Lopez v. Leader Commodities, Inc.

[SEC-SICD * CASE NO. 3779. April 3, 1996.] PABLO P. LOPEZ , complainant , vs . LEADER COMMODITIES, INC. , respondent . D E C I S I O N This is an action for annulment of trading contract, sum of money with prayer for the issuance of a writ of attachment. The respondent was declared in default. Thereafter complainant presented his evidence ex-parte. Complainant in his amended complaint alleges inter alia, that: 1. Respondent is a private corporation duly organized and existing pursuant to the laws of the Philippines and registered as such with this Honorable Commission with principal place of business at the 12th Floor, Allied Bank Building, Ayala Avenue, Makati, Metro Manila, where it may be served with the summons and other processes of this Honorable Commission. 2. Respondent is engaged in the business of commodity futures trading. 3. In 1987, respondent through Ms. Maria Victoria Bantug, who represented herself to be an investment consultant of the respondent, made solicitations upon complainant with representations that investments with it in the commodity futures trading is safe, yield high profits and withdrawable at any time. 4. Respondent further assured complainant that his investments will be handled by their highly professionalized and trained staff members and by reason thereof, there is no way for the complainant to incur losses on his investments but rather, he would be certain to gain high profits. 5. Complainant was fully enticed and attracted by the foregoing representations and assurances of the respondent thereby causing him to place investment with the respondent in the total sum of P283,000.00. 6. Respondent then required complainant to sign several documents in blank forms, one of them is the Rules for Commodity Trading and Customers Agreement, which the respondent represented as standard documents to enable them to trade the investments of complainant. 7. While the aforementioned agreement bears an acknowledgment before a notary public, complainant did not appear before a notary public nor had he acknowledged the said document before a notary public, a clear manifestation that right at the inception, respondent already acted in bad faith and malice aforethought. 8. Respondent palpably, grossly and maliciously breached its assurances and representations to complainant when upon its supposed to be professional and risk free handling of complainant's investments, respondent reported to complainant losses of the investments. 9. On various and several occasions, complainant demanded respondent to rectify and restore his cash positions but despite thereof, respondent unjustly, maliciously, fraudulently and unlawfully refused to comply thereto, resulting to complainant's undue damage and prejudice. LexLib 10. The investments consultants of the respondent, Ma. Victoria Bantug turned out to be an unlicensed and unauthorized investment consultant hence, rendering the trading contract null and void pursuant to the Revised Securities Act and its implementing rules and guidelines. 11. Respondent caused the complainant to execute the trading contract and the other papers and documents in pursuance thereto, through fraud, deceit, misrepresentations and acts in palpable violation of the Revised Securities Act and the Revised Rules and Regulations in Commodity Futures Trading , thereby rendering said trading contract as null and void and in existent and the papers and documents executed pursuant thereto as equally void and in existent. 12. Likewise, respondent consented, approved and ratified the acts of its agent/employee, Ms. Maria Victoria Bantug, to represent herself to be a duly authorized licensed investments consultant/salesman notwithstanding the fact that she is not a licensed investments consultant/salesman, hence the subject trading contract solicited and made the subject matter of this case, is null and void and in existent pursuant to the Revised Rules and Regulations on Commodity Futures Trading . 13. Complainant upon discovering the evil fraudulent, immoral, unethical and illegal scheme of respondent, immediately demanded the return of his investments but notwithstanding the foregoing, respondent unjustly and unlawfully refused to comply thereto, the complainant's undue damage and prejudice in the actual amount of P283,000.00 14. Due to the foregoing fraudulent, immoral, unethical, unjust and illegal acts and conduct of the respondent, complainant suffered anxiety, mental anguish, fright, wounded feelings and sleepless nights and further exposed him to public ridicule and social embarrassment thereby entitling complainant an award for moral damages in the sum of not less than P50,000.00. 15. To serve as public example and a deterrent to fraudulent acts, respondent must be adjudged liable for exemplary damages in the amount of not less than P25,000.00. 16. To protect his interest, complainant was constrained to engage the services of the undersigned counsel with an agreed attorney's fee of P50,000.00. 17. Respondent through fraud, deceit and misrepresentations, caused undue damage to complainant in the actual amount of P283,000.00. 18. Respondent through misrepresentation, fraud and deceitful schemes, ploy, devices and machinations, successfully enticed and convinced complainant in their highly irregular, immoral and illegal transactions resulting to complainant's undue damage and prejudice. 19. Respondent is guilty of fraud, deceit and misrepresentations in incurring the above said obligation of P283,000.00 and as such, respondent has a lawful, valid and genuine obligation to complainant, above all legal counterclaims, in the aforementioned amount considering further that the trading contract upon which the investments proceeded is void ab initio, thus pursuant to Article 1416 of the Civil Code, respondent is legally bound to return to complainant the aforementioned sum of P283,000.00. Considering that respondent was declared in default, the case shall be resolved on the basis of complainant's unrebutted evidence. The issues to be resolved are as follows: 1. Whether or not the trading contract is null and void; 2. Whether or not complainant is entitled to recover his investments with the respondents plus damages. From the evidence adduced, we find merit to the complainant's assertion that the trading contract is null and void. LLjur It is significant to note that the investment of the complainant which led him to sign the trading contract, was obtained and solicited by Ms. Bantug, respondent investments consultant who turned out to be an unlicensed investment consultant (Exhibit "A"). As such she was not authorized to solicit complainant's investment. Section 19 of Batas Pambansa Blg. 178 (The Revised Securities Act), provides as follows: "SECTION 19. Registration of brokers, dealers and salesman No broker, dealer or salesman shall engage in business in the Philippines as such broker, dealer or salesman or sell any securities, including securities exempted under this Act, except in exempt transactions, unless he has been registered as broker, dealer, or salesman pursuant to the provision of the section." As aptly pointed out by the complainant, Section 53 of the Revised Securities Act declared as void contracts secured by an unlicensed salesman or investments consultants, to wit: "SECTION 53. Validity of Contracts a) Any condition, stipulation, provision binding to any person to waive compliance with any provision of this Act or any rule or regulation thereby, as well as waiver itself, shall be void. b) Every contract made in violation of any provision of this Act or of any rule or regulation thereunder and every contracts, including any contract for listing a security on an exchange heretofore or hereafter made, the performance of which involves violation of or the continuance of any relationship or practice in violation of any provision of this Act, or any rule or regulation thereunder, shall be void." The trading contract subject of this case, was solicited, obtained and secured by respondent through fraud, deceit and misrepresentation thereby rendering it as null and void pursuant to Section 29, in relation to Section 53 of the Revised Securities Act. Section 29, Fraudulent transactions a) It shall be unlawful for any person directly or indirectly in connection with the purchase or sale of any securities 1. To employ device, scheme or artifice to defraud. LLphil 2. To obtain money or property by means of any untrue statement of a material fact necessary made, in the light of the circumstances under which they were made, not misleading or 3. To engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person. Under the facts and circumstances obtaining in this case, complainant is entitled to recover his investment with damages when the same was fraudulently secured pursuant to 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 law is designed for the protection of the plaintiff he may if public policy is thereby enhanced, recover what he has paid or delivered." Likewise, complainant was able to prove by sufficient evidence his claim for damages and attorney's fees. WHEREFORE, considering the foregoing, judgment is hereby rendered in favor of the complainant as follows: a. Declaring the subject trading contract as null and void; b. Ordering respondent to pay complainant the sum of P283,000 plus legal interest therein upon the date of investment. c. Directing the respondent to pay complainant by way of moral damages the amount of P50,000.00 d. Directing the respondent to pay complainant the amount of P50,000.00 as exemplary damages. e. Ordering respondent to pay the sum of P50,000.00 as attorney's fees. f. Costs of suit. SO ORDERED. (SGD.) ENRIQUE L. FLORES, JR. Hearing Officer