Gregorio Fule vs. Onapal Philippine Commodities Inc., et al.

[SEC-SICD * CASE NO. 3628. February 7, 1991.] GREGORIO FULE , complainant , vs . ONAPAL PHIL., COMMODITIES INC., ET AL. , respondents . D E C I S I O N This is an action for annulment of trading contract, recovery of investment and damages, with prayer for immediate issuance of a writ of a preliminary attachment against Onapal Philippine Commodities, Inc., Carlos H. Kapili, Ricardo Alvero and Loida I. Averion alleging, among others, that sometime in April, 1988, respondent Loida I. Averion (Averion for short), representing herself as a duly licensed and authorized solicitor of respondent Onapal's San Pablo City Branch, approached complainant in San Pablo City and at Alaminos, Laguna, trying to convince and entice complainant to invest with respondent Onapal; that respondent Averion represented commodity futures trading as safe, risk-free, high profit and sure return of investments; that having failed to fully convince complainant, respondent Averion then brought along with her at San Pablo City and Alaminos, Laguna, respondent Ricardo Alvero (Alvero for short), who represented himself as the General Manager of respondent Onapal's San Pablo City Branch, and there and then, they conspired, connived and aided each other in convincing complainant to invest in respondent Onapal's San Pablo City Branch future commodities trading; that complainant, who was sweet talked, convinced and led to believe the misrepresentations of respondents Alvero and Averion, made several investments with respondent Onapal's San Pablo City Branch, in the total amount of ONE MILLION ONE HUNDRED EIGHTEEN THOUSAND EIGHT HUNDRED TEN (P1,118,810.00) PESOS; that respondents, with the intent to defraud and to deceive complainant, caused the latter to sign their prepared Trading Contract; that complainant was, likewise, made to sign a special power of attorney in favor of respondent Alvero, representing that such was a requirement because complainant's account shall be deemed company managed account; that in furtherance of their irregular, fraudulent, deceitful and illegal scheme, respondents caused complainant to pre-sign blank purchase order and sales order forms, together with the Risk Disclosure Statement, with their misrepresentation that the foregoing are routinary which do not affect their previous assurance that complainants' investments are safe, profitable and can be withdrawn at anytime the complainant so desires; that respondents periodically assured complainant that his investments were making good; that complainant, after sometime, demanded the withdrawal of his total investments pursuant to respondents' representations, but respondents were able to return only the amount of P305,650.00 leaving a balance of P813,160.00; that despite repeated demands made by complainant for the return of the remaining amount of his investments, respondents unjustly and unlawfully refused to comply thereto, causing damage and prejudice to complainant; and that respondents, who acted in conspiracy and in connivance with each other in the perpetration of the foregoing fraudulent, illegal, deceitful acts and misrepresentation to the public and to herein complainant in particular, are jointly and severally liable to complainant. LexLib Hearings were conducted on complainant's application for the issuance of a writ of preliminary attachment and on March 13, 1990, an Order was issued directing the issuance of a writ of preliminary attachment upon the filing by the complainant of a bond in the amount of EIGHT HUNDRED THIRTEEN THOUSAND ONE HUNDRED SIXTY (P813,160.00)PESOS. On November 17, 1989, upon an ex-parte motion filed by complainant, an Order was issued declaring respondents in default for their failure to file their answer within the reglementary period pursuant to the provisions of the Revised Rules of Procedure in the Securities and Exchange Commission . On November 27, 1989, an urgent motion to set aside order of default was filed by respondents and which urgent motion was denied in an Order dated January 9, 1960. On January 16, 1990, a motion for reconsideration was filed by the respondents seeking to reconsider the Order dated January 9, 1990 which denied the motion to set aside order of default. Also filed earlier are the complainant's motion to deem evidence for application for a writ of attachment as evidence in chief and the Ex-parte motion to render judgment thereon. In an Order dated November 8, 1990, the Hearing Panel denied the motion for reconsideration and granted complainant's motion to consider the evidence on the incident of preliminary attachment as evidence in chief. Hence, this decision. From the evidence presented, both oral and documentary, the following facts appear to have been duly established; that sometime in April, 1988, a certain Loida I. Averion, representing herself as a duly licensed and authorized solicitor of Onapal, San Pablo City Branch, approached a complainant at his office in Alaminos, Laguna, and tried to convince the latter to invest with the respondent corporation in their commodity futures trading; that during the next visit made by respondent Averion, she was with respondent Ricardo Alvero, who represented himself as the manager of Onapal's San Pablo City Branch, and then and there convinced complainant to make investment with respondent corporation; that both respondents Averion and Alvero fraudulently misrepresented to complainant that the latter's investment would be a safe and profitable undertaking and withdrawable at anytime; that after sometime, he was sweet-talked, convinced and was led to believe the misrepresentation; that he was required to sign a special power of attorney in favor of respondent Alvero saying that the former's account of investment is classified as company managed account; and made several investments with the respondents Onapal at San Pablo City Branch in the total amount of P1,118,810.00; that he was also made to pre-sign blank purchase order and sales forms, together with the Risk Disclosure Statement with representation that all these things are routinary; that after sometime, he tried to withdraw his money but was told that it's still in the market so it's quite impossible to get it; that after several demands made, he was able to withdraw only the amount of P305,650.00 leaving the balance of P813,160.00; that despite repeated demands, respondents failed to return the balance of his investment; that because of the breach of promises committed by respondents, complainant conducted verification on the authority of respondents to solicit investments; that a certification was issued by the Securities and Exchange Commission certifying that respondent Onapal has no authority to operate a Commodity Futures business in San Pablo City; and that respondent Averion was, likewise, not a licensed commodity futures broker. The issue boils down on the question of whether or not the trading contract is a valid contract in the light of the fraud and misrepresentation committed by the respondents and whether or not complainant is entitled to recover the balance of his investment including damages; Complainant impugn the validity of the subject trading contract he entered into with respondent Onapal for having been executed through fraud and misrepresentation committed by the respondents. The term "fraud", in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omission, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in damage to another, or by which an undue and unconscientious advantage is taken of another. (People vs. Sabio, L-45490, November 20, 1978) Fraud from the legal point of view may be defined as deception practice to induce another to part with his property or surrender some legal rights and which accomplished the end desired. As commonly used, the word implies deceit, deception, artifice or trickery. Misrepresentation, on the other hand, is a representation which is not true, a false representation. The fraud contemplated therein must be serious so as to induce consent of one of the parties. Respondents Averion and Alvero's presentation of the business of respondent Onapal, though an overstatement of the actual market situation, and their misrepresentation that they are licensed brokers are, to our mind, the primordial factors which constituted the material and serious fraud that induced complainant to sign the trading contract and part with his money. cdlex It is beyond cavil of doubt that respondents, through misrepresentation and deception, caused complainant heavy financial loss in what they term as investment in respondent Onapal's Commodity Futures Trading business; that the procedure respondents took in effecting the trading contract constitute a serious fraud and misrepresentation cannot now be doubted. In the investigation that ensued brought about by respondents' refusal to return the balance of complainant's investment, it was unravelled that, per certification issued by the Securities and Exchange Commission (Exh. "D"), respondent Onapal has no authority to operate a Commodity Futures Trading business in San Pablo City. Neither was respondent Averion a licensed commodity futures broker. Moreover, the documents involved from the time the trading contract was issued to complainant to the moment the final trading was made, were so irregularly executed. As appearing on records, certain documents were pre-signed and some material facts misrepresented. It is to be noted that evidence is wanting of any direct proof that the business proposition as presented by respondents Averion and Alvero was with the express knowledge of respondent Onapal. Neither was there any evidence evincing that respondent Onapal participated, directly or indirectly in the perpetration of the misrepresentation of respondents Averion and Alvero. But this could not be taken as an obstacle in view of the well accepted rule in criminal case that the mere absence of the same does not necessarily result in acquittal, for conviction thereof may still be achieved on some other forms of evidence. (People vs. Mingoa, G.R. No. L-5371, March 26, 1953, 92 Phil. 856) The foregoing therefore, notwithstanding, we hold respondent Onapal responsible not only for what could be its single act of omission, that is, by knowingly permitting respondents Averion and Alvero to solicit commodity futures contract on its behalf without the required license from the Securities and Exchange Commission in violation of the express provision of Sec. 21 * of the Securities and Exchange Commission Revised Rules and Regulations governing Commodity Futures Exchanges, Futures Commission Floor Brokers, Commodity Futures Association, Commodity Pool Operators and Commodity Trading Advisor but also by operating commodity futures business in San Pablo City without the needed license to operate from the Securities and Exchange Commission. It is, therefore, undisputed that respondent Onapal's liability is joint and solidary with that of respondents Averion and Alvero for all the damages resulting therefrom suffered by complainant. For all the foregoing, we consider complainant's futures contract to be null and void, the same having been traded by an unlicensed commodity futures broker. Complainant's futures trading contract being absolutely wanting in civil effects is nothing but a non-existing contract, and entitles complainant to a return of his investment. WHEREFORE, judgment is hereby rendered in favor of the complainant and against the respondents; a) declaring complainant's future trading contract to be null and void; and b) ordering respondents, who are jointly and solidarily liable, to reimburse complainant the sum of EIGHT HUNDRED THIRTEEN THOUSAND ONE HUNDRED SIXTY (P813,160.00) PESOS plus legal interest thereon. No pronouncement as to costs. SO ORDERED. (SGD.) ALBERTO P. ATAS Hearing Officer (SGD.) KIRTH S. BANSUELO Hearing Officer * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .