Hallare v. Kingly Commodities Traders, Multi-Resources, Inc.

[SEC-SICD * CASE NO. 3716. June 1, 1994.] CONSUELO HALLARE , complainant , vs .KINGLY COMMODITIES TRADERS, MULTI-RESOURCE, INC. , respondent . D E C I S I O N This is an amended complaint filed by Consuelo Hallare, through counsel, against Kingly Commodities Traders and Multi-Purpose, Inc. (Kingly for short),a commodity futures broker, for the return of her investment in the amount of Two Hundred Twenty Thousand Pesos (P220,000.00).Complainant also prayed for the award of Three Hundred Thousand Pesos (P300,000.00) moral damages, One Hundred Thousand Pesos (P100,000.00) exemplary damages, and attorney's fees in the amount of Sixty Thousand Pesos (P60,000.00) and an appearance fee of Seven Hundred Pesos (P700.00) per hearing. Complainant alleged, among others, that sometime in October 1997, in Naga City, a certain Imelda Silot Approached her who represented herself as a well trained, experienced and authorized representative of Kingly and enticed her to trade in commodity futures, an almost risk-free form of investment, if Mrs. Silot handles the trading of complainant's account. On October 17, 1987, complainant was persuaded to invest, signed a Customer's Agreement, a contract of adhesion drafted and prepared by Kingly and deposited the amount of Sixty Thousand Pesos (P60,000.00) in the Naga City Branch of Kingly. On November 18, 1997, complainant made an additional deposit in the amount of P40,000.00, P10,000.00, on December 10, 1987, P33,000.00 on December 11, 1987 and P23,500.00 on December 17, 1987. Complainant's Account No. NGAA 1002 was traded by Mrs. Silot. And when complainant inquired about her investment, Mrs. Silot told her that she had already lost all her investment so that she had to put up additional margins to maintain her trading positions. Suspecting that she was misinformed, complainant made effort to find out what it is all about, only to realize that it is a very risky form of investment. Complainant later found out that Mrs. Silot, who solicited and traded her account, is not licensed by the SEC thus confirming her suspicion that she is a victim of fraud, deception, misinterpretation and bad faith of Kingly, for letting an untrained, inexperienced and unlicensed solicitor to solicit and trade her account. It is also the contention, of the complainant that Kingly violated SEC requirement that only a licensed investment consultant can solicit and trade an account so that complainant's contract should be declared null and void and should be entitled to a return of her investment. In answer to the complaint, respondent Kingly admitted certain allegations in the complaint. It also denied generally and specifically material averments in the complaint and by way of special and affirmative defenses states that the customer's agreement which the complainant executed is a valid agreement authorizing Kingly to receive and/or execute contract through established commodity futures exchanges/markets; that a complainant signed a "Risk Disclosure Statement" acknowledged to have been read and understood by her; that contrary to the claim of the complainant, her account was handled by Violeta Concepcion, a licensed investment consultant; that complainant was advised and made aware of the mechanics, intricacies and technicalities of commodity future trading, hence there was no deception, fraud, misrepresentation nor any illegal act committed by the herein respondent; that under par. 9 of the Customer's Agreement, and reports of execution of orders and statement of accounts will be conclusive if not objected to within three (3) days upon receipt thereof; that complainant made all the necessary margin deposit voluntarily; that the complainant made her initial deposit of P50,000.00 on October 17, 1987 and withdrew the same on October 23, 1987 even authorizing her investment consultant Violeta Concepcion to receive the withdrawn amount in her behalf; that complainant had all the opportunity and option to close her account, to withdraw the whole or part of her deposit, and/or to proceed with and trade in commodity futures as she finally decided to do; that the complainant did not object to the provisions of the customer's agreement; that the complainant is well-educated and is highly improbable for her to claim that the respondent corporation committed fraud, deception, misrepresentation and bad faith because she was aware of all her transactions and that she is well versed with the rules and regulations of futures trading; that this complaint should be dismissed on the ground that a married woman may not sue or be sued alone without joining her husband as provided in Section 4, Rule 3 of the Rules of Court; and that since trading in commodity futures is undertaken through margin deposit only, the possibility of incurring deficit is a reality. And by way of conclusion, respondent claims that petitioner should be made to pay the amount of P1,650.00 plus 24% per annum from April 14, 1988 until fully paid representing her deficit balance with Kingly; that due to the filing of the malicious, unwarranted and baseless action, respondents suffered actual and moral damages in the amount of P1,000,000.00; exemplary damage in the amount of P500,000.00 and P80,000.00 as attorney's fees. On the compulsory counterclaim, respondents prayed that the judgment be rendered (1) ordering the complainant to pay the herein respondent the following (a) the sum of P1,650.00 representing her trade deficit/overloss with interest of net loss that 24% per annum from April 24, 1988 until it is fully paid plus loss of collection; (b) the sum of not less than P1 Million for and as actual and moral damage; (c) the amount of P80,000.00 for and as attorney's fees; and (d) the sum of not less than P20,000.00 for and a cost of suit. LLphil In her answer to the counter-claim, complainant specifically denies material allegations therein and prays that judgment be rendered dismissing respondents' counterclaim. Preliminary conference of this case was originally set on June 11, 1990 and both parties were directed to file their respective preliminary conference brief five (5) days prior to the scheduled preliminary conference. On June 20, 1990, respondent was declared as in default for failure to file its preliminary conference brief within the prescribed period and the presentation of evidence for the complainant ex-parte was set on July 4, 1990. On August 29, 1990, it was the turn of the complainant to be declared non-suited for the absence of the complainant and her counsel at the preliminary conference on the said date despite due notice. However, both orders declaring the respondent as in default and complainant non-suited were reconsidered and the preliminary conference was conducted on September 13, 1990, which was also terminated on the same date. Trial on the merits ensued to resolve the following issues, to wit: 1. Whether or not respondent was guilty of fraud, deceit and misrepresentation in securing complainant's investment; 2. Whether or not the complaint should be dismissed on the ground that a married woman may not sue alone without joining her husband; and 3. Who is entitled to claim for damages. Both parties adduced, testimonial and documentary evidence. On September 21, 1990, complainant filed an amended complaint principally to include complainant's husband as a party complainant. Finding the amended complaint sufficient in form and substance, the former Hearing Officer Rolando Malabonga, required the respondent to file its answer thereto. Thus curing the defect in the original complaint. It would appear from the evidence adduced by the complainant that she made various deposits of different amounts on different dates from October 31, 1987 to December 17, 1987. The existence and authenticity of which, except for minor corrections, were clearly admitted by the respondents. Respondent objected to the admission of Exhibits "J" to "K-2" representing instruction of sale and purchase and initials of Imelda Silot were objected to on the ground that they are mere photocopies without the benefit of comparison with the original documents. Exhibits "J-1" which is allegedly the initial of Imelda Silot traded the account of the complainant in violation of the SEC regulations on the ground that she is not duly licensed by the SEC was objected to on the ground that the initial I.S. has never been properly identified as that of Imelda Silot. Petitioner presented an affidavit, Exhibit "L",of Imelda Silot dated October 19, 1989 to prove that she actually traded the account of the petitioners. However, respondent alleged that the testimony of the witness should have been done orally unless witness is incapacitated to speak. Several deposits of different amounts are made on various dates from December 27, 1987 to February 23, 1988 (Exhibits "M-1" to "M-9") covered by their respective deposit notice were presented in evidence by the petitioner, the existence of which was duly admitted by the respondents. Respondents, however, objected to the purpose for which the said evidence were offered on the ground that they are not separate from the margin receipts, but simply the basis of the issuance of the margin receipts. Objection to Exhibit "M" and their subsequent particularly Exhibits "M-4-A","M-5" and "M-5-A" are premised on the ground that they were not properly identified and therefore inadmissible specially the signature of Imelda Silot. Likewise, the presentation of exhibits "M" to "S-1" to proved that Imelda Silot traded complainants account were objected to by the respondent on the ground that not anyone of them were identified at all. Upon the other hand, respondents presented Exhibits "1" to "3-A" to prove that complainant Consuelo Hallare voluntarily executed a Customer's Agreement who was informed of the risk of loss in commodity futures trading which can be substantiated and that it was Violeta Concepcion who handled complainant's account. It also appears that complainant was properly advised not to sign this agreement until she has fully read and understood the same. Respondents also presented Exhibits "4" to "12-A" to prove that margin deposits of the complainant were received by Violeta Concepcion a duly licensed investment consultant in her capacity as adviser of the complainant and also to prove that the complainant made her initial deposit of P50,000.00 on October 17, 1987 while deposit was withdrawn by the complainant on October 23, 1987 and to prove that complainant had the option to withdraw all her unremitted funds. These exhibits also show that complainants made various deposits to her account in order to support her existing position in the market which were on a losing trend. Exhibits "14" to "18-D-1" were presented to prove that all her transactions involving her deposit were with the consent of the complainant; through various purchase and sale reports and trading balance sheets and lastly, to prove that the Investment Consultant of the complainant is Violeta Concepcion, a duly licensed consultant by the SEC. After a careful evaluation of the allegations in the pleadings, as well as the evidence adduced during the hearings and the arguments of counsels, this Hearing Officer is inclined to sustain the view of the complainant. During the hearings conducted on the above-entitled case, it has been established that it was Ms. Imelda Silot who solicited and enticed the complainant to invest in Kingly Commodities Traders Multi-Resources, Inc. (Kingly for short).By her own testimony, she admitted to be working for Kingly and that the solicitation and subsequent trading of the account of the complainant was with the knowledge and consent of Kingly (TSN 10-3-90, p. 12).Likewise admitted by Ms. Silot is the fact that she was not duly licensed by the Securities and Exchange Commission to solicit and/or to trade futures account (TSN 10-3-90 p. 10).She also admitted that the solicitation and trading of complainant's account were with the knowledge and consent of Kingly. Based on the testimony above of Ms. Silot it has also been established that Kingly allowed Ms. Silot to violate the SEC Rules on Future Trading when it allowed Ms. Silot, an unlicensed person to solicit and trade futures accounts which amount to fraud and misrepresentation. While it is true that Ms. Silot may have some working knowledge and experience in selling and trading futures account, it cannot be denied that such qualifications do not measure up to SEC requirement due to lack of the necessary license for the business to solicit and trade future commodities. Kingly could not escape responsibility for fraud, deception, bad faith and misrepresentation when it allowed an unlicensed person to represent it in soliciting and trading futures account. While it may be true that Violeta Concepcion, a duly licensed Investment Consultant handled the account of the complainant, there is no showing that she was the one who solicited and traded complainant's accounts. In fact, it was Ms. Silot who persuaded the complainant to invest in commodity futures contract. Considering the above-findings and considerations, the contract entered into between the complainant and Kingly is flawed. In the light of the foregoing, judgment is hereby rendered: 1. Ordering to return complainant's investment in the amount of P220,000.00 plus legal interest from February 13, 1990 until fully paid; and 2. To pay P60,000.00 attorney's fees plus P700.00 appearance fee per hearing to complainant. LibLex SO ORDERED. (SGD.) MANUEL P. PEREA Hearing Officer