The Court of Appeals (CA) has prevented the Securities and Exchange Commission (SEC) from implementing its cease and desist order (CDO) on Camp John Hay Development Corp. (CJHDEVCO), which stopped the said corporation from allegedly selling securities.
This was after the CA issued an eight-page decision dismissing the case filed by the Bases Conversion Development Authority (BCDA) against CJHDEVCO.
CJHDEVCO is engaged in developing the Camp John Hay Special Economic Zone.
The appellate court found that the SEC had violated the right to due process of CJHDEVCO and its subsidiary, CJH Suites Corp.
The CA ruling was penned by Associate Justice Hakim Abdulwahid along with Associate Justices Marlene Gonzales-Sison and Edwin Sorongon who both concurred with the ruling
Earlier, the SEC prevented CJHDEVCO from “engaging in the business of selling securities by selling Limited Warranty Deeds and Leaseback Agreements to unit buyers for hotel operations” of The Manor and Forest Lodge, formerly known as The Suites at Camp John Hay in Baguio City.
In its plea before the CA, CJHDEVCO claimed that the Leaseback Agreement is only an “option” given to unit buyers.
It added that it does not classify the transaction as a sale of securities but only as a simple lease agreement.
In the cited ruling, the CA opined that the SEC-Enforcement and Prosecution Department (EPD) investigated BCDA’s allegations that CJHDEVCO and CJH Suites Corp. were selling securities without complying with the requirements under Section 8 of Republic Act 8799, otherwise known as the Security Regulation Code (SRC).
The said provision requires registration and approval from the SEC prior to the sale of securities to the public.
However, the CA said that during the investigation, the SEC-EPD failed to give CJHDEVCO and CJH Suits Corp. an opportunity to explain or respond to its findings.
The CJHDEVCO and CJH Suites Corp. were only apprised of the investigation conducted by the commission and its findings only after the issuance of the CDO.
“At the very least, petitioners should have been given the opportunity to explain and answer the allegations propounded to them prior to the issuance of the assailed order,” the CA noted.
It added that EPD already secured several documents and interviewed some clients of CJHDEVCO, who bought units from The Manor or The Suites. However, the SEC-EPD failed to get CJHDEVCO’s side.
The CA, moreover, said that the SEC erred in its findings.
“The buyers of the units do not invest in petitioners the money that they could use for running some business and would generate profits for the investors,” the ruling stated.
The court added that the buyers of the said units do not invest or deposit money in a common enterprise that would eventually generate profit for them.