCI, not to the
buyer-sponsor.

Apparently, PCI patterned its scheme from that of Golconda Ventures, Inc. (GVI), which company
stopped operations after the Securities and Exchange Commission (SEC) issued a cease and desist
order (CDO) against it. As it later on turned out, the same persons who ran the affairs of GVI directed
PCI’s actual operations.

In 2001, disgruntled elements of GVI filed a complaint with the SEC against PCI, alleging that the
latter had taken over GVI’s operations. After hearing,1 the SEC, through its Compliance and
Enforcement unit, issued a CDO against PCI. The SEC ruled that PCI’s scheme constitutes an
Investment contract and, following the Securities Regulations Code, 2 it should have first registered
such contract or securities with the SEC.

Instead of asking the SEC to lift its CDO in accordance with Section 64.3 of Republic Act (R.A.) 8799,
PCI filed with the Court of Appeals (CA) a petition for certiorari against the SEC with an application for
a temporary restraining order (TRO) and preliminary injunction in CA-G.R. SP 62890. Because the CA
did not act promptly on this application for TRO, on January 31, 2001 PCI returned to the SEC and
filed with it before the lapse of the five-day period a request to lift the CDO. On the following day,
February 1, 2001, PCI moved to withdraw its petition before the CA to avoid possible forum shopping
violation.

During the pendency of PCI’s action before the SEC, however, the CA issued a TRO, enjoining the
enforcement of the CDO.3 In response, the SEC filed with the CA a motion to dismiss the petition on
ground of forum shopping. In a Resolution,4 the CA initially dismissed the petition, finding PCI guilty of
forum shopping. But on PCI’s motion, the CA reversed itself and reinstated the petition.5

In a joint resolution,6 CA-G.R. SP 62890 was consolidated with CA-G.R. SP 64487 that raised the same
issues. On July 31, 2003 the CA rendered a decision, granting PCI’s petition and setting aside the
SEC-issued CDO.7 The CA ruled that, following the Howey test, PCI’s scheme did not constitute an
investment contract that needs registration pursuant to R.A. 8799, hence, this petition.

The Issue Presented

The sole issue presented before the Court is whether or not PCI’s scheme constitutes an investment
contract that requires registration under R.A. 8799.

The Ruling of the Court

The Securities Regulation Code treats investment contracts as "securities" that have to be registered
with the SEC before they can be distributed and sold. An investment contract is a contract,
transaction, or scheme where a person invests his money in a common enterprise and is led to expect
profits primarily from the efforts of others.8

Apart from the definition, which the Implementing Rules and Regulations provide, Philippine
jurisprudence has so far not done more to add to the same. Of course, the United States Supreme
Court, grappling with the problem, has on several occasions discussed the nature of investment
contracts. That court’s rulings, while not binding in the Philippines, enjoy some degree of
persuasiveness insofar as they are logical and consistent with the country’s best interests.9

The United States Supreme Court held in Securities and Exchange Commission v. W.J. Howey
Co.10 that, for an investment contract to exist, the following elements, referred to as the Howey test
must concur: (1) a contract, transaction, or scheme; (2) an investment of money; (3) investment is
made in a common enterprise; (4) expectation of profits; and (5) profits arising primarily from the
efforts of others. 11 Thus, to sustain the SEC position in this case, PCI’s scheme or contract with its
buyers must have all these elements.

An example that comes to mind would be the long-term commercial papers that large companies, like
San Miguel Corporation (SMC), offer to the public for raising funds that it needs for expansion. When
an investor buys these papers or securities, he invests his money, together with others, in SMC with
an expectation of profits arising from the efforts of those who manage and operate that company.
SMC has to register these commercial papers with the SEC before offering them to investors.

Here, PCI’s clients do not make such investments. They buy a product of some value to them: an
Internet website of a 15-MB capacity. The client can use this website to enable people to have internet
access to what he has to offer to them, say, some skin cream. The buyers of the website do not invest
money in PCI that it could use for running some business that would generate profits for the investors.
The price of US$234.00 is what the buyer pays for the use of the website, a tangible asset that PCI
creates, using its computer facilities and technical skills.

Actually, PCI appears to be engaged in network marketing, a scheme adopted by companies for
getting people to buy their products outside the usual retail system where products are bought from
the store’s shelf. Under this scheme, adopted by most health product distributors, the buyer can
become a down-line seller. The latter earns commissions from purchases made by new buyers whom
he refers to the person who sold the product to him. The network goes down the line where the orders
to buy come.

The commissions, interest in real estate, and insurance coverage worth ₱50,000.00 are incentives to
down-line sellers to bring in other customers. These can hardly be regarded as profits from investment
of money under the Howey test.

The CA is right in ruling that the last requisite in the Howey test is lacking in the marketing scheme
that PCI has adopted. Evidently, it is PCI that expects profit from the network marketing of its
products. PCI is correct in saying that the US$234 it gets from its clients is merely a consideration for
the sale of the websites that it provides.

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision dated July 31, 2003 and the
resolution dated June 18, 2004 of the Court of Appeals in CA-G.R. SP 62890.

SO ORDERED
[13] G.R. No. 137512 September 27, 2004

PEOPLE OF THE PHILIPPINES, appellee,

vs.
ELVIRA PETRALBA, appellant.
RAYMOND HOUSCHT, JEFF GONZALES, and RICHARD ALCANTARA, co-accused.
DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari assailing the decision,1 promulgated by the Court of Appeals,2 that
affirmed the joint decision rendered by the Regional Trial Court, Branch 17, Cebu City 3 (RTC, for brevity),
convicting appellant Elvira Petralba of violations of Sections 4, 19 and 29 of Batas Pambansa Bilang (B.P. Blg.) 178,
otherwise known as The Revised Securities Act.

The factual background of the case is as follows:

Appellant and her co-accused Raymond Houscht, Jeff Gonzales and Richard Alcantara are charged in three
separate Informations, docketed as CBU-29843, to wit:

That on or about the 2nd day of July, 1991 and for sometime prior and subsequent thereto – in the City of
Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said accused, conniving and
confederating together and mutually helping one another, with deliberate intent, with intent of gain and of
defrauding one Dr. Leoni L. Bailey, did then and there induce the latter to invest in securities trading,
more particularly, in foreign exchange trading at Landsdale4 (sic) Enterprises Ltd. using the facilities of
Madura Management Corp., where accused Elvira Petralba claimed to be trader, Raymond Houscht as
Sales Manager, Jeff Gonzales as Asst. Sales Manager, and Richard Alcantara as Executive Vice-President,
thereby offering for sale to the public within the Philippines unregistered and unlicensed securities which
 are neither exempt securities nor exempt transactions under sections (5) and (6) of Batas Pambansa Blg.
178, which representations were only made to induce said Dr. Leoni L. Bailey to give and deliver and in
fact he gave and delivered the amount of $9,000.00 as capital investment, as the accused very well
knew that the securities which they offered to sell and sold to the public within the Philippines
were not registered in Violation of Section 4 of Batas Pambansa Blg. 178.5 (Emphasis supplied)

CBU-29844, to wit:

That on or about the 2nd day of July, 1991, and for sometime prior and subsequent thereto, in the City of
Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said accused, conniving and
confederating together and mutually helping one another, with deliberate intent, with deceit and
misrepresentation, with intent of gain and of defrauding one Dr. Leoni L. Bailey, did then and there induce
the latter to invest in foreign exchange trading with Landsdale (sic) Enterprises Ltd. using the facilities of
Madura Management Corp., where accused Elvira Petralba claimed to be trader, Raymond Houscht as
Sales Manager, Jeff Gonzales as Assistant Sales Manager, and Richard Alcantara as Executive Vice-
President, assuring him that Landsdale (sic) Enterprises Ltd. and Madura Management Corp. are
duly licensed to engage in foreign exchange trading when in truth and in fact, these companies
do not have such license, and as a consequence of such deceit and misrepresentation said Dr.
Leoni L. Bailey invested the total amount of $9,000.00, the accused thereby engaging in
fraudulent transactions in foreign exchange trading in Violation of Section 29 of Batas
Pambansa Blg. 178.6 (Emphasis supplied)

and CBU-29845, to wit:

That on or about the 2nd day of July, 1991, and for sometime prior and subsequent thereto, in the City of
Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said accused, conniving and
confederating together and mutually helping one another, with deliberate intent, with intent to gain and to
defraud one Dr. Leoni L. Bailey, did then and there induce the latter to invest in foreign exchange trading
with Landsdale (sic) Enterprises Ltd. using the facilities of Madura Management Corp., where accused
Elvira Petralba claimed to be trader, Raymond Houscht as Sales Manager, Jeff Gonzales as Asst. Sales
Manager, and Richard Alcantara as Executive Vice-Pres., assuring him of a high monthly interest and
compounding of capital within a short period and the money can be withdrawn anytime,
therebyacting and functioning as brokers, dealers or salesmen of securities, which
representations were only made to induce said Dr. Leoni L. Bailey to give and deliver as in fact
he gave and delivered the amount of $9,000.00, as evidenced by receipts, without authority of
law not having been registered with the Securities and Exchange Commission as brokers,
dealers or salesmen of securities in Violation of Section 19 of Batas Pambansa Blg.
178.7 (Emphasis supplied)

Only appellant was duly arraigned. She pleaded not guilty to the charges against her under the foregoing
Informations, and joint trial ensued thereafter. All her co-accused remain at large.

The findings of fact of the trial court as affirmed in toto by the Court of Appeals, are as follows:

The evidence for the Prosecution as established thru the oral testimonies of Dr. Leoni Bailey and Atty.
Rosalinda San Fontanosas and the documents they had identified substantially shows that Dr. Bailey was
holding office in 1991 in her residence at 12 San Jose Street, Cebu City as clinical consultant.

Accused Elvira Petralba introduced herself as a representative of Lansdale Enterprises Limited showing the
doctor her brochures (Exhibit "B") and told her the Lansdale has an office in Hongkong with its principal office
in Tokyo. Accused gave Dr. Bailey some documents one of which is the customer’s agreement (Exhibit "C").
Dr. Bailey gave the accused a check worth $6,000.00 as her starting capital for foreign exchange trading to be
handled by Mr. Richard Alcantara, the manager of Lansdale.

Accused Petralba assured Bailey that the business was protected by a foreign company in the amount of
$4,000,000.00. Four (4) persons, namely, Petralba, the manager, the assistant manager and another person
were present. Petralba signed a receipt (Exhibit "A") wherein her confirmatory signature (Exhibit "A-2")
appears.

Bailey demanded partial return of her investment from accused Petralba but the latter failed to do so. Bailey
contacted the office of Lansdale, its officers including the manager and Petralba several times but these
persons were always out. Finally, Bailey went to the Securities and Exchange Commission (SEC), filed a
complaint and executed an affidavit (Exhibit "D", "D-1") before Atty. Cunanan (Exhibit "D-2"), the director, the
original copy of which is with the SEC. She likewise submitted the original copy of the receipt with the SEC.

Dr. Bailey and Elvira Petralba knew each other as early as the first week of June 1991. Since accused wanted
to see her about foreign currency trading, Bailey invited her to her office in July 1991. Petralba told her that
she represents REATA, an investment company in foreign exchange.
 Dr. Bailey was in this business before in the United States. There was no problem there because everything
was taken cared of by her financial adviser. The company also assumed the responsibility in case of loss,
hence the investment was protected. In this particular case, the four (4) accused convinced her that her
investment is protected.

Bailey gave the accused the check although the payee was Lansdale which traded her money without her
consent. Out of the amount in the check only $300 was returned to her by the cashier of Lansdale.

During the first week of trading or on July 8, 1991, Bailey signed (Exhibit "A-1") the instruction of purchase
(Exhibit "A") because she was asked to sign it. Bailey also signed other instructions of purchase (Exhibits "2"
to "12") but before she signed them (Exhibits "13" to "23", "13-A" to "23-A") she read all of them. She also
signed a form letter dated August 15, 1991 (Exhibits "24", "24-A" and "D") which she was asked to fill up as
the company was changing its name to Tokyo Commonwealth Limited.

Bailey read the contract and the trading rules of Lansdale before she signed it. She understood all the
stipulations contained therein. There is a provision in paragraph ten (10) thereof stating the risk of loss in
trading but accused assured her that the company had a reserve fund in the amount of $14 million as
investor’s protection fund.

When Bailey signed the check for investment, the persons present were Alcantara, Petralba and two others.
Alcantara introduced himself as the Assistant Vice-President of Lansdale. The customer’s agreement was
signed by Bailey marked as Exhibit "A" and the receipt as Exhibit "E".

It was Atty. Rosalinda San Fontanosas of SEC’s legal department who investigated Lansdale Enterprises in
connection with the complaint of Dr. Leoni Bailey after a certain Felix Chan in their office resigned.

On July 2, 1991, all the accused were not yet licensed as traders when they presented to Dr. Bailey the
investment proposal except Mr. Alcantara who has a license for the period from January 15, 1991 to December
31, 1991.

Lansdale Enterprises Ltd. has not been registered with the Securities and Exchange Commission (SEC) per
first indorsement dated July 25, 1994 (Exhibits "F", "F-1" and "F-2") and another indorsement dated July
20, 1994 (Exhibits "G", "G-1" and "G-2").8

After trial on the merits, the RTC rendered judgment, the dispositive portion of which reads as follows:

WHEREFORE, premises considered, the Court finds the accused Elvira Petralba guilty beyond reasonable doubt
in three (3) counts of Violations of Sections 4, 19 and 29 of Batas Pambansa Bilang 178, otherwise known as
The Revised Securities Act and accordingly, accused is hereby sentenced to serve an imprisonment of seven
(7) years for each count or a total period of twenty-one (21) years; to indemnify private complainant Dr. Leoni
Bailey the sum of Five Thousand Seven Hundred US Dollars ($5,700.00) or its current Philippines Peso value
with the legal rate of interest per annum from the time of the filing of these informations plus costs of the
suits.

SO ORDERED.

Cebu City, Philippines. February 16, 1996.9

On appeal to the Court of Appeals, the appellate court affirmed in full the RTC judgment.

Hence, the present petition, appellant raising the following Assignment of Errors, thus:

THE COURT OF APPEALS ERRED IN AFFIRMING IN FULL THE JUDGMENT OF THE COURT A QUO THEREBY ALSO
CONCLUDING THAT ACCUSED-APPELLANT, WHO IS A MERE EMPLOYEE, CONNIVED AND CONFEDERATED
WITH HER CO-ACCUSED, AND REPRESENTED HERSELF AS TRADER THUS ALLEGEDLY VIOLATING SECTIONS 4
AND 19 OF BATAS PAMBANSA BILANG 178, OTHERWISE KNOWN AS THE REVISED SECURITIES ACT, WHEN
NO PROOF WAS PRESENTED TO PROVE BEYOND REASONABLE DOUBT THAT ACCUSED-APPELLANT IS GUILTY
OF SAID ALLEGED VIOLATIONS.

II

THE COURT OF APPEALS ERRED IN AFFIRMING THE CONVICTION OF THE ACCUSED-APPELLANT BY THE
COURT A QUO FOR VIOLATION OF SEC. 4, 19, AND 29 OF BATAS PAMBANSA BLG. 178, OTHERWISE KNOWN
AS THE REVISED SECURITIES ACT, UPON EVIDENCE WHICH FAILED TO ESTABLISH THE IDENTITY OF THE
REAL SELLER FROM AMONG THE MANY ACCUSED IN THIS CASE.

III
 THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE COURT A QUO BY DISREGARDING THE
FACT THAT ANOTHER CO-ACCUSED AND ALLEGED CO-CONSPIRATOR IN THIS CASE WHO HAS NOT BEEN
BROUGHT TO COURT WAS LICENSED TO TRANSACT BUSINESS WITH THE PRIVATE COMPLAINANT.

IV

THE COURT OF APPEALS ERRED IN CONCLUDING THAT A CUSTOMER’S CONTRACT FALLS WITHIN THE TERM
"SECURITIES".

THE COURT OF APPEALS ERRED IN AFFIRMING THE JUDGMENT OF THE COURT A QUO IN SENTENCING THE
ACCUSED-APPELLANT TO SERVE AN IMPRISONEMNT OF SEVEN (7) YEARS FOR EACH COUNT OR FOR A TOTAL
PERIOD OF TWENTY-ONE (21) YEARS WHEN ACCUSED-APPELLANT’S ACTUATIONS WERE THAT MERELY OF AN
EMPLOYEE AND HAS NOT BENEFITED WHATSOEVER FROM THE TRANSACTION COMPLAINED OF NOR DID SHE
DEFRAUD PRIVATE COMPLAINANT OF HER MONEY AS THE SAME WAS DIRECTLY GIVEN TO HER EMPLOYER.10

On the basis thereof, the following questions arise: (1) whether the contract between complainant Dr. Leoni Bailey
and Lansdale Enterprises Ltd. falls within the term "securities" contemplated by the Revised Securities Act; (2)
whether the prosecution had established that appellant represented herself as a broker, dealer or trader in
conspiracy with her co-accused; (3) whether the prosecution evidence established the identity of the real seller
from among the four accused including herein appellant; (4) whether the established fact that her co-accused,
Richard Alcantara, executive vice-president of Lansdale was duly licensed to trade exonerates appellant from
liability under The Revised Securities Act; and (5) whether appellant should be held criminally liable considering
that she was a mere employee of Lansdale and she has neither benefited from the subject transaction nor
defrauded private complainant of her money as the same was directly given to her employer.

These five questions boil down to the principal issue of whether or not the Court of Appeals erred in affirming the
conviction of appellant; or stated differently, whether or not the prosecution has established the guilt of appellant
beyond reasonable doubt for violating Sections 4, 19 and 29 of B.P. Blg. 178.

We are constrained to look into the evidence presented before the trial court so as to resolve the herein appeal. It
is settled that as a rule, our jurisdiction in cases brought to us from the Court of Appeals is limited to the review
and revision of errors of law allegedly committed by the appellate court, as its findings of fact are deemed
conclusive and we are not duty-bound to analyze and weigh all over again the evidence already considered in the
proceedings below.11 However, we have consistently enunciated that we may review the findings of fact of the
Court of Appeals: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on
speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible;
(d) when the judgment of the Court of Appeals, in making its findings, is conflicting; (e) when the factual findings
are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the
same are contrary to the admissions of both appellant and appellee; (g) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a
different conclusion; and (h) where the findings of fact of the Court of Appeals are contrary to those of the trial
court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner
are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on record.12

After a careful examination of the prosecution evidence, we find that the findings of both lower courts were
grounded on mere surmises or conjectures; the inferences they made were manifestly mistaken, bordering on
absurdity; and the judgment of the appellate court was based on misapprehension of facts or mere conclusions
without citation of specific, competent evidence.

Under the three Informations, appellant is charged with conniving and confederating together with her three co-
accused, and mutually helping one another, with deliberate intent to gain and defraud complainant by: (1) offering
for sale, together with her co-accused, securities which were not registered in violation of Section 4 of the law; (2)
representing and acting as broker or dealer to induce complainant as in fact she delivered the subject amount, not
having been registered with the Securities and Exchange Commission, in violation of Section 19 of the same law;
and (3) assuring the complainant that Lansdale is duly licensed to engage in foreign exchange trading when in fact
said company is not duly-licensed, as a consequence of which complainant invested the amount of $6,000.00,
thereby engaging in fraudulent transactions in foreign exchange trading, in violation of Section 29 of the law.

The Court of Appeals erred in affirming the RTC’s decision. The prosecution failed to establish the guilt of appellant
beyond reasonable doubt.

Appellant claims that the transaction that transpired between complainant and her employer Lansdale was a mere
foreign exchange trading which is not covered by the term "securities" of B.P. Blg. 178, 13 the prevailing law at the
time of the commission of the alleged crimes.
Section 2 of B.P. Blg. 178 provides:

Section 2. Definitions. – For purposes of this Act:

(a) "Securities" shall include bonds, debentures, notes, evidences of indebtedness, shares in a company,
preorganization certificates or subscription, investment contracts, certificates of interest or
participation in a profit sharing agreement, collateral trust certificates, equipment trust certificates
(including conditional sale contracts or similar interests or instruments serving the same purpose), voting
trust certificates, certificates of deposit for a security, or fractional undivided interests in oil, gas, or other
mineral rights, or in general, interest or instruments commonly considered to be "securities", or
certificates of interests or participation, in temporary or interim certificates for, receipts for, guarantees of,
or warrants or rights to subscribe to or buy or sell any of the foregoing; or commercial papers evidencing
indebtedness of any person, financial or non-financial entity, irrespective of maturity, issued, endorsed,
sold transferred or in any manner conveyed to another with or without recourse, such as promissory
notes, repurchase agreements, certificates of assignments, certificates of participation, trust certificates or
similar instruments; or proprietary or non-proprietary membership certificates, commodity futures
contracts, transferable stock options, pre-need plans, pension plans, life plans, joint ventures contracts,
and similar contracts and investments where there is no tangible return on investments plus profits but an
appreciation of capital as well as enjoyments of particular privileges and services. . . . [Emphasis supplied]

Clearly therefrom, as pointed out by the Office of the Solicitor General, the foreign exchange trading transaction
that transpired between complainant and Lansdale appears to be an investment contract or participation in a profit
sharing agreement that falls within the definition of the law. When the investor is relatively uninformed and turns
over his money to others, essentially depending upon their representations and their honesty and skill in managing
it, the transaction generally is considered to be an investment contract.14 The touchtone is the presence of an
investment in a common venture premised on a reasonable expectation of profits to be derived from the
entrepreneurial or managerial efforts of others.15 Dr. Bailey testified on this matter16 but no contract was submitted
by the prosecution. The prosecution failed to prove by sufficient evidence that indeed, the amount delivered by Dr.
Bailey to Lansdale, through appellant, is an investment contemplated by the Revised Securities Act and not a mere
act of buying and selling foreign exchange. The Customer’s Agreement, marked as Exhibit "C" during the hearing of
the case, was not offered in evidence by the prosecution. The fundamental rule is that upon him who alleges rests
the burden of proof.17

Moreover, the receipt, marked as Exhibit "A," merely shows that Dr. Bailey remitted the amount of US$6,000.00 to
Lansdale through appellant, as account executive. It contained a request for appellant to follow-up proper
remittance and credit of her trading account as well as the issuance of the receipt of said amount18 which is
confirmed by appellant as shown by her signature, marked as Exhibit "A-2." Exhibit "A" did not prove that
appellant committed any of the offenses charged against her. The receipt merely established that appellant
received the amount from Dr. Bailey for the purpose of remitting the same to Lansdale and to follow-up the
crediting thereof to her trading account. The brochure, Exhibit "B," given by appellant to Dr. Bailey, does not prove
appellant’s guilt beyond reasonable doubt in the absence of direct and specific proof on the (1) actual participation
of appellant in the alleged offer and sale of securities to the public within the Philippines which were not registered
in violation of Section 4 of B.P. Blg. 178; (2) manner by which appellant misrepresented to Dr. Bailey that Lansdale
is duly licensed to engage in foreign exchange trading in violation of Section 29 of said law; and (3) manner by
which appellant misrepresented to Dr. Bailey that she was a licensed broker, dealer or salesperson of securities
when in fact she was not, thereby inducing Dr. Bailey to invest and deliver the amount of US$6,000.00, in violation
of Section 19 of said law.

Furthermore, while it is established by the prosecution that Lansdale was not duly registered19 and appellant was
not licensed as a broker,20 the manner by which appellant connived with her co-accused and induced her to invest
her $6,000.00,21 not $9,000.00 as erroneously stated in the Informations, are too sketchy, devoid of any certainty
as to the actual participation of appellant in the commission of the offenses charged against her. A simple perusal
of the direct testimony of complainant as quoted verbatim hereunder, readily supports our findings, viz:

Q - Do you remember what transaction did you enter with the accused on July 2, 1991?

A - On July 2, 1991, I turned over to her a check for $6,000.00.

Q - What was your purpose in turning over to her the check for $6,000.00?

A - That was to start my investment with the foreign currency trading.

Q - Do you know who will take care of the foreign exchange trading?

A - It was supposed to be handled by the manager, Mr. Richard Alcantara.

Q - You said you were gypped by Elvira Petralba?

A - Yes, sir.

Q - What happened to your transaction, if you can remember?

A - They got my money.

Q - Will you please tell this Honorable Court how they got your money?

A - I do not know how they manage the trading. They only give me hope but that hope was never
realized.

Q - Before you meet Elvira Petralba the accused in this case and considering that you wanted to be
involved in an investment business, did you take steps to verify if really the foreign exchange trading is
good?

A - There were lots of businessmen I know who got involved in this foreign exchange trading and because
of this, I would like to be enlightened. Whether or not the business is authenticated, it is very difficult for
a private person to understand.

Q - Are you telling the court that you merely relied on the promises of Elvira Petralba because you don’t
understand fully the business venture?

A - There were four of them who enticed me to invest in the business. The manager, assistant manager,
Elvira Petralba, and another person.

Q - So you met Elvira Petralba who was responsible in your investing in the business?

A - Yes, sir, she said I have nothing to lose in that kind of business because we are protected by a
company abroad in the amount of 4 million dollars, if ever something happened to our investment or to
the company. The four of them were very positive in convincing me. However, those promises and
assurance did not turn out good.

Q - So you invested in the business?

A - Yes, sir.

Q - What happened to those promises?

A - Not a single promise came out to be supported by any action. They refused and failed to return my
money when I demanded for a partial return of my investment.

Q - What was then your reaction when you were not able to withdraw your money upon your demand?

A - I bombarded the office with telephone calls but nobody would answer the phone. I tried to contact
Elvira Petralba and other officers but they could not be contacted. So I tried turning over my complaint to
Social Securities Commission. (sic)

Q - Could you tell us what other benefits could you derive from investing with foreign currency trading?

A - They told me I could communicate with them anytime I want to clarify something but it turned out not
to be true. It is very difficult to contact them and it is also very difficult to get inside the office because
there are so many requirements you have to accomplish before you can get inside. All that I can do is to
call them thru telephone but nobody will answer the calls.

Q - Let us go step by step. First is the benefit. How much are you suppose to get as benefit by investing
your $6,000.00

A - There are no definite benefits fixed in foreign currency exchange. The rate goes up and down anytime.
However, we were primarily protected from any losses. There are many businessmen like Mr. Clavano who
also joined this kind of business venture.

Q - You said you will be protected from any losses of your investment.

A - Yes, sir.

Q - How?

A - At first they will let you know and convince you of their expertise and will present to you all the
benefits you can derive if you invest with them, and they have also defense if over the price will go down
or up. They said they could freeze it but they did not fully explain what will be frozen and how the freezing
 will be done. They just ate and ate our interest until everything has been eaten. May be that is what they
mean by freezing. When I invested my $6,000.00 they were already the ones controlling it. They decide
what to sell and what to buy, and if you entertain any doubt, they will cure your doubts. They will insist
that they are doing the best for you. They said we have nothing to lose. But if you demand for clarification
they could not explain.22

As one would readily observe therefrom, the testimony of the complainant insofar as appellant is concerned, is
comprised merely of generalities and conclusions that would not hold in court to justify the conviction of herein
appellant. In People vs. Mariano,23 we held that the evidence, taken in its entirety, must be clear and convincing to
prove an accused’s guilt beyond reasonable doubt, otherwise, he is entitled to an acquittal.24 And so must herein
appellant be acquitted in the present three criminal cases.

No less than the Constitution mandates that an accused shall be presumed innocent until the contrary is
proved.25Section 14 (2), Article III of the Constitution provides that in criminal cases, the quantum of evidence
required to overturn this presumption is proof beyond reasonable doubt, which, under Section 2, Rule 133 of the
Revised Rules of Court, is that proof which produces moral certainty in an unprejudiced mind. In People vs.
Saturno,26 we held:

It is a basic rule that the guilt of an accused must be proved beyond reasonable doubt. Before he is
convicted, there must be moral certainty of guilt – a certainty that convinces and satisfies the reason and
conscience of those who are to act upon it that he is guilty of the crime charged. Under our criminal
justice system, the overriding consideration is not whether the court doubts the innocence of the accused
but whether it entertains a reasonable doubt as to his guilt.

The task of the prosecution is two-fold: first, to prove that a crime has been committed, and second, that the
accused is the person responsible therefor. Thus, the prosecution must be able to overcome the constitutional
presumption of innocence with evidence beyond reasonable doubt to justify the conviction of the accused.

The prosecution and both lower courts merely depended on the wholesale self-serving declarations of complainant.
Complainant failed to specify what appellant said and did so as to support the conclusion that appellant connived
with her co-accused in defrauding her. There is nothing in the records to show how appellant offered or induced
complainant to buy unregistered securities as required under Section 4 of B.P. Blg. 178, to wit:

Section 4. Requirements of registration of securities. – (a) No securities, except of a class exempt under
any of the provisions of Section five hereof or unless sold in any transaction exempt under any of the
provisions of Section six hereof, shall be sold or offered for sale or distribution to the public within the
Philippines unless such securities shall have been registered and permitted to be sold as hereinafter
provided.

(b) Notwithstanding the provisions of paragraph (a) of this Section and of the succeeding Sections
regarding exemptions, no commercial paper as defined in Section two hereof shall be issued, endorsed,
sold, transferred or in any manner conveyed to the public, unless registered in accordance with the rules
and regulations that shall be promulgated in the public interest and for the protection of investors by the
Commission. …

(c) A record of the registration of securities shall be kept in a Register of Securities in which shall be
recorded orders entered by the Commission with respect to such securities. Such register and all
documents or information with respect to the securities registered therein shall be open to public
inspection at reasonable hours on business days.

Under Section 19 of B.P. Blg. 178, no broker, dealer or salesman shall engage in business in the Philippines as such
broker, dealer or salesman or sell any securities, including securities exempted under this Act, except in exempt
transactions, unless he has been registered as a broker, dealer or salesman. True, there is undisputed evidence
that appellant is not a licensed broker at the time of the subject transaction with complainant. However, as already
discussed above, there is no evidence whatsoever how exactly appellant misrepresented herself as a broker or
dealer thereby inducing complainant into investing her money with Lansdale.

Section 29 of the same law provides:

Section 29. Fraudulent transactions. – (a) It shall be unlawful for any person, directly or indirectly, in
connection with the purchase or sale of any securities –

(1) To employ any device, scheme, or artifice to defraud, or

(2) To obtain money or property by means of any untrue statement of a material fact or any
omission to state a material fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading, or
 (3) To engage in any act, transaction, practice, or course of business which operates or would
operate as a fraud or deceit upon any person.

(b) It shall be unlawful for any person to describe a security to a second person, without purporting to
offer it, for a consideration received or to be received directly or indirectly from the issuer, any other
person interested in buying or selling the security, an underwriter, broker, dealer, or investment adviser,
or a controlling, controlled, or commonly controlled person of any such person, unless (1) he concurrently
discloses the source of the consideration or the nature of or reason for his employment or (2) if the
second person or his agent in the transaction is identified, that information is known to the second person.

The testimony of complainant read in its entirety does not sufficiently establish that appellant herself had
uttered any words of assurance or committed a particular act as specified under the aforequoted provision
of law. Neither did complainant’s testimony show her specific participation in the alleged conspiracy to
defraud complainant. Dr. Bailey’s testimony did not prove the guilt of appellant beyond reasonable doubt.

To repeat, the only prosecution evidence that shows the participation of appellant is the document27 marked as
Exhibits "A," "A-1" to "A-3," whereby complainant is remitting to appellant, as account executive, the amount of
$6,000.00, duly confirmed by the signature of appellant; and instructing appellant to follow-up and ensure proper
remittance and credit of her (complainant’s) trading account with Lansdale. How and why complainant entrusted to
appellant said amount is not demonstrated by complainant’s testimony.

Moreover, the RTC made mention of a brochure, marked as Exhibit "B" but the same is not offered as evidence by
the prosecution as shown by its Written Offer of Evidence.28 Section 34, Rule 132 of the Rules of Court mandates
that the Court should not consider any evidence which has not been formally offered. Even the "Customer’s
Agreement," marked as Exhibit "C," was not offered in evidence by the prosecution.

Let it be stated that the fact that her co-accused Alcantara was licensed would not exonerate appellant because the
license is personal to Alcantara. Neither would the fact that appellant did not receive the amount of $6,000.00
personally exonerate her if she were found guilty of the charges against her.

Nevertheless, as discussed earlier, there is no proof beyond reasonable doubt to hold appellant guilty of all the
offenses charged against her under the three Informations.

WHEREFORE, the appealed decision of the Court of Appeals, together with that of the Regional Trial Court,
is REVERSED. Appellant ELVIRA PETRALBA is ACQUITTED of the crimes charged in Criminal Cases Nos. CBU-
29843 to 29845.

SO ORDERED.

[14] & [17] G.R. No. 161057 September 12, 2008

BETTY GABIONZA and ISABELITA TAN, Petitioners,

- versus -

COURT OF APPEALS, ROXAS and EVELYN NOLASCO, Respondents.

DECISION

Tinga, J.:

On 21 August 2000, petitioners Betty Go Gabionza (Gabionza) and Isabelita Tan (Tan) filed their respective
Complaints-affidavit1 charging private respondents Luke Roxas (Roxas) and Evelyn Nolasco (Nolasco) with several
criminal acts. Roxas was the president of ASB Holdings, Inc. (ASBHI) while Nolasco was the senior vice president
and treasurer of the same corporation.

According to petitioners, ASBHI was incorporated in 1996 with its declared primary purpose to invest in any and all
real and personal properties of every kind or otherwise acquire the stocks, bonds, and other securities or evidence
of indebtedness of any other corporation, and to hold or own, use, sell, deal in, dispose of, and turn to account any
such stocks.2 ASBHI was organized with an authorized capital stock of P500,000.00, a fact reflected in the
corporation’s articles of incorporation, copies of which were appended as annexes to the complaint. 3

Both petitioners had previously placed monetary investment with the Bank of Southeast Asia (BSA). They alleged
that between 1996 and 1997, they were convinced by the officers of ASBHI to lend or deposit money with the
corporation. They and other investors were urged to lend, invest or deposit money with ASBHI, and in return they
would receive checks from ASBHI for the amount so lent, invested or deposited. At first, they were issued receipts
reflecting the name "ASB Realty Development" which they were told was the same entity as BSA or was connected
therewith, but beginning in March 1998, the receipts were issued in the name of ASBHI. They claimed that they
were told that ASBHI was exactly the same institution that they had previously dealt with.4

ASBHI would issue two (2) postdated checks to its lenders, one representing the principal amount and the other
covering the interest thereon. The checks were drawn against DBS Bank and would mature in 30 to 45 days. On
the maturity of the checks, the individual lenders would renew the loans, either collecting only the interest earnings
or rolling over the same with the principal amounts.5

In the first quarter of 2000, DBS Bank started to refuse to pay for the checks purportedly by virtue of "stop
payment" orders from ASBHI. In May of 2000, ASBHI filed a petition for rehabilitation and receivership with the
Securities and Exchange Commission (SEC), and it was able to obtain an order enjoining it from paying its
outstanding liabilities.6 This series of events led to the filing of the complaints by petitioners, together with
Christine Chua, Elizabeth Chan, Ando Sy and Antonio Villareal, against ASBHI.7 The complaints were for estafa
under Article 315(2)(a) and (2)(d) of the Revised Penal Code, estafa under Presidential Decree No. 1689, violation
of the Revised Securities Act and violation of the General Banking Act.

A special task force, the Task Force on Financial Fraud (Task Force), was created by the Department of Justice
(DOJ) to investigate the several complaints that were lodged in relation to ASBHI.8 The Task Force, dismissed the
complaint on 19 October 2000, and the dismissal was concurred in by the assistant chief state prosecutor and
approved by the chief state prosecutor.9 Petitioners filed a motion for reconsideration but this was denied in
February 2001.10 With respect to the charges of estafa under Article 315(2) of the Revised Penal Code and of
violation of the Revised Securities Act (which form the crux of the issues before this Court), the Task Force
concluded that the subject transactions were loans which gave rise only to civil liability; that petitioners were
satisfied with the arrangement from 1996 to 2000; that petitioners never directly dealt with Nolasco and Roxas;
and that a check was not a security as contemplated by the Revised Securities Act.

Petitioners then filed a joint petition for review with the Secretary of Justice. On 15 October 2001, then Secretary
Hernando Perez issued a resolution which partially reversed the Task Force and instead directed the filing of five
(5) Informations for estafa under Article 315(2)(a) of the Revised Penal Code on the complaints of Chan and
petitioners Gabionza and Tan, and an Information for violation of Section 4 in relation to Section 56 of the Revised
Securities Act.11 Motions for reconsideration to this Resolution were denied by the Department of Justice in a
Resolution dated 3 July 2002.12

Even as the Informations were filed before the Regional Trial Court of Makati City, private respondents assailed the
DOJ Resolution by way of a certiorari petition with the Court of Appeals. In its assailed Decision13 dated 18 July
2003, the Court of Appeals reversed the DOJ and ordered the dismissal of the criminal cases. The dismissal was
sustained by the appellate court when it denied petitioners’ motion for reconsideration in a Resolution dated 28
November 2003.14 Hence this petition filed by Gabionza and Tan.

The Court of Appeals deviated from the general rule that accords respect to the discretion of the DOJ in the
determination of probable cause. This Court consistently adheres to its policy of non-interference in the conduct of
preliminary investigations, and to leave to the investigating prosecutor sufficient latitude of discretion in the
determination of what constitutes sufficient evidence to establish probable cause for the filing of an information
against a supposed offender.15

At the outset, it is critical to set forth the key factual findings of the DOJ which led to the conclusion that probable
cause existed against the respondents. The DOJ Resolution states, to wit:

The transactions in question appear to be mere renewals of the loans the complainant-petitioners earlier granted to
BSA. However, just after they agreed to renew the loans, the ASB agents who dealt with them issued to them
receipts indicating that the borrower was ASB Realty, with the representation that it was "the same entity as BSA
or connected therewith." On the strength of this representation, along with other claims relating to the status of
ASB and its supposed financial capacity to meet obligations, the complainant-petitioners acceded to lend the funds
to ASB Realty instead. As it turned out, however, ASB had in fact no financial capacity to repay the loans as it had
an authorized capital stock of only P500,000.00 and paid up capital of only P125,000.00. Clearly, the
representations regarding its supposed financial capacity to meet its obligations to the complainant-petitioners
were simply false. Had they known that ASB had in fact no such financial capacity, they would not have invested
millions of pesos. Indeed, no person in his proper frame of mind would venture to lend millions of pesos to a
business entity having such a meager capitalization. The fact that the complainant-petitioners might have benefited
from its earlier dealings with ASB, through interest earnings on their previous loans, is of no moment, it appearing
that they were not aware of the fraud at those times they renewed the loans.

The false representations made by the ASB agents who dealt with the complainant-petitioners and who inveigled
them into investing their funds in ASB are properly imputable to respondents Roxas and Nolasco, because they, as
ASB’s president and senior vice president/treasurer, respectively, in charge of its operations, directed its agents to
make the false representations to the public, including the complainant-petitioners, in order to convince them to
invest their moneys in ASB. It is difficult to make a different conclusion, judging from the fact that respondents
Roxas and Nolasco authorized and accepted for ASB the fraud-induced loans. This makes them liable for estafa
under Article 315 (paragraph 2 [a]) of the Revised Penal Code. They cannot escape criminal liability on the ground
that they did not personally deal with the complainant-petitioners in regard to the transactions in question. Suffice
it to state that to commit a crime, inducement is as sufficient and effective as direct participation.16

Notably, neither the Court of Appeals’ decision nor the dissent raises any serious disputation as to the occurrence
of the facts as narrated in the above passage. They take issue instead with the proposition that such facts should
result in a prima facie case against either Roxas or Nolasco, especially given that neither of them engaged in any
face-to-face dealings with petitioners. Leaving aside for the moment whether this assumed remoteness of private
respondents sufficiently insulates them from criminal liability, let us first discern whether the above-stated findings
do establish a prima facie case that petitioners were indeed the victims of the crimes of estafa under Article
315(2)(a) of the Revised Penal Code and of violation of the Revised Securities Act.

Article 315(2)(a) of the Revised Penal Code states:

ART. 315. Swindling (estafa). — Any person who shall defraud another by any of the means mentioned herein
below shall be punished by:

xxx xxx xxx

(2) By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneous with the
commission of the fraud:

(a) By using a fictitious name, or falsely pretending to possess power, influence, qualifications, property, credit,
agency, business or imaginary transactions, or by means of other similar deceits;

xxx xxx xxx

The elements of estafa by means of deceit as defined under Article 315(2)(a) of the Revised Penal Code are as
follows: (1) that there must be a false pretense, fraudulent act or fraudulent means; (2) that such false pretense,
fraudulent act or fraudulent means must be made or executed prior to or simultaneously with the commission of
the fraud; (3) that the offended party must have relied on the false pretense, fraudulent act or fraudulent means,
that is, he was induced to part with his money or property because of the false pretense, fraudulent act or
fraudulent means; and (4) that as a result thereof, the offended party suffered damage.17

Do the findings embodied in the DOJ Resolution align with the foregoing elements of estafa by means of deceit?

First. The DOJ Resolution explicitly identified the false pretense, fraudulent act or fraudulent means perpetrated
upon the petitioners. It narrated that petitioners were made to believe that ASBHI had the financial capacity to
repay the loans it enticed petitioners to extend, despite the fact that "it had an authorized capital stock of
only P500,000.00 and paid up capital of only P125,000.00."18 The deficient capitalization of ASBHI is evinced by its
articles of incorporation, the treasurer’s affidavit executed by Nolasco, the audited financial statements of the
corporation for 1998 and the general information sheets for 1998 and 1999, all of which petitioners attached to
their respective affidavits.19

The Court of Appeals conceded the fact of insufficient capitalization, yet discounted its impact by noting that ASBHI
was able to make good its loans or borrowings from 1998 until the first quarter of 2000.20 The short-lived ability of
ASBHI, to repay its loans does not negate the fraudulent misrepresentation or inducement it has undertaken to
obtain the loans in the first place. The material question is not whether ASBHI inspired exculpatory confidence in its
investors by making good on its loans for a while, but whether such investors would have extended the loans in the
first place had they known its true financial setup. The DOJ reasonably noted that "no person in his proper frame of
mind would venture to lend millions of pesos to a business entity having such a meager capitalization." In estafa
under Article 315(2)(a), it is essential that such false statement or false representation constitute the very cause or
the only motive which induces the complainant to part with the thing.21

Private respondents argue before this Court that the true capitalization of ASBHI has always been a matter of
public record, reflected as it is in several documents which could be obtained by the petitioners from the SEC.22 We
are not convinced. The material misrepresentations have been made by the agents or employees of ASBHI to
petitioners, to the effect that the corporation was structurally sound and financially able to undertake the series of
loan transactions that it induced petitioners to enter into. Even if ASBHI’s lack of financial and structural integrity is
verifiable from the articles of incorporation or other publicly available SEC records, it does not follow that the crime
of estafa through deceit would be beyond commission when precisely there are bending representations that the
company would be able to meet its obligations. Moreover, respondents’ argument assumes that there is legal
obligation on the part of petitioners to undertake an investigation of ASBHI before agreeing to provide the loans.
There is no such obligation. It is unfair to expect a person to procure every available public record concerning an
applicant for credit to satisfy himself of the latter’s financial standing. At least, that is not the way an average
person takes care of his concerns.
Second. The DOJ Resolution also made it clear that the false representations have been made to petitioners prior
to or simultaneously with the commission of the fraud. The assurance given to them by ASBHI that it is a worthy
credit partner occurred before they parted with their money. Relevantly, ASBHI is not the entity with whom
petitioners initially transacted with, and they averred that they had to be convinced with such representations that
Roxas and the same group behind BSA were also involved with ASBHI.

Third. As earlier stated, there was an explicit and reasonable conclusion drawn by the DOJ that it was the
representation of ASBHI to petitioners that it was creditworthy and financially capable to pay that induced
petitioners to extend the loans. Petitioners, in their respective complaint-affidavits, alleged that they were enticed
to extend the loans upon the following representations: that ASBHI was into the very same activities of ASB Realty
Corp., ASB Development Corp. and ASB Land, Inc., or otherwise held controlling interest therein; that ASB could
legitimately solicit funds from the public for investment/borrowing purposes; that ASB, by itself, or through the
corporations aforestated, owned real and personal properties which would support and justify its borrowing
program; that ASB was connected with and firmly backed by DBS Bank in which Roxas held a substantial stake;
and ASB would, upon maturity of the checks it issued to its lenders, pay the same and that it had the necessary
resources to do so.23

Fourth. The DOJ Resolution established that petitioners sustained damage as a result of the acts perpetrated
against them. The damage is considerable as to petitioners. Gabionza lost P12,160,583.32 whereas Tan lost
16,411,238.57.24 In addition, the DOJ Resolution noted that neither Roxas nor Nolasco disputed that ASBHI had
borrowed funds from about 700 individual investors amounting to close to P4B.25

To the benefit of private respondents, the Court of Appeals ruled, citing Sesbreno v. Court of Appeals, 26 that the
subject transactions "are akin to money market placements which partake the nature of a loan, the non-payment
of which does not give rise to criminal liability for estafa." The citation is woefully misplaced. Sesbreno affirmed
that "a money market transaction partakes the nature of a loan and therefore ‘nonpayment thereof would not give
rise to criminal liability for estafa through misappropriation or conversion.’"27 Estafa through misappropriation or
conversion is punishable under Article 315(1)(b), while the case at bar involves Article 315 (2)(a), a mode of estafa
by means of deceit. Indeed, Sesbreno explains: "In money market placement, the investor is a lender who loans
his money to a borrower through a middleman or dealer. Petitioner here loaned his money to a borrower through
Philfinance. When the latter failed to deliver back petitioner's placement with the corresponding interest earned at
the maturity date, the liability incurred by Philfinance was a civil one."28 That rationale is wholly irrelevant to the
complaint at bar, which centers not on the inability of ASBHI to repay petitioners but on the fraud and
misrepresentation committed by ASBHI to induce petitioners to part with their money.

To be clear, it is possible to hold the borrower in a money market placement liable for estafa if the creditor was
induced to extend a loan upon the false or fraudulent misrepresentations of the borrower. Such estafa is one by
means of deceit. The borrower would not be generally liable for estafa through misappropriation if he or she fails to
repay the loan, since the liability in such instance is ordinarily civil in nature.

We can thus conclude that the DOJ Resolution clearly supports a prima facie finding that the crime of estafa under
Article 315 (2)(a) has been committed against petitioners. Does it also establish a prima facie finding that there
has been a violation of the then-Revised Securities Act, specifically Section 4 in relation to Section 56 thereof?

Section 4 of Batas Pambansa Blg. 176, or the Revised Securities Act, generally requires the registration of
securities and prohibits the sale or distribution of unregistered securities.29 The DOJ extensively concluded that
private respondents are liable for violating such prohibition against the sale of unregistered securities:

Respondents Roxas and Nolasco do not dispute that in 1998, ASB borrowed funds about 700 individual investors
amounting to close to P4 billion, on recurring, short-term basis, usually 30 or 45 days, promising high interest
yields, issuing therefore mere postdate checks. Under the circumstances, the checks assumed the character of
"evidences of indebtedness," which are among the "securities" mentioned under the Revised Securities Act. The
term "securities" embodies a flexible rather than static principle, one that is capable of adaptation to meet the
countless and variable schemes devised by those who seek to use the money of others on the promise of profits
(69 Am Jur 2d, p. 604). Thus, it has been held that checks of a debtor received and held by the lender also are
evidences of indebtedness and therefore "securities" under the Act, where the debtor agreed to pay interest on a
monthly basis so long as the principal checks remained uncashed, it being said that such principal extent as would
have promissory notes payable on demand (Id., p. 606, citing Untied States v. Attaway (DC La) 211 F Supp 682).
In the instant case, the checks were issued by ASB in lieu of the securities enumerated under the Revised
Securities Act in a clever attempt, or so they thought, to take the case out of the purview of the law, which
requires prior license to sell or deal in securities and registration thereof. The scheme was to designed to
circumvent the law. Checks constitute mere substitutes for cash if so issued in payment of obligations in the
ordinary course of business transactions. But when they are issued in exchange for a big number of individual non-
personalized loans solicited from the public, numbering about 700 in this case, the checks cease to be such. In
such a circumstance, the checks assume the character of evidences of indebtedness. This is especially so where the
individual loans were not evidenced by appropriate debt instruments, such as promissory notes, loan agreements,
etc., as in this case. Purportedly, the postdated checks themselves serve as the evidences of the indebtedness. A
different rule would open the floodgates for a similar scheme, whereby companies without prior license or authority
from the SEC. This cannot be countenanced. The subsequent repeal of the Revised Securities Act does not spare
respondents Roxas and Nolasco from prosecution thereunder, since the repealing law, Republic Act No. 8799
known as the "Securities Regulation Code," continues to punish the same offense (see Section 8 in relation to
Section 73, R.A. No. 8799).30

The Court of Appeals however ruled that the postdated checks issued by ASBHI did not constitute a security under
the Revised Securities Act. To support this conclusion, it cited the general definition of a check as "a bill of
exchange drawn on a bank and payable on demand," and took cognizance of the fact that "the issuance of checks
for the purpose of securing a loan to finance the activities of the corporation is well within the ambit of a valid
corporate act" to note that a corporation does not need prior registration with the SEC in order to be able to issue a
check, which is a corporate prerogative.

This analysis is highly myopic and ignorant of the bigger picture. It is one thing for a corporation to issue checks to
satisfy isolated individual obligations, and another for a corporation to execute an elaborate scheme where it would
comport itself to the public as a pseudo-investment house and issue postdated checks instead of stocks or
traditional securities to evidence the investments of its patrons. The Revised Securities Act was geared towards
maintaining the stability of the national investment market against activities such as those apparently engaged in
by ASBHI. As the DOJ Resolution noted, ASBHI adopted this scheme in an attempt to circumvent the Revised
Securities Act, which requires a prior license to sell or deal in securities. After all, if ASBHI’s activities were actually
regulated by the SEC, it is hardly likely that the design it chose to employ would have been permitted at all.

But was ASBHI able to successfully evade the requirements under the Revised Securities Act? As found by the DOJ,
there is ultimately a prima facie case that can at the very least sustain prosecution of private respondents under
that law. The DOJ Resolution is persuasive in citing American authorities which countenance a flexible definition of
securities. Moreover, it bears pointing out that the definition of "securities" set forth in Section 2 of the Revised
Securities Act includes "commercial papers evidencing indebtedness of any person, financial or non-financial entity,
irrespective of maturity, issued, endorsed, sold, transferred or in any manner conveyed to another." 31 A check is a
commercial paper evidencing indebtedness of any person, financial or non-financial entity. Since the checks in this
case were generally rolled over to augment the creditor’s existing investment with ASBHI, they most definitely take
on the attributes of traditional stocks.

We should be clear that the question of whether the subject checks fall within the classification of securities under
the Revised Securities Act may still be the subject of debate, but at the very least, the DOJ Resolution has
established a prima facie case for prosecuting private respondents for such offense. The thorough determination of
such issue is best left to a full-blown trial of the merits, where private respondents are free to dispute the theories
set forth in the DOJ Resolution. It is clear error on the part of the Court of Appeals to dismiss such finding so
perfunctorily and on such flimsy grounds that do not consider the grave consequences. After all, as the DOJ
Resolution correctly pointed out: "[T]he postdated checks themselves serve as the evidences of the indebtedness.
A different rule would open the floodgates for a similar scheme, whereby companies without prior license or
authority from the SEC. This cannot be countenanced."32

This conclusion quells the stance of the Court of Appeals that the unfortunate events befalling petitioners were
ultimately benign, not malevolent, a consequence of the economic crisis that beset the Philippines during that
era.33 That conclusion would be agreeable only if it were undisputed that the activities of ASBHI are legal in the
first place, but the DOJ puts forth a legitimate theory that the entire modus operandi of ASBHI is illegal under the
Revised Securities Act and if that were so, the impact of the Asian economic crisis would not obviate the criminal
liability of private respondents.

Private respondents cannot make capital of the fact that when the DOJ Resolution was issued, the Revised
Securities Act had already been repealed by the Securities Regulation Code of 2000.34 As noted by the DOJ, the
new Code does punish the same offense alleged of petitioners, particularly Section 8 in relation to Section 73
thereof. The complained acts occurred during the effectivity of the Revised Securities Act. Certainly, the enactment
of the new Code in lieu of the Revised Securities Act could not have extinguished all criminal acts committed under
the old law.

In 1909-1910, the Philippine and United States Supreme Courts affirmed the principle that when the repealing act
reenacts substantially the former law, and does not increase the punishment of the accused, "the right still exists
to punish the accused for an offense of which they were

convicted and sentenced before the passage of the later act."35 This doctrine was reaffirmed as recently as 2001,
where the Court, through Justice Quisumbing, held in Benedicto v. Court of Appeals36 that an exception to the rule
that the absolute repeal of a penal law deprives the court of authority to punish a person charged with violating the
old law prior to its repeal is "where the repealing act reenacts the former statute and punishes the act previously
penalized under the old law."37 It is worth noting that both the Revised Securities Act and the Securities Regulation
Code of 2000 provide for exactly the same penalty: "a fine of not less than five thousand (P5,000.00) pesos nor
more than five hundred thousand (P500,000.00) pesos or imprisonment of not less than seven (7) years nor more
than twenty one (21) years, or both, in the discretion of the court."38
It is ineluctable that the DOJ Resolution established a prima facie case for violation of Article 315 (2)(a) of the
Revised Penal Code and Sections 4 in relation to 56 of the Revised Securities Act. We now turn to the critical
question of whether the same charges can be pinned against Roxas and Nolasco likewise.

The DOJ Resolution did not consider it exculpatory that Roxas and Nolasco had not themselves dealt directly with
petitioners, observing that "to commit a crime, inducement is as sufficient and effective as direct
participation."39 This conclusion finds textual support in Article 1740 of the Revised Penal Code. The Court of
Appeals was unable to point to any definitive evidence that Roxas or Nolasco did not instruct or induce the agents
of ASBHI to make the false or misleading representations to the investors, including petitioners. Instead, it sought
to acquit Roxas and Nolasco of any liability on the ground that the traders or employees of ASBHI who directly
made the dubious representations to petitioners were never identified or impleaded as respondents.

It appears that the Court of Appeals was, without saying so, applying the rule in civil cases that all indispensable
parties must be impleaded in a civil action.41 There is no equivalent rule in criminal procedure, and certainly the
Court of Appeals’ decision failed to cite any statute, procedural rule or jurisprudence to support its position that the
failure to implead the traders who directly dealt with petitioners is indeed fatal to the complaint.42

Assuming that the traders could be tagged as principals by direct participation in tandem with Roxas and Nolasco –
the principals by inducement – does it make sense to compel that they be jointly charged in the same complaint to
the extent that the exclusion of one leads to the dismissal of the complaint? It does not. Unlike in civil cases, where
indispensable parties are required to be impleaded in order to allow for complete relief once the case is
adjudicated, the determination of criminal liability is individual to each of the defendants. Even if the criminal court
fails to acquire jurisdiction over one or some participants to a crime, it still is able to try those accused over whom
it acquired jurisdiction. The criminal court will still be able to ascertain the individual liability of those accused
whom it could try, and hand down penalties based on the degree of their participation in the crime. The absence of
one or some of the accused may bear impact on the available evidence for the prosecution or defense, but it does
not deprive the trial court to accordingly try the case based on the evidence that is actually available.

At bar, if it is established after trial that Roxas and Nolasco instructed all the employees, agents and traders of
ASBHI to represent the corporation as financially able to engage in the challenged transactions and repay its
investors, despite their knowledge that ASBHI was not established to be in a position to do so, and that
representatives of ASBHI accordingly made such representations to petitioners, then private respondents could be
held liable for estafa. The failure to implead or try the employees, agents or traders will not negate such potential
criminal liability of Roxas and Nolasco. It is possible that the non-participation of such traders or agents in the trial
will affect the ability of both petitioners and private respondents to adduce evidence during the trial, but it cannot
quell the existence of the crime even before trial is had. At the very least, the non-identification or non-impleading
of such traders or agents cannot negatively impact the finding of probable cause.

The assailed ruling unfortunately creates a wide loophole, especially in this age of call centers, that would create a
nearly fool-proof scheme whereby well-organized criminally-minded enterprises can evade prosecution for criminal
fraud. Behind the veil of the anonymous call center agent, such enterprises could induce the investing public to
invest in fictional or incapacitated corporations with fraudulent impossible promises of definite returns on
investment. The rule, as set forth by the Court of Appeals’ ruling, will allow the masterminds and profiteers from
the scheme to take the money and run without fear of the law simply because the defrauded investor would be
hard-pressed to identify the anonymous call center agents who, reading aloud the script prepared for them in
mellifluous tones, directly enticed the investor to part with his or her money.

Is there sufficient basis then to establish probable cause against Roxas and Nolasco? Taking into account the
relative remoteness of private respondents to petitioners, the DOJ still concluded that there was. To repeat:

The false representations made by the ASB agents who dealt with the complainant-petitioners and who inveigled
them into investing their funds in ASB are properly imputable to respondents Roxas and Nolasco, because they, as
ASB’s president and senior vice president/treasurer, respectively, respectively, in charge of its operations, directed
its agents to make the false representations to the public, including the complainant-petitioners, in order to
convince them to invest their moneys in ASB. It is difficult to make a different conclusion, judging from the fact
that respondents Roxas and Nolasco authorized and accepted for ASB the fraud-induced loans.43

Indeed, the facts as thus established cannot lead to a definite, exculpatory conclusion that Roxas and Nolasco did
not instruct, much less forbid, their agents from making the misrepresentations to petitioners. They could of course
pose that defense, but such claim can only be established following a trial on the merits considering that nothing in
the record proves without doubt such law-abiding prudence on their part. There is also the fact that ABSHI, their
corporation, actually received the alleged amounts of money from petitioners. It is especially curious that according
to the ASBHI balance sheets dated 31 December 1999, which petitioners attached to their affidavit-
complaints,44 over five billion pesos were booked as "advances to stockholder" when, according to the general
information sheet for 1999, Roxas owned 124,996 of the 125,000 subscribed shares of ASBHI. 45 Considering that
ASBHI had an authorized capital stock of only P500,000 and a subscribed capital of P125,000, it can be reasonably
deduced that such large amounts booked as "advances to stockholder" could have only come from the loans
extended by over 700 investors to ASBHI.
It is true that there are exceptions that may warrant departure from the general rule of non-interference with the
determination of probable cause by the DOJ, yet such exceptions do not lie in this case, and the justifications
actually cited in the Court of Appeals’ decision are exceptionally weak and ultimately erroneous. Worse, it too
hastily condoned the apparent evasion of liability by persons who seemingly profited at the expense of investors
who lost millions of pesos. The Court’s conclusion is that the DOJ’S decision to prosecute private respondents is
founded on sufficient probable cause, and the ultimate determination of guilt or acquittal is best made through a
full trial on the merits. Indeed, many of the points raised by private respondents before this Court, related as they
are to the factual context surrounding the subject transactions, deserve the full assessment and verification only a
trial on the merits can accord.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals dated 18 July
2003 and 28 November 2003 are REVERSED and SET ASIDE. The Resolutions of the Department of Justice in I.S.
Nos. 2000-1418 to 1422 dated 15 October 2001 and 3 July 2002 are REINSTATED. Costs against private
respondents.