Rosita Kho vs. Kingly Commodities Traders and Multi-Resources, Inc., et al.

[SEC-SICD * CASE NO. 3198. January 2, 1990.] ROSITA KHO , complainant , vs . KINGLY COMMODITIES TRADERS AND MULTI-RESOURCES, INC., ET AL. , respondents . D E C I S I O N On July 16, 1987, Rosita Kho filed a verified complaint before this Commission against Kingly Commodities Traders and Multi-Resources, Inc. (Kingly Commodities, for brevity), Branch Manager Leo Wong (Wong, for brevity) and Manuela Bongcas (Bongcas, for brevity) praying for the annulment of contract, recovery of the sum of money, damages, suspension and/or cancellation of corporate license or trading securities and for a writ of preliminary attachment. In her complaint, complainant claims that respondents, through repeated telephone calls and visitations notably of Bongcas and Wong, defrauded, deceived and induced her to enter into a contract whereby she invested in a "no risk, sure profit" scheme of Kingly Commodities; that on May 14, 1987, she gave P50,000.00 to respondents who issued a receipt CDO No. 0325 (Exh. "H"); the respondents assured her of a sure high profit in a week's time with her investment withdrawable anytime exclusive of the realized profits; that on the same day, respondents made her hurriedly sign the following documents without affording her the opportunity to read its contents: (1) Rules for Commodity Trading and Customer's Agreement; (2) Brokers Trading Regulation and Policies; and (3) Trading Information and Risk Disclosure Statements that on May 20, 1987, respondents credited to her investment of P50,000.00 the amount of P14,787.36 as gross profits; that out of such amount only P8,487.36 was reflected as her net profits after deducting P6,300.00 as commission fee for respondents; that thereafter, complainant tried to withdraw her investment and her credited profits but respondent advised her that withdrawals are permitted only upon approval by the Hongkong Head Office coursed through the Manila Office; that respondents, despite her informal demand for investment and profit withdrawal, threatened, cajoled and forced complainant to invest an additional amount of P22,762.64 on June 9, 1987, and P2,000.00 on June 15, 1987 (Exh. "F", "C", and "H"); that she refused respondents' demands, whereupon on June 16, 1987, she received a notice for Additional Margin from respondents (Exh. "I"); that she referred the matter to her counsel with the instruction to file a formal demand of her investment and profits. (Exh. "J" and "J-1"). Complainant submits that the contract and documents which she signed were contracts of adhesion because the same contained onerous terms favorable to respondents. In addition, she avers that these documents were tainted with fraud, deceit and against public interest and welfare and that therefore, the contract is ineffective and not binding upon her. Complainant prays that her investment of P83,250.00 be returned to her inclusive of earned profits in the amount of P8,487.36, plus interest, attorney's fees, exemplary damages, litigation expenses; the certificate of registration of Kingly Commodities be revoked; and a writ of preliminary attachment be issued. In an Order dated July 22, 1987, we required the respondents to file a responsive pleading and set the hearing on the prayer for a writ of Preliminary Attachment on August 24, 1987. On August 19, 1987, we received a telegram from the counsel for respondents informing us that he mailed a motion requesting for an extension of time within which to file answer to the complaint and for the re-setting of the August 24, 1987 hearing to September 29, 1987. Subsequently, on August 21, 1987, a formal motion of the above prayers was filed. Complainant filed an opposition thereto decrying the respondents' dilatory tactics and praying that respondents be declared in default. On September 8, 1987, respondents filed their answer with counterclaim. They alleged that the complaint is unfounded, inaccurate and a make-believe one; that they never guaranteed complainant of a "no risk, sure profit" investment but rather outlined to her the full basic concepts, mechanics and risks of Commodity Futures Trading; that complainant entered her investment voluntarily with full knowledge of the consequences and without being pushed hurriedly to sign the contract and documents; that respondents never received any request or instructions from complainant for the withdrawal of her investment in the amount of P58,487.36; that contrary to complainant's claim, she made her second trade the following day of the alleged notice of withdrawal and respondents issued to her the corresponding sales report (Annex "D"); that complainant was subjected neither to threats nor to an assurance that any amount subsequently endowed can save her total investment; that she was, instead, informed of her trading situation by a Notice of Additional Margin wherein she had the option to hold or give up her trading; that complainant clearly exercised her option by holding on to her trading when in response to a margin call, she remitted the amount of P22,762.64 on June 29, 1987; that on June 15, 1987, she tendered the amount of P2,000.00 as immediate "support fund" after being aware of a possible loss to her trade and in order to avoid a margin call; that on June 16, 1987, respondent issued a Notice of Additional Margin in the amount of P55,500.00 in view of floating loss in complainant's trading position; that respondents, again, gave complainant the same option to hold on or give up her trading position; that complainant being financially tied up, requested the respondents that she will avail of a special privilege to hedge her position so she could fix her loss and delay her remittance; that respondents granted complainant one (1) week or up to June 23, 1987 to cover her account deficit or P55,500.00; that inspite of the extended period, complainant failed to remit the required amount; that respondents still allowed complainant a further extended time to come up with the amount provided she would cover her negative account balance of P29,250.00 on or before June 26, 1987; that they have always complied with the law, rules or regulations of Commodity Futures Trading in the transactions with the complainant. By way of counterclaim, respondents pray that complainant be made liable for damages for maligning the image of respondents in the national and local newspaper, radio and TV; overloss in the amount of P29,250.00 as "claim of deficit" dated June 30, 1987 to Kingly Commodities; and attorney's fees and cost of litigation. After the issues were joined, we set the pre-trial conference on October 20, 1987. The said hearing date was later reset to December 15 and 16, 1987. On the scheduled hearing of December 15, 1987, counsel for respondents failed to appear despite due notice. Thereupon, counsel for complainant orally moved for presentation of complainant's evidence ex-parte. We granted the said motion and also declared that respondents were deemed to have waived their right to cross-examine the witness and/or evidence to be presented. Thereafter, we set the reception of respondents' evidence on February 5, 1988. On February 5, 1988, respondents and their counsel failed anew to appear. Upon oral motion of complainant's counsel, we declared that respondents have waived their right to present evidence and that the case could now be submitted for resolution based on the evidence on record as submitted by complainant. On February 19, 1988, respondents filed a motion for reconsideration, expostulating against the Order dated 12 February 1988, of this Commission, stating that they were never notified of the hearing of 5 February 1988; and that the herein-dated Order was made on the basis of the manifestation of complainant's counsel that respondents were duly notified. Complainant vigorously opposed the said motion. On 23 January 1989, we denied the aforesaid motion for being unfounded and without merit. The basic issues raised in the instant complaint are: Whether or not respondents violated the laws and regulations pertaining to Commodity Futures Trading in the execution of contract with complainant; Was there an attendant circumstance of fraud in the execution of the contract and during the performance and effectivity thereof? Is the Complainant entitled to the return of her investment inclusive of net profits and other reliefs prayed for? A careful study of the records of the case yield a negative answer. Corporations who venture into Commodity Futures transactions are required to disseminate and circulate to the public, particularly to its clients, the RISK DISCLOSURE AGREEMENT in order that they will fully know the hazards of the trade before they affix their signatures to the contract. Likewise, we require the following phrase to be inserted in the CUSTOMER'S AGREEMENT: THIS IS A CONTRACTUAL AGREEMENT. DO NOT SIGN UNTIL AFTER YOU HAVE FULLY READ AND UNDERSTOOD ITS CONTENTS. In addition, every customer who intends to invest in Commodity Futures is required to deposit an initial amount of P100,000.00. The purpose for this rule is to protect the public interest. People will then, refrain from blindly and recklessly investing in a transaction of which they have only little knowledge of. In the case at bar, we find that all these required formalities are found in the contract signed by complainant. Complainant failed to prove by clear and convincing evidence that respondents neglected to appraise her of the risks she was taking. Her bare allegations cannot rebut the signed RISK DISCLOSURE AGREEMENT. Moreover, complainant, being of age, in full command of her senses and a businesswoman of long standing, is presumed to have acted with due care in signing the contract and with full knowledge of its contents and import. This legal presumption is not overcomed by evidence which consists merely of the complainant's testimony ( Cf. Tan Tua Sia v . Yu, Biao Sontua, G.R. No. 34533, March 31, 1932, 56 Phil . 707 ). Besides, complainant has a lawyer to assist and advise her in the paper work. Nowhere could we also find any special circumstance which could justify complainant's failure to read the contents of the contract or disregard the legal effect and consequence of the contract she formally and voluntarily entered into. It is without doubt that respondents have treated complainant with what is now regarded as "trader's or dealer's talk." Such talk could not be strictly classified as fraudulent. They are the usual exaggerations in trade which do not affect the validity of the contract provided the party had the opportunity to know the facts ( Article 1340, New Civil Code ). Thus, this kind of talk is considered dolus bonus, a lawful astuteness. Practice has come to tolerate these false affirmations. They do not give rise to an action for damages either because of their insignificance or because of the stupidity of the victim is the real cause of loss. ( 1 Gasperi 549-550; Brugi, p . 131; Muoz, p . 401 ) In Songco v . Sellner, G.R. No. 11513, December 4, 1917, (37 Phil . 254) , the Supreme Court held that: "It is not every false representation relating to the subject matter of a contract which will render it void. It must be as to matters of fact substantially affecting the buyer's interest, not as to matters of opinion, judgment, probability, or expectation. ( Long v . Woodman, 58 Me . , 52; Hazard v . Irwin, 18 Pack, [Mass . ], 95; Bordon v. Parmelee, 2 Allen, [Mass . ], 212; Williams v . McFadden, 23 Fla . , 143, 11 Am . St . Rep . , 345 .) When the purchaser undertakes to make an investigation of his own and the seller does nothing to prevent this investigation from being as full as he chooses to make it, the purchaser cannot afterwards allege that the seller made representations. ( National Cash Register Co . v . Townsued, 137 N . C . , 652, 70 L . R . A . , 349; William v . Holt, 147 N . C . , 515 .) Complainant could have easily verified the truth of the statement of respondents. We find no proof to show that respondents used means and methods to prevent any investigation which complainant may undertake. Under the well-known maxim of caveat- emptor , complainant should have been on guard, more for being a businesswoman herself, since experience has revealed that seller's or dealer's statements are exceedingly risky to accept at its face value ( Songco v . Sellner, supra ). One who relies on Sellner's talk does so at his own peril. Further, we hold that the contract signed by complainant is not a contract of adhesion. These are contracts whereby one party has already a prepared form of a contract, containing the stipulations he desires, and he simply asks the other party to agree to them if he wants to enter into the contract ( Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol . 4, Tolentino ). Apart from her bare assertions, complainant did not substantiate her charge with evidence. And, even granting that the contract she signed is a contract of adhesion, no evidence was shown that she was forced to sign the same. She was free to accept or reject it. Complainant's act in placing additional amounts to her investment negate her theory that respondents coerced her into signing the contract. Thus, having consented to its terms, complainant cannot now repudiate the transaction or refuse to comply therewith on the pretext that the said terms are unprofitable or ill-advised. ( See Laguna Tayabas Bus Co . v . Manabat, GR No. L-23546, August 29, 1974 ) It may be true that there is an economic inequality between the parties to these contracts, as pointed out by the complainant, but our laws and our Code does not expressly regulate or prohibit these contracts which are products of modern commerce and development, but it is, likewise, juridically true that the one who adheres to the contract is in reality free to reject it entirely; if one adheres thereto, he therefore gives his consent. ( 3 Colin & Capitant 532 ) It is sufficient in these cases for the law itself or the regulatory bodies to strictly regulate these contracts by prohibiting clauses that it deems dangerous and prescribing provision which parties cannot abrogate. The equilibrium between the parties can be established in a general way by imposing limitation on their will. ( 3 Colin & Capitant 583 ) Complainant had the eyes yet refused to see, having the understanding yet refusing to utilize it, and having the opportunity to be advised by a lawyer, or be aware and to find out the circumstances of each and every business venture, refused to do so and instead plunged into the transaction, cannot now kick up a fuss if afterwards she discovers that she is at the losing end of the bargain. Parties must only exercise ordinary business sense and the faculties which are given to them for the purpose of transacting business. If they fail to do so, they cannot call upon the courts or this Commission to stand in loco parentis to them, to extricate them from bad bargains, relieve them from one-sided contracts or annul the effects of their foolish acts. To permit such liberality where none should be granted, written contracts would then lose their value and importance, if this Commission or the Court were to shunt them aside because one entered into a contract through miserable and ridiculous judgment and lose money thereby. Well entrenched in this jurisprudence is the maxim of law that a mistake caused by the manifest negligence of the complainant cannot invalidate a juridical act. prLL This Commission therefore abides with the policy of the law that the freedom enjoyed by persons to enter into contract should not be lightly interfered with. We must, like the regular courts, move with all the necessary caution and prudence in holding contracts void. ( De Belen vs. Collector of Customs, G.R. No. L-22082, September 26, 1924 , 46 Phil . 241; Gonzales vs . Trinidad, 61 Phil . 682; Tolentino vs. Paraiso, G.R. No. 11045, July 28, 1916 , 34 Phil . 609 ) There would be a substantial impairment of the liberty of the people under the constitution, if such right to enter into contracts shall be arbitrarily interfered with or struck down. ( Madrigal & Co . vs . Stevenson & Co . , G.R. No. 5315, January 15, 1910, 15 Phil . 38 ) Juridically speaking, when the respondents made use of their right even if this be unpleasant to complainant, does not prejudice the latter, and the law cannot consider as unjust the very thing that it protects. In the case before us, if in the exercise of the legal right or because of a legal situation, respondents obtain pecuniary benefit from the complainant, they cannot be said to have employed intimidation. Likewise, the fact that respondents hold certain claims against complainant and disclosed to the latter their intention to sue or threatened her with judicial proceedings in order to collect the same does not invalidate a contract as having been executed under intimidation. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. If, after a perfect and binding contract has been executed between the parties, it occurs to one of them, as in the pendente lite , to allege some defect therein as reasons for annulling it, the alleged defect must be conclusively proven, since the validity and fulfillment of contracts cannot be left to the will of one of the contracting parties. ( Joaquin vs . Mitsumine, G.R. No. 10868, August 28, 1916, 34 Phil . 858 ) It is therefore, of no consequence that complainant may not have fully understood the legal effect of the contract or had made a poor bargain, having failed to exercise ordinary prudence and diligent examination of facts, cannot be invoked by her now to annul the contract or be set aside in her favor. As regards the complainant's allegation of fraud committed by respondents during the lifetime of the contract, the same could not be given credence. Fraud is never presumed. It must be established by clear, sufficient, positive and convincing evidence ( Sinco v . Longa, G.R. No. 27962, February 14, 1928, 51 Phil . 507; Carreon v . Agcaoili, L-11156, Feb . 23, 1961 ). The time honored rule adhered to in this jurisdiction is that fraud is never presumed, fraus est odiosa et non praesumenda . The Courts never sustain findings of fraud upon circumstances which, at most, create only suspicions ( Yutivo Sons Hardware Co . vs . Court of Tax Appeals, L-13203, January 28, 1961 ), since fraud is a question of serious character and must be established by clear, sufficient, positive and convincing evidence and not by mere preponderance. ( Sinco vs. Longa, G.R. No. 27962, February 14, 1928, 51 Phil . 507; Carreon vs . Agcaoili, L-11156, February 23, 1961; Gutierrez vs . Villegas, L-17117, July 31, 1963; 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 ) It goes without saying that it must be alleged and proved at least satisfactorily, if not conclusively by one who alleges the fraud's existence. The law abhors and prescribes fraud but does not presume it; upon the contrary, every presumption is indulged in favor of good faith and honesty, until otherwise proven. The quantum of evidence necessary to prove fraud must be demonstrated by clear, strong, convincing and sufficient evidence so as to overcome the presumption that it was carefully and deliberately prepared and executed, or that of the validity and genuineness which attaches to a public document duly executed and notarized. The Courts, in Mendezona vs. Philippine Sugar Estates Development Co., G.R. 13659, March 22, 1921 , 41 Phil . 475 states that . . . "He who attempts to impugn a fact which in an unequivocal manner appears in an authentic document has the burden of proving the contrary with clear, convincing and more than merely preponderance of evidence." LibLex Indeed, even testimony uncontradicted by opposing testimony, and which seeks to overthrow a writing or document, is not equivalent to an admitted fact; if such testimony does not satisfy the test of credibility, it will not bind this Commission, who is the trier of facts. In the case before us, the contract being a public document with the attendant formal requisites of law duly complied with, it is necessary to prove that the existing instrument was executed through fraud which it seeks to overthrow and be set aside. Complainant must therefore present a clear and convincing evidence of fraud. Her bare testimony, without corroboration, of the alleged fraud is not sufficient to set aside a public document which was regularly executed. To do otherwise would set a very dangerous precedent and open the floodgates by which public document would lose its value just by a mere assertion of fraud. We measured complainant's evidence in her allegation of fraud in accordance to the legal yardstick of law and we find that complainant did not meet the quantum of evidence necessary for this Commission to set aside the recitals of a public document on the grounds of fraud, bereft as it is, of any strong, clear and convincing corroborative evidence to conform to the legal criterion set for the appreciation by this Commission. Considering the foregoing, we hold that complainant is NOT entitled to the relief sought in her complaint. As to the respondent's counterclaim, the same is denied for want of proof, having lost/waived their right to present their evidence on 5 February 1988, thus, failing to substantiate with definiteness the fact or basis by which their claim was anchored upon. ACCORDINGLY, the complaint is hereby DISMISSED for lack of merit. Respondents' counterclaim is, likewise, DISMISSED, for failure to prosecute and prove the same. No pronouncement as to cost. SO ORDERED. (SGD.) YSOBEL S. YASAY MURILLO Hearing Officer