Spouses Antonio Resurreccion and Lourdes Resurreccion vs. Paic Securities Corporation

[SEC-SICD * CASE NO. 1993. August 14, 1990.] SPOUSES ANTONIO RESURRECCION AND LOURDES RESURRECCION , petitioners , vs . PAIC SECURITIES CORPORATION , respondent . D E C I S I O N In a verified petition filed with the Securities and Exchange Commission, the petitioners alleged, inter alia, that the respondent is a stock brokerage acting as agent in buying and selling of stock listed both at the Makati, and Manila Stock Exchanges; that sometime in the year 1979, petitioners purchased shares of stock from the respondent consisting of the following: cdll Basic Pet "A" 103,000,000 shares Trans Asia 1,300,000 shares Consolidated Mines 11,000,000 original 11,000,000 preemptive rights with a total value of P2,193,800.00; that to secure the payment of the purchase of the aforesaid shares, petitioners placed as collateral their 18,221 Consolidated Banks' shares valued at P2,915,360.00; that from the time of the filing of the case, the petitioners have been charged and forced to pay usurious interest and exorbitant handling charges; that since the petitioners have placed collaterals for the purchase of the shares, the respondent allowed their account to subsist and stay annually, with the understanding that the petitioners shall pay annually the usurious interest and exorbitant handling charges; that after having paid the interest and charges, respondent outrightly demanded full payment of their account, in gross violation of their agreement with respondent; that respondent now threatens to sell all their shares at market price which is way below the acquisition costs. Hence, the prayer for the issuance of a writ of preliminary injunction and that after hearing on the merits, to make the injunction permanent and for damages. After its motion to dismiss and motion for reconsideration were both denied, the respondent filed its answer denying the material averments of the petition and by way of affirmative defenses, respondent alleged that petitioners entered into a contract with the respondent wherein the latter would act as broker for the former in trading shares of stock; that under the contract, petitioners were given a margin accommodation of 90 days which would allow petitioners to trade stocks on account; that to secure these transactions, petitioners were required, as a normal practice, to deposit with respondent shares of stock acceptable to answer for any liability that may result in the trading of stocks; that from time to time, petitioners gave instructions to respondent to purchase and sell substantial number of stocks; that petitioners' account with respondent accumulated and despite demands, petitioners failed to pay the accumulated accounts; that to recover the accumulated accounts, respondent have to sell the shares of stock of petitioners. Respondent likewise, interposed a counterclaim for the indebtedness of the petitioners and for damages. Several hearings were conducted, during which, petitioners presented their evidence. When the petitioners formally offered their evidence, counsel for the respondent failed to file his comment and/or objection thereto and so, upon motion of counsel for the petitioners, all their exhibits were admitted and receptions of evidence for the respondent was set for September 26, 1988. Counsel for the respondent, however, changed his office address without notifying this Hearing Officer, so much so that the order scheduling the reception of evidence for the respondent was returned without being served with the notation "counsel for the respondent has no known address." It is always the duty of a counsel of record to notify the court and in this case, the Commission of any change of his of office address and he has to suffer the consequences of his failure to do so. And since there is no way of notifying the counsel for the respondent, the case was submitted for decision. Evidence for the petitioners clearly established that 1) the shares of stock purchased by them were traded (Exh. "A", "A-1", to "A-29 ) 2) petitioners have been paying the service fees from 1979 (Exh, "D-2") and the interest and handling charges (Exh. "E", "E-1" to "E-13"). Even the placing of collaterals to guarantee the payment of the purchased shares was admitted by the respondent when it alleged that petitioners "were required as a normal practice to deposit with respondent a certain number of shares acceptable to the latter for any liability that may result in the trading of stocks" (par. 9 of the answer). On the petitioners' claim for damages, suffice it to state that the Court of Appeals, in the case entitled Augusto Padilla, et al., vs. Securities and Exchange Commission, CA G.R. SP NO. 18630 had ruled: "We are aware of the fact that the Securities and Exchange Commission has adopted the practice of awarding actual and other kinds of damages without protest or objection on the part of litigants. However, as explained above, we believe such practice to be unauthorized and alleged." WHEREFORE, decision is hereby rendered permanently enjoining the respondent from selling the shares of petitioners used as collateral for as long as the latter is able to pay the interest and handling charges as they fall due. (SGD.) FELIPE S. TONGCO Hearing Officer