In The Matter of the Roman Catholic Bishop of San Pablo vs. Aaron J & E Stockbrokers

[SEC-AC NO. 018. June 16, 1980.] IN THE MATTER OF THE ROMAN CATHOLIC BISHOP OF SAN PABLO , appellant , vs . AARON J & E STOCKBROKERS, INC. , appellee . D E C I S I O N This is an appeal from an order of Hearing Officer Ben R. Cristobal of this Commission dated November 29, 1973, dismissing for insufficiency of evidence a complaint of the Roman Catholic Bishop of San Pablo City charging respondent Aaron J & E Stockbrokers, Inc. with unlawful "switching of orders". It appears that respondent sold on Monday, August 13, 1973, 200,000 Philex shares upon express instructions of complainant who, however, claims that respondent's representative, a certain Nestor K. Luz, had verbally informed complainant's representative, a certain Aurelio de Jesus, in a telephone conversation that such sale would be made on Tuesday, August 14, 1973. Since it further appears that respondent had also sold on Tuesday, August 14, 1973 199,000 Philex shares at P0.88 on behalf of a certain J & E Realty, the complainant claims that the sale on August 14, 1973 allegedly on behalf of J & E Realty should be deemed as the sale on its behalf and not the sale on 13 August 1973. Hence, complainant claims from respondent brokerage firm the difference between the selling price of 199,000 Philex shares at P0.88 per share on Tuesday, August 14, 1973, and the price of P0.73 P0.74 per share on Monday, August 13, 1973, or P28,193.13, including the cash and stock dividends that had in the meantime been paid on said shares, plus legal interest on the whole amount due from August 13, 1973. Respondent brokerage firm vigorously denies that any such unlawful switching of shares had taken place. From the evidence of record, there appears to be no question that on August 10, 1973, complainant had, through its Secretary Aurelio de Jesus, given instructions to respondent's representative, Nestor K. Luz, to sell on its behalf 200,000 Philex shares and 300 Atlas shares. There is also no dispute that respondent did sell 200,000 Philex shares and 300 Atlas shares on Monday, August 13, 1973, as evidenced by respondent's Sales Confirmation Slips Nos. 6354 and 6374, respectively, bearing the date of sale (Exhibits 6 and 7). Copies of such sales confirmation slips were delivered in due course to complainant through one Pura K. Luz and the corresponding payment of P199,642.43 for the 200,000 Philex shares and 300 Atlas shares was made by respondent firm to the complainant on August 20, 1973 (Cash Voucher No. 6161, Exh. 3). In fact, complainant deposited the proceeds of the sales with Fil Bank and Trust Co. as shown by Check No. 5001458 (Exh. 8 and 8-N; tsn, September 26, 1977, pp. 13-14). In due course, complainant surrendered to the respondent brokerage firm, through the latter's employee, the corresponding stock certificates covering 200,000 Philex shares and 300 Atlas shares. Since there still remained, after the sale of 200,000 Philex shares on August 13, 1973, a balance of 105,124 Philex shares as well as 300 Atlas shares in the name of complainant in respondent brokerage firm's records, dividends subsequently declared by Philex corresponding to 105,124 shares were delivered to complainant who appears to have accepted such dividends. Thus far, the documents. Controversy started when complainant came to learn later that respondent brokerage firm had, as noted above, sold on Tuesday, August 14, 1973, 199,000 Philex shares at the much higher price of P0.88 for and in behalf of J & E Realty, the price of Philex shares having jumped suddenly in the span of 24 hours on account of market rumors of declaration by Philex of 100% cash dividend. Complainant then started besieging respondent with demands for the price differentials claiming that respondent had "switched orders" by improperly attributing to complainant the sale at the lower price and to J & E Realty the sale at the higher price, whereas, it should have been the other way around. After close examination of the evidence of record, we find the appeal to be without merit. Complainant's theory finds no better support than the declaration of Aurelio de Jesus, the good bishop's own secretary, that when he transmitted on August 10, 1973 the bishop's instructions to sell 200,000 Philex shares and 300 Atlas shares, the representative of respondent firm, Nestor K. Luz, to whom the instruction to sell was relayed by telephone, stated that the instructions would be implemented on Tuesday, August 14, 1973 because the price might be better at that time. cdll It is also claimed by complainant that when Aurelio de Jesus reported to Bishop Bantigue, the latter called up another employee of the Diocese, Mr. Bernardo de Leon, and instructed him, allegedly at about noon of August 13, 1973, to proceed to Manila immediately and tell Mr. Luz to hold the sale, but that when Mr. de Leon returned the following day, he reported to the Bishop that he was told by Mr. Luz that the instructions to hold the sale came too late, as the shares had already been sold. In fact, it turned out that Mr. de Leon tried to contact Mr. Luz only by telephone and not personally, despite the urgent nature of the instructions and that he was able to call Mr. Luz only on the morning of August 14, 1973 who, however, informed him that the shares had been sold, as previously instructed "before 3 P.M." on the preceding day. The presumption of regularity in favor of respondent's documents recording the sales in question cannot be overlooked by such testimony coming only from complainant's own employees. As between a written instrument, the authenticity of which is not questioned, recording private commercial transactions in the ordinary course of business, and verbal testimony which cannot be deemed as absolutely without bias and prejudice, reason and public policy cannot but lean the scales of justice in favor of the former. "This is a matter of both of principle and policy; of principle because such instruments are in their nature and origin entitled to a much higher degree of credit than parol evidence; of policy because it would be attended with great mischief, if those instruments upon which men's rights depended were liable to be impeached by loose collateral evidence." (Eveland v. Eastern Mining Co., G.R. No. 4976, Nov. 27, 1909,14 Phil. 384; Beaumont v. Prieto, G.R. No. 8988, March 30, 1916; Villanueva v. Yulo et al., G.R. L-12985 Dec. 29, 1959)" The contention of complainant that respondent had switched orders in that the 200,000 Philex shares that respondent had sold on 14 August 1973 were complainant's and not the 199,000 Philex shares sold by respondent on August 14, 1973 for and in behalf of J & E Realty, in effect charges respondent with fraud. Fraud is never presumed and it must be proved, not by mere preponderance of evidence, but by clear and convincing proof. "Fraud is never imputed and the courts never sustain findings of fraud upon circumstances which, at most, create only suspicion." (Yutivo Sons Hardware Co. vs. Court of Tax Appeals, L-13203, January 28, 1961). "Fraud cannot be presumed and it must be established by clear and sufficient evidence." (Id; Carreon vs. Agcaoili, L-11156, February 23, 1961; Gutierrez vs. Villegas, L-17117, July 31, 1963; Santos vs. Buenaventura, L-22797, September 22, 1966, 18 SCRA 47; Republic vs. Ker & Company, Ltd., L-21609, September 29, 1966; Commissioner of Internal Revenue vs. Gonzales, L-19495, November 24, 1966; Heng Tong Textiles Company, Inc. vs. Commissioner of Internal Revenue, L-19737, August 26, 1968). We hold that the parol evidence supplied by complainant's own employees of the fraud allegedly perpetrated by respondent brokerage firm thru the switching of the two orders does not satisfy the requirement of clear and convincing proof. Considering that the sales confirmation slips covering the 200,000 Philex shares sold by respondent on behalf of complainant on August 13, 1973 were delivered and received by respondent on the same date, respondent would have had to alter its records including the copies thereof already delivered to complainant, to perpetrate the fraud charged. This is not an easy thing to do and we are not convinced it has been done in this case. Indeed, respondent brokerage firm, in supplying complainant with the corresponding sales confirmation slips evidencing the sale of 200,000 Philex shares in its behalf on August 13, 1973, had religiously complied with the stricture of Rule B-12, of the SEC Rules and Regulations on Brokers, Dealers, and Customers, to wit: "A broker shall report to the customer all transactions entered into for the customer's account and to this end, he shall send the customer written confirmation of purchases and sales as promptly as possible on the very same day on which they were made. . . ." WHEREFORE, the order appealed from is AFFIRMED. (SGD.) ANGEL L. LIMJOCO, JR. Chairman (SGD.) JULIO A. SULIT, JR. (SGD.) SIXTO T. J. DE GUZMAN, JR. Associate Commissioner Associate Commissioner