Spouses Paciente v. C & T Global Futures, Inc.

[SEC-SICD * CASE NO. 4253. September 9, 1996.] SPS. MORITO LUCITA PACIENTE & SHELDON CURRY , plaintiffs , vs . C & T GLOBAL FUTURES, INC. ET AL. , defendants . DECISION Plaintiffs, Spouses Morito and Lucita Paciente and Sheldon Curry filed a suit for the return/recovery of investments, profits, plus damages and attorney's fees from defendants C & T Global Futures, Inc. [C & T, for brevity], Edanio de Jesus [De Jesus], Nelson Diaz [Diaz], and Miguel Lopez [Lopez]. Plaintiffs alleged, inter alia , that they were induced to invest in respondent C & T by a group of regional consultant/solicitors, namely: Diaz[as Assistant Vise-President], De Jesus, and Lopez, that through fraudulent assurances/material misrepresentation in that a) For a minimum investment P100,000.00, one is assured of a profit of at least P30,000.00/month; b) the investment will be covered by "100% insurance" or "one-to-one insurance", unlike bank deposits which are insured only up to P40,000.00; c) one could withdraw his investment anytime like a deposit in a savings account; d) the investment will be managed by defendants De Jesus and Diaz; who by their expertise and experience, there will be no occurrence of loss; that petitioner Spouses Paciente first investment was sent to C & T Makati by telegraphic transfer in the amount of P100,000.00, under account No. 03B-1001, covered by 17 April 1990 Margin Receipt No. 0927; that on 20 April 1990, plaintiffs Spouses Paciente, together with petitioner Sheldon Curry, jointly invested another P100,000.00 and received Margin Receipt No. 0933 dated 23 April 1990, for the account No. 03B-1002; that plaintiffs Spouses Paciente, again, invested on 17 May 1990 P200,000.00 through two (2) checks in the amount of P150,000.00 and P50,000.00, respectively; and Margin Receipt Nos. 0960 and 0961 dated 17 May 1990 were correspondingly issued; that the P150,000.00 was invested under account No. 03B-1001; while the P50,000.00 was placed in account No. 03B-1003; that the last investment of P100,000.00 on 24 May 1990 was made by plaintiff Spouses under 03B-1000, covered by Margin Receipt No. 0969; that it was only after plaintiffs had invested a total of P500,000.00 that they received from defendants blank forms of trading contracts which they were required to sign; that dates of the contracts and handwritten entries were antedated and was made to appear that it was executed on 17 April 1990 and 23 April 1990 to correspond with their initial investments on even dates; that after the last investment, plaintiffs instructed defendant De Jesus that they wanted to withdraw their money immediately; that despite plaintiffs' numerous demands for the withdrawal of their investments, defendants continued to invest plaintiffs' money and failed to return the same; that out of their total investment of P500,000.00 only 59,600.00 remained in October 1990, that De Jesus required from plaintiffs an additional investment of P40,400.00 and even offered plaintiffs that he will advance the same; that plaintiffs refused the offer and continued to demand from defendants the return of their total investment that plaintiffs never received the supposed profit earned amounting to P30,380.00 and P47,180.00 or a total of P77,560.00; that the balance of the principal investment in the sum of P440,400.00 [after plaintiffs was able to withdraw the sum of P59,600.00 from account no. 03B-1002 in Makati] and the uncollected net profit of P77,560.00 were not returned despite repeated demands; that owing to the defendants' unjustified refusal to return plaintiffs' investment and profits, plaintiffs suffered mental anguish, sleepless nights wounded feelings and social humiliation. Plaintiffs prayed for judgment against defendants. Defendants, in their Answer contend, among others, that plaintiffs speculated in commodity futures through defendant C & T and, therefore, were subject to risk and/or benefits brought about by market the conditions which Plaintiffs were fully aware/ apprised of; that defendants acted in diligentissimi pater familias, thus, the matter is damnum absque injuria; and as counterclaim the complaint has no basis, malicious, and unfounded; and that plaintiffs should be adjudged liable to the defendants in the form of damages, expenses of litigation, and attorney's fees as well as the dismissal of the suit. The Preliminary Conference held on 7 September 1992 settled the issues at bar, viz: a) Whether or not there was fraud in the solicitation of the commodity futures contract from the plaintiffs; b) Whether or not C & T's representative were duly licensed by the SEC, as commodity futures solicitors; and c) Whether or not plaintiffs are entitled to the return of their investments. Hearings were conducted wherein both parties presented documentary and testimonial 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 other cases shall also be utilized as witness/es in the other cases. Hence, this decision. This Hearing Officer finds for the plaintiffs. It was shown, indubitably, that plaintiff Mrs. Paciente was from the Visayas; alienated and overwhelmed by her new place of residence; having difficulties in conversing and understanding English and Tagalog; a simple and timid woman, who seldom goes out, and has but a few friends; that while she did sign a Trading Contract [Exhibit "G"], Acknowledgment [Exhibit "1"], Certification [Exhibit "12"] Blank Forms of Instructions of Sale and Instructions of Purchase [Cross-examination of De Jesus, TSN, pp. 24-28, December 4, 1995] the same documents were rushed for her signature without her reading and/or understanding the same; that the technical terms of the contract or the trading mechanics in futures commodities were not duly explained to her, and the same were beyond her ken of understanding; that owing only to the assurances of defendants Diaz, De Jesus and Lopez on the no loss/risk of her investment, 100% profit, withdrawable anytime, ultimately, induced her to invest in respondent C & T; that she was assured that the contract was just a mere formality; that her copy of the contract was unnotarized (TSN, 4 December 1994); that the contract was signed by plaintiffs in Olongapo, but they did not appear before the Notary Public in Makati; that plaintiffs opened two (2) accounts with defendant C & T under 03B-1001 and No. 0313-1002 [which she opened together with plaintiff Sheldon Curry] and that the total investment of plaintiffs amounted to P500,000.00; that both accounts earned profits, that plaintiffs tried to withdraw their investment in Olongapo, but, were told to go to defendant C & T's office in Makati to demand from defendant Diaz of their total investment of P500,000.00; and that after several attempts, they were only able to withdraw P59,600.00 from Account 03B-1002, which they were constrained to receive since they need the money. The simple testimony [in the Visayan dialect and translated] and demeanor exhibited by the plaintiff/witness Mrs. Paciente which was corroborated by evidence, persuades this Hearing Officer to favorably view the same considering that it has remained unrebutted by the defendants. Withal, even the defendants' witness, De Jesus, on cross-examination, admitted and corroborated plaintiff Paciente's testimony that the contract, although signed in Olongapo, was notarized in Makati without his and/or plaintiffs' presence in Makati; that the investment profited; that while the profits due the plaintiffs and payment instruction, through checks, were released, there was no signature of plaintiffs evidencing their receipt nor encashment thereof; that the amounts, as shown, were receive for and in behalf of the plaintiffs by defendant Diaz; that the copy of the trading contract given to plaintiffs were not even notarized; and that Mrs. Paciente was not allowed to withdraw her investment because she has unliquidated position on 18 May 1990 [TSN, 4 December 1995; TSN, 3 January 1996, pp. 10-26] Seemingly, the plaintiffs suffered substantial loss on their investment due to the unliquidated position on 18 May 1990 which was left unliquidated, allowed to float up and until October 1990 by the defendants and who failed to explain to plaintiff the mechanics of trading, being tasked to be responsible for the same since they are, allegedly, expert in the field of commodities trading. Parenthetically speaking, there is no "floating loss", but a definite loss occurring on a date of the position in the market but unliquidated. Defendants, as experts, should have declared a loss and advised plaintiffs to liquidate the same on even date. Defendants' liquidation of the loss on a later date on the speculation that the loss will become a profit, without the knowledge of the client, is extremely uncertain and hazardous. If any, evidence shows that plaintiffs were totally dependent upon defendants on what to trade, when to trade, when to liquidate and/or to open/sell positions. Plaintiffs did not have any direct intervention on any market activities initiated by the defendants. As shown by evidence, plaintiffs' accounts are controlled by the defendants since they already signed blank forms of trading in that even if the investment made profit, but declared a loss by the defendants, plaintiffs would not know or be able to tell the difference, for lack of expertise or knowledge of the field of activity. It is quite apparent that defendants did not explain nor fully apprise plaintiffs of the contract's technical terms and/or the profit or loss that shall result from any investment made; but, instead gave false assurances of "no-loss-all-profit scheme" and withdrawable anytime, all of which never did materialized. These are false assurances and gross misrepresentation of facts by the defendants amounting to fraud which if totally revealed and explained to a person of sound discretion, and/or to plaintiffs in this case, he/she/they would not enter into the same investment without further deliberation, explanation, inquiry, and/or study. Noticeable is the obvious attitude of nonchalance of the investment solicitors, Diaz, De Jesus and Lopez regarding plaintiffs' investment. Equally, to blame and censure is defendant C & T, who failed to exercise the required and proper supervision of their personnel/co-defendants. Defendants C & T, Diaz and De Jesus cannot now claim that since they were licensed by the SEC to act as Commodity Futures Brokers/Merchants or consultants, they are free from any liability. On the contrary, being licensed as such, carries the obligation to perform well, even beyond of what is now being claimed by defendants as "diligentissimi pater familias", and to be more vigilant of the Revised Securities Act to evade any prejudice and/or loss of their clients' investments. ACCORDINGLY, premises considered, judgment is hereby rendered. 1) Ordering defendants to pay to plaintiffs the amounts of a) P440,400 representing the balance of the plaintiffs' principal investment of P500,000.00 on 03B-1001 and 03B-1002 accounts; b) P77,560.00 representing the earned profits from the investments which were unremitted and/or not received by plaintiffs; c) P50,000.00 as reasonable attorney's fees; and d) Cost of suit. 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 defendants in any Philippine Bank, and if the same is unavailing, let judgment be issued against the Compensation Fund with the Manila International Futures Exchange, Inc. prcd SO ORDERED. (SGD.) YSOBEL S. YASAY-MURILLO Hearing Officer