Juanito Valencia vs. Solidlink Futures, et al.

[SEC-SICD * CASE NO. 03-96-5300. April 12, 1999.] JUANITO VALENCIA , complainant , vs . SOLIDLINK FUTURES, ET AL. , respondents . DECISION Before this Commission is a complaint for unlawful solicitation and trading of respondents Solidlink and C & T Global as well as against its accountable officers and employees. It was alleged that by virtue of an illegal scheme perpetrated by all of the respondents conspiring with each other, and with the intention of defrauding herein complainant, the former willfully caused the latter to invest P150,000.00 with Solidlink and another P100,000.00 with C & T Global. Complainant further narrated that the respondent corporations allowed an unlicensed broker to solicit & trade from him these investment in direct violation of the REVISED RULES AND REGULATIONS ON COMMODITY FUTURES TRADING enacted by the Securities & Exchange Commission pursuant to Sec. 7 of the Revised Securities Act. cdll Petitioner prayed for the return of his investment with interest of 5% per month starting from the date that the investment was made. Moral and exemplary damages were also asked for in the amount of P200,000.00 and attorney's fees of P50,000.00. After the issues have been joined Juanito Valencia and Solidlink Futures, Inc. represented by its Attorney-in-fact Vic Alvaro entered into a compromise agreement wherein Solidlink Futures Inc. undertook to return complainants investment in the amount of P150,000.00 to be taken from its trust fund. Petitioner in consideration of the agreement waived his right against Solidlink to whatever demands he may have pursuant to the present case and from whatever cause of action existing or in the future arise in relation to the subject matter except for the stipulated return of investment. The compromise agreement was approved and a Judgment by Compromise was issued on December 15 1997. Upon motion of Petitioner a Writ of Execution was issued on January 28 1999. However, when this writ was served by the assigned Sheriff upon the appointed liquidator Atty. Juanito Antonio on February 4, 1998, the latter refused to receive the same. The Sheriff's return stated that Atty. Antonio declined to receive the judgment on the ground that he does not have in his possession the assets of Solidlink Futures, Inc. LibLex A "Motion to Cite Respondent's Liquidator in Contempt" was filed by Petitioner. When the matter was set for hearing, only the complainant and his counsel appeared thereby submitting the matter for the resolution of this Commission. On the other hand, petitioner's complaint against C & T Global Inc. and the other respondents was pursued. A Motion to Withdraw Appearance for Respondents C & T Global Futures, Inc., Luis Legaspi, and Cris Tai was filed by the Quisumbing, Torres & Evangelista law firm. Upon Petitioner's opposition, the said motion was denied since there was no showing that their clients consented to the withdrawal of counsel. Moreover, the Hearing Officer observed that counsel for respondents did not even state any reason to justify the withdrawals of his representation. A preliminary conference was set for April 22, 1998, however despite due notice, respondents failed to appear during the conference and to submit their pre-trial brief. Accordingly, they were declared in default. Respondents filed a "Motion to lift Default" which was granted by the Hearing Officer on June 10, 1998. Despite the lifting of the order of default, Respondents still failed to attend and participate in the hearings. As a consequence, Petitioner was allowed to present his case ex parte. Petitioner by testimonial and documentary evidence was able to establish the following: Robert Madrid a representative of Solidlink and later on transferred to C & T Global Futures, Inc. solicited investments from herein Petitioner. Respondent Madrid was successful in convincing Petitioner to invest the amount of P150,000.00 in Solidlink Futures, Inc. as evidenced by a customer's agreement (exhibit "D") and Margin Receipt (exhibit "E"). Petitioner's account was traded by Madrid and later on by Jeffrey Engay when the former was transferred to C & T Global Futures. However, even before Madrid was transferred Petitioner's investment was already wiped out. In the hope of recovering what he lost from Solidlink Futures Inc., Petitioner was again persuaded to invest in C & T GLOBAL the amount of one hundred thousand pesos P100,000 as evidenced by a customer's agreement, (Exhibit "E") and Margin Receipts (exhibit "D"). Eventually, this investment traded by Madrid was again wiped out on the trading floor. Upon verification of the Petitioner from the Brokers and Exchange Department of the Securities & Exchange Commission he learned that no records on file which would show that Wilbur Dans, Roberto Madrid and Jeffrey Engay was ever licensed as commodity futures merchants/Brokers in direct violation of the revised rules & regulations in Commodity Future Trading. A certificate was issued by Director Eugenio Reyes submitted as exhibit "I" attesting to such fact. Petitioner further testified that the money he invested came from his retirement benefits thereby causing him great anxiety and mental torture when he learned of respondent's fraudulent scheme. After a perusal of the evidence presented, the Commission finds for the petitioner not only on his main complaint but also with his motion to cite respondent Solidlink's liquidator in contempt. Solidlink's liquidator is precisely tasked to process claims against the corporation therefore, it is his duty to receive the judgment and facilitate the processing of the claims. His unreasonable refusal to receive the Judgment is contemptuous. The Commission therefore cites him in contempt and penalizes him with the maximum fine of Ten Thousand Pesos ( P10,000.00). The Revised Securities Act in Section 19 specifically provides that 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. More specifically, the Rules on Commodity Futures Trading provides in Sec. 16 that: "SECTION 16. No person shall be allowed to engage as futures commission merchant or as futures broker in soliciting, or as floor broker in executing order for future delivery, subject to the rules of any contract market, unless such person or firm shall have been registered with and licensed by the Commission . . ." The rules further states in Section 20 that: SECTION 20. It shall be unlawful for any person to be associated with any futures commission merchant as a partner, officer or employee (or any person occupying a similar status or performing similar functions) in any capacity which involves (a) the solicitation or acceptance of customers orders other than in a clerical capacity of (b) the supervision of any person or persons so engaged unless such person shall have been registered/licensed by the Commission and such license shall not have expired nor suspended or revoked, and it shall be unlawful for any futures commission merchant to knowingly permit such person to become or remain associated with him in such capacity. . . ." Clearly Respondent Corporation's acquiescence to the actions of private respondents particularly Robert Madrid is an infraction of the Rules. Respondents' liability to return Petitioner's investment is evident since the contract entered into is void. 1 WHEREFORE, premises considered Respondents are hereby solidarily ordered to return complainant's investment with C & T Global in the amount of P100,000.00. plus interest of 5% per month computed from the date of this Order. Furthermore, respondents are hereby directed to pay Attorney's Fees in the amount of P50,000.00. The liquidator of Solidlink is hereby declared in contempt for his unreasonable refusal to accept the judgment by compromise issued by this Commission. Consequently, he is directed to pay the maximum fine of Ten Thousand Pesos (P10,000.00). cCEAHT SO ORDERED. (SGD.) ALBERTO P. ATAS (SGD.) IRENE V.C. ISIDRO-TORRES Hearing Officer Hearing Officer Footnotes 1. RSA SEC 53 (b) Every contract made in violation of any provision of this Act or of any rule or regulation thereunder, and every contract, including any contract for listing a security on an exchange heretofore or hereafter made, the performance of which involves the violation of, or the continuance of any relationship or practice in violation of any provision of this Act, or any rule or regulation thereunder, shall be void. . . .