Spouses James and Edna Gleason vs. Everich International Commodities, Inc., et al.

[SEC-SICD * CASE NO. 3653. September 6, 1990.] SPOUSES JAMES and EDNA GLEASON , complainants , vs . EVERICH INTERNATIONAL COMMODITIES, INC. ET AL. , respondents . D E C I S I O N In their complaint with a prayer for the issuance of a writ of preliminary attachment filed with the Securities and Exchange Commission on October 19, 1989 by the spouses James and Edna Gleason (complainants) against Everich International Commodities, Inc., Rosalinda Romero, Arnold A. Bigornia and John Does, (respondents) complainants prayed for the annulment of the Trading Contract they entered into with the respondent Everich International Commodities, Inc. (Everich for brevity), and for damages and attorney's fees. In support thereof, complainants alleged, inter-alia, that on various occasions from March 9 to 23, 1987, respondent Romero, introduced herself to complainants as an Investment Consultant of Everich and persuaded them to place investments with Everich, with the representation that the investment is a "No Risk Sure Profit" scheme with a straight rate of interest of 15% per month, the interest collectable monthly and the whole investment withdrawable any time; that complainants were convinced and placed an initial investment of P250,000.00; that respondent Romero caused complainants to sign pro-forma/blank forms of documents which respondent Romero represented as formal requirements on their investments; that it was only after ten (10) days from the signing of the documents that complainants were given copies of the documents they signed; that respondents Everich and Romero further convinced complainants to place margin deposits of P40,000.00 on May 19, 1987, P 14,000.00 on May 27, 1987 and P26,000.00 on June 19, 1987, or a total of P80,000.00 with the reiteration by the respondents of their assurances and promise; that complainants demanded for the return of their investments plus the promised interest but respondents returned only the sum of P 112,000.00, leaving a balance of P207,700.00; that despite demands, respondents unjustly and unlawfully refused to return the balance. prcd Complainants further alleged that because of the unlawful refusal of respondents to return the balance, they suffered anxiety, mental anguish, wounded feelings, sleepless nights and exposed them to public ridicule, social-humiliation and besmirched reputation and were constrained to engage the services of counsel. In support of the application for a writ of preliminary attachment, complainants alleged that through misrepresentation, deceit and fraudulent schemes, devices, ploy and machinations, respondents were able to cause them to make the investments and that they have no security for the satisfaction of their claim. In answering the complaint, respondents Everich and Arnold A. Bigornia admitted that complainants made the initial deposit in the amount of P250,000.00 and additional deposits in the total amount of P80,000.00 and the withdrawal by complainants of the amount of P112,300.00 but specifically denied the rest of the material averments of the complaint. By way of opposition to the application for a writ of preliminary attachment, said respondents alleged that Everich is a duly licensed commodity futures broker; that commodity future transactions/contracts are recognized by the government and clearly defined in the Revised Securities Act and by the Rules Governing Commodity Futures Trading promulgated by the Securities and Exchange Commission. By way of affirmative defenses, answering respondents alleged that conformably with the requirements of SEC, complainants were properly advised of the risks involved in futures trading through personal explanations and the "Risk Disclosure Statement" incorporated in the Customer's Agreement entered into by complainants with Everich, that before complainants entered into the customer's Agreement, they were properly apprised of the nature, intricacies and technicalities of commodity futures trading; that the instructions to buy or to sell were all initiated by complainants and were immediately reported to complainants within 24 hours through "Sales Report''. "Purchase Reports'' and Trading Balance Sheets" which were all delivered to complainants by Everich through messengers; that under paragraph 16 of the Customer's Agreement, the transactions indicated in the Sales Report or Purchase Report shall be conclusive if no objection is received by the company within three (3) days from receipt thereof; that the same notice is prominently printed in the Sales Report and Purchase Report; that complainants made 37 individual buying and selling transactions for a period of more than three (3) months and have received 18 Sales Reports. 18 Purchase Reports and 18 Trading Balance Sheets and they never complained of any irregularity in any particular transaction. Having been fully informed of all their transactions, it is clear that there was no deceit. fraud or misrepresentation by respondents. Answering respondents interposed a compulsory counterclaim. At the initial hearing on complainants' application for a writ of preliminary attachment, counsel for the answering respondents manifested that respondent Rosalinda Romero had resigned from respondent Everich and has migrated to the United States. In reply to said manifestation, counsel for the complainants manifested that he is dropping respondent Romero and the John Does from the complaint and then proceeded to present his sole witness in the person of James Gleason. While testifying, Gleason identified certain documents which were accordingly marked and offered as evidence. On the part of the respondents. James Gleason was presented as an adverse witness and Miss Maria Fe Eusebio who identified several documents, among which were Instructions of Sale, Instructions of Purchase, Sales Reports, Purchase Reports, Trading Balance Sheets and Acknowledgment Receipts of said instructions and reports (Exhibits 2", "3" up to "59") which were likewise marked and formally offered as evidence. Before the complaints' application for a writ of preliminary attachment could be resolved, their counsel filed a motion to set the case for preliminary conference, which motion was granted and the case was set for preliminary conference on March 16, 1990. Upon motion of counsel for the respondents and without objection on the part of counsel for the complainants, the scheduled preliminary conference on March 16, 1990, was cancelled and reset for March 26, 1990. TAEDcS At the preliminary conference on March 26, 1990. both parties agreed that resolution on complainant application for a writ of preliminary attachment be held in abeyance and will just be included in the decision to be rendered. The parties further agreed that the only issue to be resolved is whether or not respondents were guilty of fraud, deceit and misrepresentation in securing complainants' investments and who is entitled to damages. Counsel for the complainants manifested that he is adopting the evidence submitted in support his application for a writ of preliminary attachment as his evidence in chief for the main case. On the part of the respondents aside from adopting their evidence in opposition to the application for a writ of preliminary attachment, they manifested that they will be presenting one (1) witness in the person of Miss Merly Lim. Miss Merly Lim took the witness stand and identified several documents which were duly marked and submitted as evidence. From the evidence adduced by both parties, this Hearing Officer could not find his way clear in holding the respondents with having committed fraud, deceit and misrepresentation in making the complainants invest in commodity futures trading, considering the following: 1. Complainant James Gleason is the holder of a Bachelor's Degree in Business Administration (p. 35, T.S.N. Nov. 3, 1989) 2. He has basic knowledge in commodity futures trading, knowing somebody from Chicago Foreign Trade or Broker (p. 36, Ibid) 3. Respondent Everich is a duly registered corporation engaged in commodity futures trading (par. 2.1 of the complaint) and respondent Rosalinda Romero is a duly registered investment consultant/solicitor (Exhibits "55", "55-a" and "55-b") 4. Complainants signed the Customer's Agreement, containing the Rules for Commodity Futures Trading and Risk Disclosure Statement (Exh "B" for complainants and Exh "1" for respondents) and has acknowledged receipt of said Customer's Agreement and that they have read the contents thereof and have signed the same voluntarily and freely (Exh. "54 ') 5. Complainants authorized respondent Rosalinda Romero to initiate and execute trading transactions for them. (Exh. "5") 6. Complainants, through respondent Romero gave instructions to sell and purchase, have received Sales Reports, Purchase Reports and Trading Balance Sheets (Exhibits "2", "3" and "6" up to "53") 7. Complainants were able to withdraw P112,300.00 (p. 26 T.S.N. Nov. 3, 1989) The above-enumerated facts are all repugnant to fraud, deceit and misrepresentation. Stated otherwise, the facts duly established rendered the contention of the complainants incredible to believe. Respondents interposed a counterclaim for actual, moral and exemplary damages and attorney's fees. However, no evidence was adduced to support said damages and attorney's fees. But even assuming that the damages claimed by respondents were proven, the same could not be awarded in view of the ruling of the Court of Appeals in the case entitled Augusto Padilla vs. Securities and Exchange Commission et al., CA-G.R. SP. No. 18630, promulgated on February 1, 1990, wherein it was held that the Securities and Exchange Commission is without authority to award any kind of damages. WHEREFORE, judgment is hereby rendered dismissing the complaint, as well as the counterclaim. SEIDAC No pronouncement as to cost. (SGD.) FELIPE S. TONGCO Hearing Officer