Sps. James & Edna Gleason vs. Onapal Phil. Commodities

[SEC-SICD * CASE NO. 3651. May 27, 1991.] SPS. JAMES & EDNA GLEASON , complainants , vs . ONAPAL PHIL. COMMODITIES, INC., ET AL. , respondents . D E C I S I O N This is a case for annulment of trading contract, recovery of investments and damages with prayer for the issuance of a Writ of Preliminary Attachment. Complainants averred in their complaint that on July 1, 1987, respondent Bretana convinced and persuaded complainants to invest with respondent Onapal in its commodity futures trading, which he represented to be risk-free, well-managed accounts, high returns of investments and withdrawable at any time upon demand; that they were attracted and fully convinced of the representation of respondent Bretana, hence, on July 9, 1987, they placed an investment of P100,000.00 with respondent Onapal through respondent Bretana which was followed by additional investment of P8,615.00; that they were required to pre-sign documents and papers which respondent Bretana assured and represented as mere routinary papers and documents for their investments and that complainants were only furnished copies thereof more or less a week after; that the documents that were furnished to them turned out to be the trading contract, special power of attorney, account application and rules on commodity futures trading that upon realizing that the contract which respondent Bretana enticed them to sign and for which reason they initially agreed to invest P100,000.00 appears not what he represented them to be, complainants demanded from respondent Onapal the return of their investment, which surprised them when it refused to return their investment of P100,000.00; and they were more surprised when the respondents informed them that they have already started trading activities on their investment, despite the fact that complainants have not placed orders; that respondents Onapal and Bretana then convinced complainant to make the marginal deposit of P8,615.00 to recoup and recover their investment which complainants reluctantly acceded because of their desire to recover their hard-earned P100,000.00 investment; that contrary to the representation and assurance of respondents Onapal and Bretana, complainants were able to recover only from them the measly sum of P17,346.30, thereby leaving a balance of 91,262.70, which respondents refused to return without valid or lawful grounds, notwithstanding their various and several demands; that the directors and officers of respondent Onapal are personally liable to them considering, that they have tolerated, acceded and permitted their business to be conducted in fraudulent, deceitful schemes and devices to the detriment of complainants and the public as a whole. Respondents traversed the allegations in the complaint interposing the defenses that on July 9, 1987, complainants and respondent Onapal executed a trading contract and rule for commodity trading whereby respondent Onapal was appointed by the complainant as their broker; that on June 23, 1987, complainants signed the risk disclosure statement and executed a special power of attorney authorizing respondent Bretana to take charge of their Account No. 2004 with Onapal; that in view of the special power of attorney which complainants executed in favor of respondent Onapal, traded their account and these transactions were undertaken with the knowledge and consent of the complainants; that complainants received the confirmation of Contract and Balance Sheets (CCBS) for each of the trading transactions on their account but they did not file any protest on any of these transactions when they had all the opportunity to do so; that complainants' short margin deposit of P8,615.00 on August 10, 1987, was in accordance with the provision of the trading contract and the rules for commodity futures trading incorporated with the trading contract which was signed by the complainants on July 9, 1987; that the trading activities relative to complainants' accounts were affected and consummated legally in accordance with law, rules and regulations and agreements of the parties. prcd Hearing on complainants' prayer for a Writ of Preliminary Attachment were actually conducted whereby complainant James Gleason testified. However, during the hearing on March 12, 1990, counsel for the complainants manifested that he was adopting his evidence in the application for preliminary attachment as evidence in chief in the main case, thereby abandoning his application for the issuance of the Writ of Preliminary Attachment, for which counsel for the respondents agreed. Aside from the testimony of James Gleason, complainants presented Exhibits "A", "B", "C" and "D", including the submarkings therein which were all admitted. On the other hand, respondents did not present any witness, but instead adduced only documentary exhibits "1", "2", "3", "4", "5", "6", "7", "8", "9", "10", "11", "12", "13", "14", "15", "16", with the submarkings therein, which were all rejected except Exhibit "2" (Trading Contract) and Exhibit "4" (Power of Attorney, executed by spouses James & Edna Gleason in favor of Arthur Bretana) being common exhibits by complainants and respondents. The other exhibits of respondents were not admitted, the same not being identified, authenticated, and established. After a careful study and consideration of the evidence adduced in this case, this Hearing Officer is fully convinced of the merits of the complainants' claims and that sufficient evidence support a finding for them. Indeed, no evidence was presented by the respondents to refute the categorical declarations of complainant James Gleason as to the circumstances which led them to invest with the respondent Onapal and to sign the trading contract and its allied documents, to wit: "Atty. Guerero: Now, tell us Mr. Gleason, why did you agree to place an investment with Onapal in this total Amount P108,615.00? A. Mr. Bretana promised at that time that there was no risk or what do you want to call it or anything involve, I would be assured profits/gain. Q. How about the withdrawal of these accounts? A. We can withdraw it anytime we wish (TSN, Nov. 21, 1989)" And they signed the documents presented to them for their signatures because, as testified to by Mr. Gleason: "Atty. Guerero: Q. Why did you sign this documents? A. He merely presented them as . . . like a form for taking order, he did not present them as legal contracts and I noticed later upon receiving the contract that there was no space provided whatever for notarization. prcd Q. Mr. Gleason, you likewise testified a while ago that you did not read these documents? A. I did not. Q. Why? A. They were presented to us like a form for taking an order, Q. Were you furnished copies of these documents upon signing the same? A. All, except for the Special Power of Attorney that came into my possession this is the reason why this case. Q. Now, when were you furnished copies of these documents that you signed? A. One week after signing them. Q. So, in short, Mr. Gleason, when you signed the documents you were not immediately furnished copies of the documents? A. That's correct. Q. You said after one week or so, you were furnished copies of these documents that you signed, what are these documents? A. The contract and rules for commodity trading which I have right here the original copy" (TSN, supra, pp. 13-15) Furthermore, the said witness delineated and described the misrepresentation committed by the respondents which led them to invest in the trading activities of respondent Onapal, to wit: "Atty. Guerero: Q. You said they misrepresented, could you specify the misrepresentation? A. Over the promise that would gain, will make sure profit for us in a very limited amount of time and that we can withdraw this entire amount plus the profits at any time we wish, it did not turn out to be or turn out to happen exactly what they promised. Q. And were it for those representations of the respondents, you could not have placed investments? A. That's correct" (TSN, Nov. 21, 1989, pp. 26-27) It is thus beyond cavil that the trading contract and investments subject of this case at bar, were solicited, obtained and secured by the respondents through fraud, deceit and misrepresentation thereby, rendering them as null and void pursuant to Section 29, in relation to Section 53 of Batas Pambansa Blg. 178, otherwise known as the Revised Securities Act. Under the foregoing circumstances, complainants can recover their unreturned investments of P91,268.70 plus legal interest therein from July 1, 1987 when the same were fraudulently obtained, in accordance with Article 1146 * of the Civil Code of the Philippines, thus: "ARTICLE 1146. * When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designed for the protection of the plaintiff; he may if public policy is thereby enhanced, recover what he has paid or delivered." And obviously, the prohibition on fraudulent transactions in securities and commodity futures trading as provided for in the Revised Securities Act, is for the protection of the investing public such as complainants, thereby enhancing public interest. LibLex However, considering that respondent Onapal is engaged primarily in the business of commodities futures trading, under its charter, and it appearing that other respondents who were directors and/or officers of respondent corporation have nothing to do in the investment transactions of the complainants or if some of them have participated, obviously they were acting for and/on behalf of the corporation, said respondents, therefore, should not be held responsible for the loss of complainants' investment in respondent Onapal. Only respondent Onapal should bear the burden of returning, complainants' investments. Reasonable Attorney's fees will also be awarded to complainants' Counsel commensurate to his performance in handling this case. However, claims for moral and exemplary damages cannot be granted there being no sufficient proof that complainants are entitled thereto. WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainants declaring the subject Trading Contract null and void and ordering respondent Onapal Philippines Commodities, Inc., the following: 1. To return and/or pay the Complainants the amount of P91,268.70 plus legal interest thereon from date investment was made on July 1, 1987 until the same is fully returned, and 2. To pay an Attorney's fees of P25,000.00. SO ORDERED. (SGD.) JUANITO B. ALMOSA, JR. Hearing Officer