Trinidad Rosales vs. Onapal Philippine Commodities, Inc., et al.

[SEC-SICD * CASE NO. 3422. October 2, 1990.] TRINIDAD ROSALES, assisted by her husband, FLORENCIO ROSALES , complainant , vs . ONAPAL PHIL. COMMODITIES, INC., ET AL. , respondents . D E C I S I O N This is an action for recovery of a sum of money or investment and damages plus attorney's fee. LLpr In support of her complaint, complainant alleged, among others, that she is a merchant residing at Poblacion, Urdaneta, Pangasinan; that respondent Onapal Phil. Commodities, Inc., (Onapal, for short) is a corporation duly organized and existing under the laws of the Philippines; that respondents David Tionloc (Tionloc, for short) and Juliet R. Tan (Tan, for short) are employed as the duly authorized representatives of respondent Onapal; that sometime on May 23, 1988, respondent Tan, representing herself as an authorized agent of respondent Onapal at its sub-office at Urdaneta, Pangasinan, and her Office Manager, respondent Tionloc, convinced herein complainant to invest in the buy and sell of commodity futures without the benefit of any brochure as to the exact nature of the activities and transactions of respondent Onapal except their assurance to the herein complainant that, with their expert assistance and counseling, complainant would double her money within a short period of time; that as a consequence thereof, complainant agreed to invest her only life time savings in the amount of P100,000.00 for which she was made to execute and sign an antedated Trading Contract, purportedly executed on May 18, 1988 at Makati, Metro Manila, where complainant never appeared, and for which she was issued a Commodity Trading Account No. 3054, that as a result of the execution of said Trading Contract and issuance of commodity Trading Account No. 3054, respondent Tionloc required complainant to execute a special Power of Attorney in favor of respondent Tan for the latter to represent her in the trading transactions which are in the form of "authorized orders" to be signed only by her or her attorney-in-fact; that pursuant to the said Special Power of Attorney, respondent Tan was given the authority to trade and enter the market to make purchases in behalf of complainant only at the marginal price of P46.00 or lower, which according to respondent Tan was the safest marginal price for existing future commodities; that on or about May 26, 1988, respondent Tionloc, without any authority from the complainant or her attorney-in-fact, respondent Tan, made unauthorized transactions and traded the account of complainant making purchases at P46.65, in violation of the instructions and orders of complainant as given to her attorney-in-fact; that because of the alleged sudden drop of the price of the future commodities he traded, all the investments of complainant were lost; that complainant came to know of said loss only after she was advised a few days later by respondent Tionloc, through respondent Tan, that unless she pays within five (5) days an additional amount of P65,000.00 to meet the "call margin" all her said investments would be counted as lost; that in order to save her original investments, complainant secured various loans even at unreasonable and exorbitant interests to cover up the required amount of P65,000.00; that on June 8, 1988, complainant paid said additional amounts to respondent Onapal at its Branch Office at Dagupan City; that respondent Tionloc, apparently with the full authority, permission and approval of respondent Onapal, undertook all the trading and marketing of complainant's account without the necessary authority for undertaking such transactions, either from the complainant or her attorney-in-fact, respondent Tan; that respondents Tan and Tionloc, who undertook and managed the account of complainant, were not licensed commodity futures salesman but are mere office employees of respondent Onapal; that all the transactions and trading undertaken by the respondents for and in behalf of complainant's account were illegal for being in violation and in complete disregard of the rules on commodity futures trading; that due to respondent's acts of deception, misrepresentation and violation of the Trading Contract, complainant lost her lifetime savings of P100,000.00 and incurred loans in the amount of P65,000.00 some with exorbitant interest; that as a consequence of respondents' irresponsible acts, complainant suffered sleepless nights, mental anguish, wounded feelings and extreme anxiety. In their answer, respondents denied all the material allegations in the complaint and, by way of special and affirmative defenses, alleged, inter alia, that the Commission has no jurisdiction to try and decide the instant case considering that it is an action for recovery of a sum of money which falls within the exclusive jurisdiction of the Regional Trial Court; that complainant does not have a cause of action as against respondent Onapal for the latter is only acting as a broker and whatever transactions complainant had with it have been made thru her duly authorized representatives that respondents Tionloc and Tan have acted in good faith and in accordance with the instruction of the complainant; that complainant is in estoppel and she could no longer question the validity of all the transactions made pursuant to her instructions; that pursuant to the instruction of the complainant, purchases of future commodities have been made against her trading account on speculation basis which resulted to losses and respondent Onapal shouldered a substantial sum of money to cover the "call margin"; that by reason of the unjustified and unwarranted filing of this case, the integrity, goodwill and reputation of respondent Onapal, as well as that of the other respondents, were stained, besmirched and tarnished to such an extent that many of their customers had entertained great doubts about the operation of the trading business and as a result of which they have severed their business relationship with them; that because of the unwarranted and malicious filing of the instant case, respondents Tionloc and Tan had experienced and still continue to experience many sleepless nights; and that in order to protect and safeguard their good reputation, goodwill and integrity, respondents were forced to engage the services of counsel. On October 27, 1988, the preliminary conference was terminated and the parties have agreed that the issues to be resolved are: 1. Whether or not transactions involving complainant's account were undertaken by respondent Onapal without the knowledge and consent of the former; llcd 2. Whether or not respondents Tionloc and Tan have the full authority to transact business for and in behalf of the complainant pursuant to Commission's Rules for Commodity Trading; 3. Whether or not respondent Onapal has duly authorized respondents Tionloc and Tan to transact business for and in behalf of complainant; 4. Whether or not transactions entered into by respondent Tan pursuant to the Special Power of Attorney executed by the complainant are valid and binding; 5. Whether or not, by reason of the loss in these transactions, respondent Onapal has given or advanced the amount of P25,000.00 in order to have a call margin until it is replenished; and 6. Who is entitled to the claim for damages and attorney's fee? While the question of jurisdiction was not among the issues agreed upon by the parties at the preliminary conference of this case, the same was raised by the respondents in their answer. The issue of jurisdiction having been raised, necessarily, the same must be passed upon or resolved. It is already settled that cases of this nature fall within the jurisdiction of the Commission, particularly Sec. 5 (a) of P.D. 902-A, as amended, which states that: "In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: a) Devices or schemes employed by or any acts, of the board of directors, business associations, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of associations or organizations or organizations registered with the Commission. . . ." This case therefore falls squarely under the aforequoted provision of PD No. 902-A, as amended. From the evidence presented, particularly the undisputed testimony of the complainant, it appears that sometime on May 23, 1988, respondent Tan, representing herself as an authorized agent of respondent Onapal with sub-office at Urdaneta. Pangasinan, and respondent Tionloc, the Office Manager therein, who likewise represented himself as a licensed broker and salesman of respondent Onapal, had finally convinced the herein complainant, who is merely an elementary graduate and could hardly understand the English language as shown from her testimony which had to be conducted in Tagalog and translated into English, to invest in the by and sell of future commodities which they represented as a system of trading transactions wherein the complainant could double her investment in a matter of one week. Having been convinced by respondents Tionloc and Tan, complainant had agreed to invest her savings for a minimum investment of P100,000.00. Consequently, said respondents had caused the complainant to sign a blank Trading Contract on the blank space which they have checked without explaining to the complainant the possible risks involved in commodity futures trading. The Trading Contract (Exhs. "B" and "I") which was actually signed by the complainant on May 23, 1988 was antedated to May 18, 1988. LLphil Likewise, respondents Tionloc and Tan, who were not licensed solicitors/salesman of respondent Onapal, had caused the complainant to sign a Special Power of Attorney (Exhs. "A" and "2") after the latter's original investment of P 100,000.00 was lost, authorizing respondent Tan to enter into trading transactions concerning complainant's Account No. 3054. Thereafter, complainant was required by the respondents to make additional deposit of P65,000.00. Unfortunately, however, said additional deposit was also wiped out. Upon the other hand, respondent Onapal had continuously allowed employees, respondents Tionloc and Tan, to solicit, manage or transact account of complainant notwithstanding its knowledge that said respondents were not licensed solicitors/salesman. And even worse, respondent Onapal had allowed a certain T. Patulan to transact the account of complainant despite its knowledge that the transactions (Exhibits "6", "8", "10" and "11") entered into by said T. Patulan were never authorized by the complainant. Neither did the complainant authorize said T. Patulan to transact her account. Based from the foregoing, it is clear that respondents are guilty of fraud and misrepresentation in securing complainant's investment. Since respondents, particularly respondent Onapal, are the ones interested in the enforcement of Trading Contract (Exhs. "B" and "1"), it is their duty to explain to the complainant, who is a mere elementary graduate and can hardly understand English, the terms and conditions of said contract. Thus, Art. 1332 of the Civil Code of the Philippines (Civil Code, for brevity) provides: "When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former ." (Emphasis supplied) However, as already pointed out, there was no showing whatsoever that the terms and conditions of the Trading Contract (Exhs. "B" and "I") were properly explained by the respondents to the complainant before the latter was asked to sign it. This fact alone would already prove that deceit or fraud was committed by the respondents considering that even a highly educated person who has no background of business, law and commodity futures trading could hardly understand the terms and conditions of said contract. Likewise, respondents had committed fraud when through their deceitful words and machination, such as assuring the complainant, who too gullible, that her money or investment would be doubled in a week's time complainant was tempted or enticed into investing in commodity futures trading. Art. 1338 of the Civil Code is explicit on this point. It provides that: "There is fraud when through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to." Going now to the first issue that was agreed upon during the pre-trial conference, that is, whether or not transactions involving complainant's account were undertaken by respondent Onapal without the knowledge and consent of the former, the answer is in the affirmative. From the evidence on hand, such as the Buying Order Form/Selling Order Form (Exhs. "6", "8", "10" and "11"), it is clear that the Commodity Futures Solicitor Salesman of respondent Onapal who took charge or transacted complainant's Commodity Trading Account No. 3054 was a certain T. Patulan with Licensed No. 38 R5 but who was never authorized by the complainant to take charge of her account. Respondent Tan who is supposed to be the attorney-in-fact of the complainant (Exh, "2") had not made said trading transactions. As regards the second issue, it is clear that pursuant to the Commission's Rules for Commodity Trading, respondents Tionloc and Tan have no authority to transact business for and in behalf of the complainant considering that per certification of the Commission, through its Brokers and Exchanges Department, both of them are not licensed Commodity Futures Solicitors/Salesmen, of respondent Onapal (Exh. "F"). With respect to the third issue, it is interesting to note that even from the allegations of the answer which are judicial admissions that could not be controverted or denied by the respondents, it is very clear that notwithstanding the fact that respondents Tionloc and Tan are not licensed Commodity Futures Solicitors/Salesmen, they were allowed by respondent Onapal to transact complainant's account. If, indeed, respondent Onapal is in good faith and had not authorized respondents Tionloc and Tan, who were its employees, to transact trading business for and in behalf of complainant, why did it allow respondents Tionloc and Tan to manage the account of complainant when it has knowledge of the fact that these respondents are not licensed solicitors/salesmen? Anent the fourth issue, it must be noted that pursuant to the provisions in respondents Onapal's Renewal of License as Commodity Futures Commission Merchant/Broker, all contracts traded by any unlicensed salesman of respondent Onapal shall be considered null and void. Ergo, since respondent Tan is not a licensed solicitor, it follows that whatever transactions entered into by respondent Tan pursuant to the Special Power of Attorney (Exhs. "A" and "2") executed by the complainant cannot be given effect. On the issue of whether or not respondent Onapal has given or advanced the amount of P25,000.00 in order to have a call margin, this Hearing Officer finds no evidence to show that, indeed, respondent Onapal has given or advanced said amount. With regard to complainant's claim for damages, the same needs no further discussion since it could not be awarded in view of the recent ruling of the Court of Appeals in the case, entitled: "Augusto Padilla, et al. vs. Securities and Exchange Commission, et al.", CA-G.R. SP No. 18630, promulgated on February 1, 1990 wherein it was held that the Commission is without authority to award any kind of damages. Anent the Complainant's claim for attorney's fee, complainant herself testified that she engaged the legal services of her counsel for a fee of P20,000.00. This Hearing Officer feels that a reasonable amount of attorney's fee paid by the complainant to her lawyer who had devoted time and effort in handling her case should, at least, be awarded. IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered. 1. Declaring as null and void the Trading Contract entered into by and between respondent Onapal Phil. Commodities, Inc. and the complainant; 2. Declaring as null and void all the trading transactions undertaken by the respondents or their agent in behalf of the complainant; 3. Ordering the respondents to pay the complainant, jointly and severally, the sum P165,000.00, Philippine Currency, plus legal rate of interest from the date the instant case was filed until fully paid; and, 4. Ordering the respondent to pay the complainant, jointly and severally, the sum of P10,000.00 as attorney's fee. SO ORDERED. (SGD.) ROBERTO MALABONGA Hearing Officer