Gonzales v. C & T Global Futures, Inc.

[SEC-SICD * CASE NO. 4251. September 9, 1996.] NORMA D. GONZALES , plaintiff, vs . C & T GLOBAL FUTURES, INC., ET AL. , defendants . D E C I S I O N A suit for the recovery/return of investments, unremitted profits, damages and attorney's fees was filed by, herein plaintiff against defendants C & T Global Futures, Inc. [C & T], Edanio de Jesus [De Jesus] and Nelson Diaz [Diaz]. dctai Plaintiff avers, inter alia , that as an administrator of the Garbes-Dizon building in Olongapo City, she leased an office space to defendants C & T; that defendant De Jesus induced her to invest in C & T with fraudulent assurances that for a minimum of P100,000.00, plaintiff would make a profit of at least P5,000.00 a week; that plaintiff could withdraw her investment and/or profit anytime just like a saving deposits in a bank; that there is no chance of losing the investment because the same would be 90% "tabla-panalo" [90% chance of making profit and a 10% of breaking even]; that the investment of P160,000.00 would give plaintiff two (2) trading positions which will earn her greater profits considering that if one position will not move the other one will make up for it; that he [De Jesus] is an expert investment consultant who knows the market and shall be the one to take care of plaintiff's investment; that because of these assurances, plaintiff invested and gave defendant De Jesus the sum of P100,000.00 through telegraphic transfer, and the investment was placed under Account No 03A-1001; that plaintiff was made to sign a Trading Contract and Rules for Commodity Trading and five (5) blank sales/purchase/withdrawals forms allegedly necessary for defendant to manage plaintiff's account; that on 26 January 1990, plaintiff was given a Trading Balance Sheet dated 25 January 1996 reflecting a gross profit of P13,000.00 less P7,700.00 commission charges, leaving a profit of P5,300.00; that on same date, defendant De Jesus was instructed by plaintiff to withdraw the principal investment and profits (P105,300.00) which she was able to encash; that on 9 February 1990, defendant De Jesus urged the plaintiff to invest in sugar; that encouraged by the profits made by defendants, plaintiff invested P100,000.00 on 13 February 1990 under Margin Receipt No. 0852 placed under the same account number; that defendant De Jesus told plaintiff to open a savings account with United Coconut Planters Bank [UCPB] where defendant C & T maintains an account, for the easier withdrawal/s of investment and profits; that plaintiff opened UCPB Savings Account No. 218-103771-7 on 15 February 1990 and furnished defendant De Jesus of the same; that on 12 March 1990, plaintiff was informed that she earned a gross profit of P12,500.00 minus the commission charges of P7,700.00 leaving a net profit of P4,800.00; that having been convinced repeatedly by the defendants, plaintiff invested another P60,000.00 on 3 April 1990 after De Jesus assured her that her investment will have a stronger position in the market; that her total investment amounted to P164,800.00 inclusive of profit; that plaintiff received a Trading Balance Sheet dated 1 June 1990 informing her of the gross profit of P43,680.00, less Commission charges of P7,700.00, leaving her a net profit of P35,980.00; that plaintiff again, received a Notice of Additional Margin also dated 1 June 1990 requiring her to invest the amount of P56,500.00 otherwise C & T will close her account and she will lose all of her investment that the situation was later on confirmed by defendant De Jesus; that plaintiff was surprised by the Notice of Additional Margin of 1 June 1990 since the Trading Balance Sheet as of June 1, 1990 showed her total margin deposit was in the amount of P195,980.00; that after reminding De Jesus of the "tabla-panalo" scheme, De Jesus informed plaintiff, that she already lost P177,480.00; that if plaintiff will give defendants the amount of P56,500.00, she will surely recover this amount; that De Jesus told her to talk to defendant Diaz, who was managing her account; that plaintiff, by long distance, talked with Diaz, who only repeated the explanation of De Jesus; that in her desire to recover her money, although not understanding defendants' technical explanation, but, relying only on defendants' repeated assurances, plaintiff was compelled to make an additional investment of P56,500.00 covered by a Margin Receipt No.: 1066, dated 25 June 1990; that on 4 July 1990, plaintiff was informed by defendants that she earned a gross profit of P156,800.00 less Commission of P7,700.00 leaving a net profit of P149,100.00, and that plaintiff has now a total margin deposit amounting to P401,580.00; that Plaintiff immediately instructed De Jesus to withdraw all her investment plus profits; that De Jesus told plaintiff that she cannot withdraw because she incurred losses in her other trading positions; that when asked about her losses, De Jesus gave confusing contradictory explanations which she could not understand; that on 16 July 1990, plaintiff received a Notice of Spot Month Margin Requirement requiring her to deposit P294,920.00 else defendant C & T will close her account; that plaintiff confronted De Jesus that she could not raise the amount, and also reminded him of her immediate instructions for the withdrawal of her money which defendants failed to do so; that plaintiff was informed that the other officials of C & T will meet and discuss the matter; that plaintiff was again informed that she only have to invest an additional amount of P50,000.00 and from their (defendants') personal funds, defendants will advance the rest of the amount required so that her account will not be closed; that plaintiff was further told by the defendants that they were doing the same only as a special favor because plaintiff wanted to recover her investment; that giving in, plaintiff invested the additional amount of P50,000.00 on 3 August 1990; that plaintiff received Trading Balance Sheet dated 28 August 1990 showing that she made a profit of P2,300.00; that in September 1990, plaintiff demanded from defendant Diaz that her money be returned; that Diaz told plaintiff that the same cannot be had because of her losses; that Diaz will help her recover all the amount within one (1) month if she will sign a contract for foreign exchange investment which Diaz shall manage for her; that plaintiff was even shown a check for P77,340.00 as her alleged profit; that anxious to recover her loss, plaintiff signed the foreign exchange contract and defendant Diaz made her endorsed the check [her alleged profit of P77,340.00] for investment; that a few days thereafter a certain Esmeraldo R. Gollena, Jr., [Gollena] Executive Vice-President and General Manager of C & T, informed plaintiff that she could not recover her losses by investing in the foreign exchange as the profits were allegedly small, but recovery could be had by investing in Tokyo beans; that plaintiff became angry at being passed around but De Jesus assured her that he went to Gollena about plaintiff's investment and was told that Gollena would take care of plaintiff's money/investment in red beans; that plaintiff learned later from De Jesus that Gollena ran away with her money, but she was assured that De Jesus will use his own money equivalent to her investment in foreign exchange; that plaintiff can recover her principal investment only if they recover from Mr. Gollena; that in her desire to recover her money, plaintiff agreed and signed another foreign contract in December 1990, but defendants lost that signed contract, that plaintiff became angry and refused to sign another foreign contract that plaintiff was, again, induced by Diaz to sign another one after explaining to her the circumstances of the loss of the first one; and that to date, defendant have not returned plaintiff's investment and profit in the total amount of P309,580.00. In answer to the complaint, defendants contend that plaintiff speculated in commodity futures, subject to the risks/benefits brought about by market conditions, being fully aware/apprised thereof; that defendants duly performed all their obligations under the contract; that damages prayed for by the plaintiff are speculative, extravagant and baseless, hence unrecoverable. In the pre-trial conference held on 07 September 1992, the parties agreed on the issues, viz: a) Whether or not there was fraud in the solicitations of the commodity futures account from plaintiff; b) Whether or not defendant C & T Global Futures, Inc.'s. account representatives were duly licensed by the SEC as commodity future solicitors; c) Whether or not plaintiff is entitled to the return of her investments. Hearings were conducted wherein both parties presented oral and documentary evidence. Pursuant to the agreement of the parties, through their counsel, that SEC Cases Nos. 4250, 4251, 4253 and 4254 having been filed simultaneously by several plaintiffs from Olongapo, with only one lawyer representing all of them against the common defendants, whose defense is, likewise, handled by a sole lawyer in all cases filed; and that while these cases shall be heard individually, the decision shall be rendered separately, but simultaneously, in all cases so as not to pre-empt any pending cases still on trial, and/or cause any apprehension on both/either parties that the winning or losing of one case shall set a precedent to all others still pending since the witness/es of the other case shall also be utilized as witness/es in the other cases. Hence, this decision. Anent the first issue Whether or not there was fraud in the solicitation of the contract, this Hearing Officer is of the belief, and so holds, that the false, misleading and inaccurate assurances coupled with gross misrepresentations by the defendants of the "tabla-panalo" scheme of plaintiff's investment, huge profits to be generated/earned weekly, withdrawable anytime, handled by experts who knows the market, and that two (2) positions are more viable since if a loss is incurred in one position, the other position will compensate for the loss, amounted to fraud and deceit. It is apparent that defendants resorted to fraud and machinations in order to facilitate and/or procure investment/s from plaintiff, who seem to be gullible, naive persons, and easily duped into entering into a contract she had no knowledge of. To buttress this findings, defendants could not even show proof to rebutt plaintiff's claim nor prove to this Hearing Officer that the technical terms of the contract and/or intricacies of investing and trading in the futures market were fully explained and duly understood by the plaintiff. True, plaintiff was made to sign a Risk Disclosure Statement, but, even the same does not specifically show that the contract or risk agreement was signed after such technical terms, the ins-and-outs of investment and/or trading were duly explained by the defendants. Notice is hereto taken that had the risks been fully ventilated/explained, plaintiff would have inquired, deliberated and/or studied the same with thoroughness before investing; and/or, chances are, might even balk at investing in the market. Of note, as borne out by evidence, plaintiff's investment has been shunted back and forth, from commodity futures to foreign investment and back to commodity futures (Tokyo beans) without full explanation of such shift, but done only under the guise of recovering her investment by the defendants, who did not even give her the courtesy of an explanation on how her investment suffered losses. Moreover, even though the profits were declared, and some checks were issued for this purpose, the same were not even received by the plaintiff. As admitted even by the defendant's witness, De Jesus, during the hearing, the cheques were received and encashed by defendant Diaz; and that there is no showing that the proceeds of the check were indeed turned over to the plaintiff. On the second issue, this Hearing Officer finds, that defendant De Jesus, at the time of the solicitation of the investment from plaintiff was not licensed to solicit investment, as shown by the Certification [Exhibit "B", defendants] issued by the SEC; and by their own evidence, defendants are hereby bound. For lack of proper license, thus, the solicitation by Defendant De Jesus of plaintiff's investment on 19 January 1990 [De Jesus being licensed to solicit for C & T only on 31 January 1990], the contract between defendant C & T and plaintiff is hereby declared null and void. Defendants, therefore, committed a gross violation of the Revised Securities Act. Premised on all the aforegoing, plaintiff can, thus, recover her total investment including the profits unremitted. ACCORDINGLY, judgment is hereby rendered DIRECTING defendants to pay the plaintiff: a) The amount of P309,580.00 representing her investment and profits earned on various dates; b) The sum of P50,000.00 as reasonable Attorney's fees; and c) Costs Should the Defendants be incapable of paying the amounts adjudged against them and/or shall refuse to do so, let all of the above be satisfied through the Cash Bond deposited by the defendants in any Philippine Bank; and if the same is unavailing, let judgment be issued against the Compensation Fund with the Manila International Futures, Inc. prcd SO ORDERED. (SGD.) YSOBEL S. YASAY-MURILLO Hearing Officer