091 People v. Rosenthal and Osmena

UP Law F2021 091 People v.
Rosenthal and Osmena

Administrative Law Judicial determination of 1939 Laurel
sufficiency of standards – Public
Interest
SUMMARY
Jacob Rosenthal and Nicasio Osmena were charged with violating Blue Sky Law, particularly §2 and §5 which
mandates securing permit from the Insular Treasurer a permit before selling speculative shares. They were
found guilty by the CFI of Manila. On appeal before the SC, they questioned the constitutionality of the Blue
Sky Law: (1) it was an undue delegation of legislative authority to the Insular Treasurer; (2) it violated equal
protection; (3) it was vague and ambiguous. The SC upheld the constitutionality of the Blue Sky Act, providing
ample explanation most especially on the first ground. The CFI decision was affirmed, with modification on
the fine of the appellants.
FACTS
 Appellants Jacob Rosenthal and Nicasio Osmena were charged with violation of Blue Sky1 Law (Act.
No 2581) specifically §2 and §5;
 They sold “speculative shares” without obtaining permit from the Insular Treasurer (Treasurer);
 It was speculative because the value thereof materially depended upon proposed promise of future
promotion and development of the oil business (O.R.O. Oil Co.) rather than on actual tangible assets
and conditions thereof;
 CFI found them guilty and were sentenced to pay fine, or subsidiary imprisonment in case of
insolvency, and the costs of trial;
 The case was elevated to the SC, the petitioners now assailing the constitutionality of Blue Sky Law
 They argued that: (1) it was an undue delegation of legislative authority o the Insular Treasurer; (2) it
violated equal protection; (3) it was vague and ambiguous;
 On the first ground, the appellants argued that Blue Sky Law empowered the Treasurer to (a) issue
and (b) cancel certificates or permits for the sale of speculative shares without fixed standard or rule,
making it the Treasurer’s opinion the sole criterion.
 They also argued that the Treasurer had discretionary power to determine when is a security
speculative.
RATIO
[RELEVANT] W/N the Blue Sky Law constitutes undue delegation of Legislative power to the Insular
Treasurer
No.
1. Issuance must be in compliance with the law

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.
2. Cancellation is in “the public interest”

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, — we incline to hold that "public interest" in this case is a sufficient
1
“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”
standard to guide the Insular Treasurer in reaching a decision on a matter pertaining to the
issuance or cancellation of certificates or permits.
a. Meaning of 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. (citing US jurisprudence).
b. Can appeal to the Secretary of Finance

In this connection, we cannot overlook the fact that Act No. 2581 allows an appeal from the decision of
the Treasurer to the Secretary of Finance. Hence, it cannot be contended that the Insular Treasurer
can act and decide without any restraining influence.
3. Not a discretionary power to determine ‘speculative’ shares

§1 of Act No. 2581 defines and enumerates what are "speculative securities" and all the other
provisions of the Act must be read and construed in conjunction and harmony with said section.
4. Decisions of other state Supreme Courts analogous to the case at hand

Laws of the different states of the American Union similar in nature were assailed on constitutional grounds
somewhat analogous to those involved in the case at bar, but the decisions of both the state courts and
the Supreme Court of the United States have upheld their constitutionality. "Besides it is certainly
apparent that if the conditions are within the power of the State to impose, they can only be ascertained by an
executive officer. Reputation and character are quite tangible attributes, but there can be no legislative
definition of them that can automatically attach to or identify individuals possessing them, and necessarily
the aid of some executive agency must be invoked.
5. Other discussion (suppletory)

The maxim of delegatus non potest delegare or delegata potestas non potest delegare has been made to
adapt itself to the complexities of modern governments, giving rise to the adoption, within certain limits,
of the principle of "subordinate legislation", not only in the United States and England but in practically all
modern governments. The difficulty lies in the fixing of the limit and extent of the authority. While courts
have undertaken to lay down general principles, the safest is to decide each case according to its
peculiar environment, having in mind the wholesome legislative purpose intended to be achieved.
W/N Blue Sky Law violated the principle of equal protection

No.
Appellants contended that it violated equal protection and because the law discriminates between an
owner who sells his securities in a single transaction and one who disposes of them in repeated and
successive transactions.
Citation of Hall vs. Geiger-Jones Co

We cannot give separate attention to the asserted discriminations. It is enough to say that they are within
the power of classification which a state has. A state 'may direct its law against what it deems the evil
as it actually exists without covering the whole field of possible abuses, and it may do so none the less that
the forbidden act does not differ in kind from those that are allowed . . . If a class is deemed to present a
conspicuous example of what the legislature seeks to prevent, the 14th Amendment allows it to be
dealt with although otherwise and merely logically not distinguishable from others not embraced
in the law.
W/N Blue Sky Law was vague and uncertain

No.
An Act will be declared void and inoperative on the ground of vagueness and uncertainty only upon a
showing that the defect is such that the courts are unable to determine, with any reasonable degree of
certainty, what the legislature intended. The circumstance that this court has on more than one
occasion given effect and application to Act No. 2581 decisively argues against the position taken
by appellant Osmeña. In this connection we cannot pretermit reference to the rule that "legislation
should not be held invalid on the ground of uncertainty if susceptible of any reasonable
construction that will support and give it effect. An Act will not be declared inoperative and
ineffectual on the ground that it furnishes no adequate means to secure the purpose for which it is
passed, if men of common sense and reason can devise and provide the means, and all the
instrumentalities necessary for its execution are within the reach of those intrusted therewith.”
FALLO
The judgments of the lower court are affirmed, with the modification that the fines are reduced as to accused
Jacob Rosenthal from P500 to P200 in each case, and as to accused Nicasio Osmeña, from P1,000 to P500 in
case No. 62365 and from P2,000 to P1,000 in case No. 52366, with subsidiary imprisonment for both in case
of insolvency, and costs. So ordered.

091 People v. Rosenthal and Osmena

Uploaded by

Copyright:

Available Formats

091 People v. Rosenthal and Osmena

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

091 People v. Rosenthal and Osmena

Uploaded by

Copyright:

Available Formats

UP Law F2021 091 People v.

Rosenthal and Osmena

1. Issuance must be in compliance with the law

2. Cancellation is in “the public interest”

a. Meaning of Public Interest

b. Can appeal to the Secretary of Finance

3. Not a discretionary power to determine ‘speculative’ shares

4. Decisions of other state Supreme Courts analogous to the case at hand

5. Other discussion (suppletory)

W/N Blue Sky Law violated the principle of equal protection

Citation of Hall vs. Geiger-Jones Co

W/N Blue Sky Law was vague and uncertain

You might also like