Santos R. Pelaez vs. Anselmo Trinidad & Co. Inc.

[SEC-SICD * CASE NO. 2425. March 6, 1987.] SANTOS R. PELAEZ , complainant , vs . ANSELMO TRINIDAD & CO., INC. , respondent , vs. GERARDO DABBAY AND CARMEN MINDANAO MINING CONSOLIDATED, INC., third party respondent . D E C I S I O N This is a petition for mandamus filed by Santos Pelaez to compel Anselmo Trinidad & Co., Inc. (ATCO) to return to complainant stock certificate No. 17687 of Carmen Mindanao Mining Consolidated, Inc. (CMMCI). Respondent, ATCO filed a third party complaint against CMMCI and Gerardo Dabbay, the latter having been declared in default for failure to file an answer to the third party complaint despite service of summons. LLphil Santos Pelaez and ATCO presented oral and documentary evidence to substantiate their respective claims. The following facts were duly established by the evidence presented by the petitioner. Stock certificate No. 17687-C of CMMCI (hereafter referred to as CMMCI stock certificate) registered in the name of Santos R. Pelaez was delivered to ATCO as evidenced by an "in receipt (Exh. A). When delivered to ATCO, the CMMCI stock certificate was endorsed in blank by the registered stockholder, Santos R. Pelaez. It is however disputed as to who personally delivered to ATCO the CMMCI stock certificate. Santos Pelaez claims that he personally delivered the CMMCI stock certificate to the office of ATCO. Respondent, however, claims that the stock certificate was delivered to ATCO personally by Gerardo Dabbay. The CMMCI stock certificate represents 200,000,000 shares of CMMCI. Out of this, 169,500,000 shares were sold to ATCO. Santos Pelaez wrote the transfer agent, Rizal Commercial Banking Corporation (RCBC), demanding that no cancellation and transfer of his CMMCI stock certificate No. 17687-C be made. Santos Pelaez then demanded from ATCO the return of his CMMCI stock certificate which was refused. On the other hand, ATCO established the following facts: Gerardo Dabbay opened a margin account agreement with ATCO (Exhs. 4, 5, and 5-A) whereby Dabbay agreed to deliver a stock certificate of CMMCI for 200 million shares to secure his (Dabbay's) purchases of shares of stock through ATCO. Through a letter dated October 6, 1981 (Exh. 6), Dabbay instructed ATCO to purchase 1 million shares of CMMCI. In compliance with Dabbay's written instructions, ATCO purchased for Dabbay the CMMCI shares as evidenced by Exhs. 8, 9, 10, 11, 12 and 13. Despite the repeated demands by ATCO to Dabbay to pay the amounts of his purchases, Dabbay failed and refused. Consequently, pursuant to the margin account agreement (Exhs. 4, 5 and 5-A), ATCO sold out the security position of Dabbay, as evidenced by the seller's confirmation slips marked as Exhs. 14, 15 and 16. No rebuttal evidence was presented by Santos Pelaez. ATCO filed a Third Party Complaint against Carmen Mindanao Mining Consolidated, Inc. (CMMCI) and Gerardo Dabbay seeking reimbursement of any damages and amounts that ATCO may be held liable for in favor of Santos Pelaez. CMMCI filed its answer denying the allegations in the Third Party Complaint. Gerardo Dabbay failed to file an answer despite service of summons and was, upon motion by ATCO, declared as in default. After considering all the allegations in the pleadings and the evidence adduced by Santos R. Pelaez and ATCO, this Commission holds that the main issue to be resolved is the effect of the delivery of the CMMCI stock certificates to ATCO. It is admitted and therefore there is no dispute that the CMMCI stock certificate was duly endorsed by the registered stockholder, Santos Pelaez, when it was physically delivered to ATCO. At the time of delivery of the CMMCI stock certificate to ATCO, the only document was the "in receipt" of ATCO (Exh. A). American jurisprudence abounds with authorities on the effects of the delivery of a stock certificate endorsed in blank. To cite a few: ". . . the transfer may be made by endorsing on the certificates of stock . . ." (12 Fletcher Cyclopedia Corporation 281) ". . . Where the assignment . . . (is) executed in blank, the (stock) certificate may be transferred from hand to hand by delivery, like a note endorsed in blank, and any holder thereof has authority to fill in his own name as transferee . . . and cause the transfer to be registered on the books of the corporation" (12 Fletcher Cyclopedia 285). ". . . A written assignment of stock certificate will ordinarily transfer the whole title, and a mere delivery thereof at least an equitable title" (Caslettoe vs. Jenkins 186 W.C. 166, 119 S.E. 202, as cited in 12 Fletcher Cyclopedia Corporation 284). On or about the delivery of the CMMCI stock certificates to ATCO, an agreement and margin agreement (Exhs. 4 and 5, respectively) were entered into between Gerardo Dabbay and ATCO. The more pertinent stipulations in Exhs. 4 and 5 are: "This is to confirm our agreement that we (ATCO) shall extend to you (Gerardo Dabbay) margin accommodation, under the following terms and conditions: xxx xxx xxx "2. You (Gerardo Dabbay) delivered to us (ATCO) as margin cover, such security acceptable to us as may be necessary pursuant to par. 6 hereof . . . The certificates covering said securities shall be delivered duly endorsed in blank . . ." xxx xxx xxx "5. You (Gerardo Dabbay) hereby authorize us (ATCO) to pledge, lend, comingle, or dispose of such security belonging to you for the amount due to us under your account." xxx xxx xxx "8. Your failure to give such additional security within the said forty eight (48) hours shall be deemed a substantial breach and shall give us the right to terminate this agreement and . . . sell this security for insufficiency of margin . . ." One of the factual issues in dispute is who delivered the CMMCI stock certificate to ATCO. Santos Pelaez claims that it was he who personally delivered the CMMCI stock certificate to ATCO. On the other hand, ATCO claims that it was Gerardo Dabbay who personally delivered the CMMCI stock certificate to ATCO. This contradictory postures taken by the parties is however, to our mind of no consequence. This is for the reason that the CMMCI stock certificate when delivered to ATCO was endorsed in blank. In consequence of this circumstances, it is believed that ATCO acquired the right of ownership, if not absolute ownership at least equitable ownership, over the CMMCI stock certificate. Thus, ATCO had the right to sell the shares represented by the CMMCI stock certificate. While it may not be absolutely necessary to discuss the issue of who delivered the CMMCI stock certificate to ATCO, a brief discussion thereof will be made if only to further support and bolster this conclusion. Santos Pelaez claims that it was he who personally delivered the CMMCI stock certificates to ATCO and that the only document issued at the time of his alleged delivery was an "in receipt" (Exh. A). The CMMCI stock certificate represents 200 Million shares with a par value of P0.01 for a total par value of P2,000,000.00. Reason dictates and experience has shown that a person leaving a duly endorsed stock certificate with a par value of P2,000,000.00 would have exercised more prudence and would have shown more interest in this certificate. Yet, although the CMMCI stock certificate was delivered to ATCO on September 21, 1981 (TSN July 12, 1984, page 43), Santos Pelaez initially inquired about the certificate only in October 1982 (TSN July 12, 1984 pp. 43-44), or more than one year thereafter. This inaction by Santos Pelaez of more than a year leads one to believe that he had intended to vest upon ATCO more than just the physical possession of the certificate. This would tend to confirm the assertion by ATCO that the CMMCI stock certificate was delivered as security. More, Santos Pelaez's inaction for more than a year could be construed to whatever ATCO had done regarding the CMMCI stock certificate. On the other hand, the contention by ATCO's witness, Mr. Manuel Mendoza, that it was Gerardo Dabbay who personally delivered the CMMCI stock certificate to ATCO appears more credible. At the hearing on December 11, 1985, Mr. Manuel Mendoza categorically affirmed that the CMMCI stock certificate was delivered to ATCO by Gerardo Dabbay (pp. 8-9). No attempt was made by Santos Pelaez to rebut the foregoing. Santos Pelaez vehemently and repeatedly denied having known or met Gerardo Dabbay. This position was made by Santos Pelaez as his case would appear to suffer from a substantial and material flaw if it were proven otherwise. It is to be recalled that ATCO claims that it was Gerardo Dabbay who personally delivered the CMMCI stock certificates, duly endorsed, to ATCO. If therefore circumstances would point to a principal and agent relationship between Santos Pelaez and Gerardo Dabbay, then any trace of doubt on the validity of the sale by ATCO of the shares represented by CMMCI stock certificate would be removed. The exhibits and testimony of the witnesses by the complainant and ATCO tend to cast doubts on the assertion by Santos Pelaez that he does not personally know Gerardo Dabbay. On the witness stand (Aug. 2, 1984 hearing), Santos Pelaez affirmed that he had not met Gerardo Dabbay. However, the Amended Complaint, page 4 par. 12, duly verified by Santos Pelaez, contains the allegations that: ". . . Gerardo Dabbay on the other hand, when confronted by the herein complainant (Santos Pelaez), denied any knowledge . . . " The allegations by Santos Pelaez that he has not met Gerardo Dabbay and his admission under oath in the Amended Complaint that he "confronted" Gerardo Dabbay are extremely difficult to reconcile; either one has to be false. At the hearing of July 12, 1984, Santos Pelaez admitted having ordered a private investigator to look for Gerardo Dabbay (page 10). Mr. Santos Pelaez admitted hiring the private investigator in October 1982. Surprisingly, the private investigator hired by Santos Pelaez to look for Gerardo Dabbay produced an affidavit of Gerardo Dabbay notarized October 1981. This affidavit of Gerardo Dabbay relates to the facts of this case. Again, it is highly strange why Gerardo Dabbay would execute an affidavit one year before Santos Pelaez was supposed to have hired a private investigator to look for Gerardo Dabbay. A document presented by ATCO (Exh. 3) would again cast doubts on the disclaimer by Santos Pelaez of knowledge of Gerardo Dabbay. That document dated October 6, 1982 partly reads as follows: "Our (CMMCI) agreement with Mr. Dabbay was for him to secure a written order from me (Santos Pelaez, signatory to this letter) for any purchase and the agreement between Anselmo Trinidad & Co. and Mr. Dabbay is to accept orders only in writing from Mr. Dabbay". The referred letter was signed by Santos Pelaez. It is difficult to believe that Santos Pelaez had not read the letter before signing it and if he did, which is the more reasonable assumption, it would demolish any pretension by Santos Pelaez of not knowing Gerardo Dabbay. It is therefore clear from the foregoing that ATCO had the right to sell the shares represented by the CMMCI stock certificates and to have the transfer registered with CMMCI's transfer agent. prLL We find it unnecessary to pass upon the other issues raised by the parties. WHEREFORE, judgment is hereby rendered dismissing the above-entitled complaint. ATCO's counterclaim and Third Party Complaint are likewise dismissed. SO ORDERED. (SGD.) ANTONIO M. ESTEVES Hearing Officer