331 Phil. 962
DAVIDE, JR., J.:
2. That, on May 16, 1988, Ramon Bernardo, Sr. and minor Ramon C. Bernardo, Jr. with the assistance of his natural father Ramon J. Bernardo, Sr. entered into a trading commodity agreement, captioned by defendant as Rules for Commodity Trading & Customer’s Agreement with the defendant, whereby plaintiff minor and his father made initial deposit[s] of P60,000.00 in cash and P40,000.00 in check, or the total margin deposit of P100,000.00 as security for all commodities bought or sold according to the market, brand, delivery month and quantity of commodity, collectively referred to as Trading Contracts, and for the purchase and/or sale of commodity futures, in accordance with the terms and conditions of said agreement, a photocopy of said agreement is attached herewith as Annex "A", while the margin deposits are attached as Annexes "B" and "C" hereof;The petitioners as plaintiffs therein then prayed for a judgment: (a) declaring null and void the Instruction of Sale and purchases signed by minor Ramon Xavier C. Bernardo, Jr., and V.R. Bautista and the commodity agreement signed by Ramon Xavier C. Bernardo, Jr., and, (b) ordering the defendant to pay the plaintiffs (1) P100,000.00 representing the total margin deposits made by the minor Bernardo, Jr., (2) P200,000.00, from each of the defendant, as exemplary damages, (3) P200,000.00, from each of the defendants, as moral damages, and (4) a sum equivalent to 25% of the total amount due as attorney’s fees, plus the costs of the suit.
3. That the margin deposits in the amount of 100,000 which came into the possession of the defendant and allegedly used by it in the purchased [sic] of soybeans through purchase and sale orders without instructions from the plaintiff, Ramon Bernardo, Sr., knowing fully well that the latter gave oral instructions not to purchase and sell commodities without his approval, and execute one transaction only, in violation on par. 6 of the Rules for Commodity Trading and Customer’s Agreement which requires clear instruction[s] from the customer before a [sic] purchase or sell orders are made;
4. That after the execution of the said agreement (Annex "A" hereof) and the payment of the margin deposits in the amount of 100,000 which came from Ramon Bernardo, Sr., defendants through insidious machinations required the minor, Ramon Xavier Bernardo, Jr. to sign blank instructions of sale and purchase, without the knowledge, intervention, or approval of the plaintiff, Ramon Bernardo, Sr., the natural guardian of [the]minor, Ramon Bernardo, Jr., knowing fully well that the minor Bernardo, Jr. has no legal capacity to enter into contract without the assistance of the father, Ramon Bernardo, Sr., and aggravated by the fact that plaintiff, Ramon Bernardo, Sr., gave very clear verbal instruction to the defendant not to execute sale or purchase orders without his approval; furthermore, the purchase or sell orders signed by Ramon Xavier Bernanrdo are voidable considering that he is a minor, that the acts committed by the defendants in securing the blank signatures of Ramon Bernardo, Jr., without the assistance of his father, Bernardo, Sr. were made to insure the monetary benefit and advantage of the defendants to the prejudice of the plaintiffs.
5. That a certain V.R. Bautista, an alleged authorized agent of the defendant, without any authority from the plaintiff, Ramon Bernardo, Sr., signed the Instruction of Purchase annex "E", Instructions of Sale annexes "G", "I", thus fraudulently depriving the plaintiffs the amount of 100,000, thus paving way for the alleged transactions wherein according to the defendants, the plaintiffs allegedly lost their money;
6. That the defendant knowing fully well that Ramon Bernardo, Jr. is a minor and had no capacity to contract, through insidious machinations induced and required him to sign Instructions of Purchase, annexes "D", "F", Instructions of Sale, annex "H", inspite of the clear instruction of the father that purchase and sale orders will have to be approved by him, thereby taking advantage of the minority and inexperience of the plaintiff, Ramon Bernardo, Jr.; furthermore, the plaintiff, Ramon Bernardo, Sr. informed the defendant beforehand that the defendant is a minor, and this is the reason that he signed the commodity agreement, and yet defendant in bad faith still required the minor to sign the Instructions of Purchase and Instructions of Sale;
7. That the defendant, Gloria Cadiente de Pedro was the one who received the Margin Deposit in the amount of 100,000, as shown by the margin receipts no. 0322, 032, which the plaintiffs up to now did not know the reason why it was lost, and it is the duty of defendant de Pedro to account on [sic] where the money went, and if she is unable to do so to return the same to the plaintiffs;
8. That the plaintiff, Ramon Bernardo, Sr. as owner of the money in his personal capacity, and as a guardian of Ramon Bernardo, Jr. is entitled to the return of the amount of 100,000, the total margin deposits made by the minor Bernardo to the defendant after fraudulent inducements, and exploitation of his minority, plus damages;
9. That defendants are guilty of fraudulent schemes, machinations, imaginary transactions or other similar deceits to the prejudice of Ramon Bernardo, Sr. and minor Ramon Bernardo, Jr., resulting to [sic] mental anguish and serious anxiety on the part of the plaintiffs, who are fully convinced that they were defrauded of their money given to defendant Master Investments, hence, defendants should be adjudge to pay plaintiffs…
7. This Honorable Court has no jurisdiction over the subject matter;and set up counterclaims for damages and attorney’s fees.
8. The complaint states no cause of action;
9. Plaintiff has not complied with the legal requirements before it can sue as an alleged "natural guardian" of his son;
10. Plaintiff and son are in estoppel and barred by laches, and their claims have been waived, abandoned or otherwise extinguished[6]
This is a case of a minor, fraudulently induced by the defendant Master’s Commodities to invest in commodities futures. Deception was employed. The minor was made to believe, that once he invest in commodities futures, he will surely make a big profit. The explanation was made in very technical manner. Statistics were shown. A market chart was shown. All these instruments were designed to convince the minor that there was no way that he could lose his money.In its decision[12] dated 22 February 1991, the trial court dismissed the case for want of jurisdiction:
The minor was fraudulently convinced. He convinced his father, Ramon Bernardo, Sr. To give him the money. His father was in serious doubt about the investment. The minor insisted, that it became an enigma for the father whether to give in to the wishes of the son. The father talked to the representatives of the defendant, Masters Commodities. They also deceived him by the same explanation that they gave to the son. They made it appear that the investment will surely make money.
Since the minor could not sign the contract, the defendants induced the father to sign it, to validate whatever infirmity the agreement had with respect to the acts of the minor. To give in to the wishes of his son, the father agreed to sign the agreement, on the condition that there should only be one transaction, and that the purchase and sale orders be cleared with him.
After the agreement was signed, that father was no longer ask to sign the purchase and sale orders. Inspite of defendant Master’s knowledge that Ramon Bernardo, Jr. Was a minor, it fraudulently asked him to sign the subsequent purchase and sale orders. It avoided the father. It was easier for the defendant Masters to deceive the minor son then the father. The subsequent orders were either signed by the minor, Ramon Bernardo, Jr. Or V.R. Bautista, an officer of the defendant Masters. All these orders were illegal, because they were not authorized by Ramon Bernardo, Sr.
The plaintiffs after the foregoing misrepresentations, invested money. It bought soybeans futures, because the indication was that the price was going up. It was the minor’s consent that was obtained. Just four days later, the price went down. The market went against the defendants Masters judgement. Plaintiffs immediately lost money, contrary to expectations. They were advised to short sell allegedly to cut losses. This was based on the assumption that the price will go down. But again, the defendant committed another fraudulent inducement. The market went up, against the advise of the defendant Masters.
It was deception after deception. When the market was going up, the plaintiff minor was advise to sell. The market went against the advise. When minor was advised to short sell, the market went up. Even the market average went against the advise. When the advise to sell was made, there was no chance for the plaintiff to recover. There were misrepresentations as to the true situation of the market. There were fraudulent deceptions. These were not simple errors. These were clear tortious and fraudulent acts.
The plaintiffs were literally trapped. The moment they gave their money, they lost control of it. It was the defendant Master’s that decided on what to do with money. The money transfer was legalized by the agreement. But after money transfer, it was the defendant Master’s that decided the faith of the margin deposit. The Father was not consulted anymore. All of these fraudulent acts were justified under a highly technical and one sided contract, whose provisions are even contrary to law. no ordinary layman could fully understand its provisions, especially if fraudulent misrepresentations were made.
The defendant Masters alleged that it bought soybeans. But it does not know where the soybeans were? Defendant Masters don’t no, even know from show it bought the soybeans? It said that it was in the warehouse, but it does not even know where the warehouse was located. The most logical conclusion is that there really a transaction? The evidence did not show that the soybeans and the seller really existed. Where did the money go? Definitely in the hands of the defendants Masters, but as to how it was spent, that is where the fraud lies.[11]
It is apparent from plaintiffs complaint specifically paragraph 9 thereof, that plaintiffs accuse defendants, among others of employing fraudulent schemes, machinations and other acts similar thereto which accusation is within the coverage of Sec. 5 of Presidential Decree No. 902-A the pertinent portion of which reads as follows:On the appeal, the Court of Appeals (CA-G.R. CV No. 34168) affirmed[14] the trial court and held:
Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall original and exclusive jurisdiction to hear and decide cases involving:
a. Devices or schemes employed by or any acts. of the board of director, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission.[13]
Plaintiff-appellant’s claim that the fraud committed by defendant-appellee in the instant case is the fraud under Arts. 1330, 1338, and/or 1339 of the Civil Code and not those alluded to in Sec. 5a of P.D. 902-A has no merit. The "fraudulent schemes, machinations, imaginary transactions or other deceits" alleged in the instant case was committed by the defendant-appellee corporation and the alleged victim, although only Ramon Bernardo, Jr. in this case, could be anyone among the public who transact or transacted similar business or transaction with said corporation. the plaintiff-appellant himself was the one who used the terms "fraudulent schemes, machinations, imaginary transaction or other deceits" in his complaint. For that matter, plaintiff-appellant’s allegation that "minor Ramon C. Bernardo, Jr. x x x with the assistance if his natural father Ramon J. Bernardo entered into a trading commodity agreement, captioned by defendant as Rules for Commodity Trading & Customer’s Agreement with the defendant" (par. 2, Complaint) could only mean or imply that anyone, among the public, interested may just see or contact defendant-appellee or its representative and make an investment and he or she is a prospective if not yet sure and actual victim. This, in fact, is the gist of the following claim/argument submitted by plaintiff-appellant:Their motion for reconsideration[15] having been denied by the Court of Appeals in its resolution of 16 June 1995,[16] the petitioners filed this instant petition and contend therein that the Court of Appeals erred in: (a) dismissing the complaint for lack of jurisdiction; and (b) failing to declare the contract void. In the main, they argue that the trial court had jurisdiction over the subject matter of Civil Case No. 88-1644, it being an action for a sum of money with damages, and that no intra-corporate dispute was involved to warrant an exercise of jurisdiction by the SEC.x x x
It must be well emphasized that the defendant-appellee is a corporation engaged in the trading commodities. The plaintiffs-appellants entered into contract "a trading agreement" with said defendant-appellee, wherein they parted with their money in the nature of investment. They, plaintiffs-appellants expected to receive returns or profits from the money they invested. Unfortunately, they were the victims of the fraud and misrepresentation by the defendant-appellee, as they contented. It is precisely to check machinations like this that the Securities and Exchange Commission will come in to the picture.
The grant of jurisdiction to the SEC must be viewed in the light of the nature and function of the SEC under the law. Section 3 of Presidential Decree No. 902-A confers upon the latter "absolute jurisdiction, supervision and control over all corporations, partnerships or associations, who are grantees of primary franchise and/or license or permit issued by the government to operate in the Philippines."
The principal function of the SEC is the supervision and control over corporations, partnerships and associations with the end in view that investments in these entities maybe encourage and protected, and their activities pursued for the promotion of economic development. (Sales vs. Securities and Exchange Commission, G.R. 54330, 13 January 1988).
SEC. 5 Amendment to conform to or authorize presentation of evidence. -- When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. Such amendments of he pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence.It is settled that even if the complaint be defective, but the parties go to trial thereon, and the plaintiff, without objection, introduces sufficient evidence to constitute the particular cause of action which it intended to allege in the original complaint, and the defendant voluntarily produces witnesses to meet the cause of action thus established, an issue is joined as fully and as effectively as if it had been previously joined by the most perfect pleadings.[22] Likewise, when issues not raised by the pleading are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings..[23]