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Onapal Philippines Commodities, Inc. v. CA

F: Onapal is a registered and licensed commodity futures broker.

usan Chua !as invited by "ia#, Account $%ec. Of Onapal, to invest in the

commodity futures trading by depositing P&''k

Chua signed a (radig Contract and other documents !)o being a!are of the risks

involvedChua !as asked to deposit again P*''k. he !anted to !ithdra! her money but

"IA+ !ouldnt allo! her

Chua instituted the present action to recover her money

I: -O the (/A"I0 CO(/AC( is 1A2I"

3$2": 1A2I" I I($2F 45( (/AA(IO CA//I$" O5( (O I6P2$6$( I( 1OI"

Commodity Fi%tures Contract

7specie of securities

7agreement to buy or sell a speci8ed 9uantity and grade of a commodity at a future

sale at a price established at the oor of e%change

(erms of Contract signed by Chua

7Onapal !ill act as broker and !ill directly transmit the order of customers ;includes

Chua< to its principal Frank!ell $nterprises in 3=. (he later !ill then place the order

to (okyo $%change.

7ho!ever, in this case, there !as no evidence that the orders and the money !ere

transmitted to Frank!ell.

>the trading contract I 1A2I" I I($2F because it complies !ith the /52$ A"

/$052A(IO O CO66O"I(? F5(5/$ (/A"I0

>45( the transaction !hich !as carried out to implement the contract "$1IA($"

from the true import of the agreement@no actual delivery to Frank!ell

@8nal settlement is made by payment of the dierences of prices

7the dealings became mere speculative contracts in !hich parties merely 0A642$

in the rise and fall of prices -3IC3 I I22$0A2

As such, the trading contract became in the nature of a 0A642I0 CO(/AC(

-3IC3 I 522 A" 1OI".

Onapal v. CA: In I"A, there is netting o of agreements !hich may give rise to

gambling issues. In case there is but pretended delivery of goods involved in the

transactions, the Civil Code provision prohibiting gambling is violated.

I/: (heres a section that pending the issuance of $C of rules of trading of

securities of futures, trading is suspended. 3o!ever, in the document called

3I(O/? OF 4AC=0/O5" of $C, !hat is suspended is public trading of

commodity future transactions

Onapal happened !hen commodities trading !as still allo!ed. (he problem in this

case is that even if the contract !as valid, its implementation !as such that there

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!as no delivery of the commodity, in violation of A/( B'D, CC

(he issue no! is -O cross7currency s!apping after this, or contracts about

currencies, is comprehended in A/( B'D. In other !ords, is For$% securitiesE hare

of stocksE O, O4ut is it goodsE

2ook at AG*G: 0oods de8ned. It e%cludes money and legal tender in the

Philippines. It is implied to include foreign e%change. If that is the case, then is Fore%

supposed to be contemplated under Art B'DE I/ says no, because introductory

paragraph of AG*G states that the de8nition of goods undr that article is for the

title of sales, not under the title of aleatory contracts. O AB'D does not

contemplate fore%.

lawphil.net

G.R. No. 90707

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 90707 February 1, 1993

ONAPAL PHILIPPINES COMMOITIES, INC.,petitioner,vs.

THE HONORA!LE COURT OF APPEALS a"# SUSAN CHUA, responents.

Zosa & Quijano Law Offices for private respondents.

CAMPOS, $R., J.:

!his is an appeal b" wa" of a Petition for Certiorariuner Rule #$ of the Rules of Court to annul

an set asie the followin% actions of the Court of &ppeals'

a( Decision %in Case C&)*.R. CV No. +-#/ an

b( Resolution %%en"in% a Motion for Reconsieration

on the %roun of %rave abuse of iscretion a0ountin% to lac1 or e2cess of

3urisiction an further %roun that the ecision is contrar" to law an evience.

http://www.lawphil.net/judjuris/juri1993/feb1993/gr_90707_1993.htmlhttp://www.lawphil.net/judjuris/juri1993/feb1993/gr_90707_1993.html

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!he 4uestione ecision uphel the trial court5s finin%s that the !rain% Contract1on 6futures6 is a specie of %a0blin% an therefore null an voi. &ccorin%l",

the petitioner 7as efenant in lower court( was orere to refun to the privateresponent 7as plaintiff( the losses incurre in the train% transactions.

In support of the petition, the %rouns alle%e are'

8( &rticle +8 of the New Civil Coe is inapplicable to the factual 0ilieu of the instant case

consierin% that in a co00oit" futures transaction the bro1er is not the irect participant ancannot be consiere as winner or loser an the contract itself, fro0 its ver" nature, cannot be

consiere as %a0blin%.

( & co00oit" futures contract, bein% a specie of securities, is vali an enforceable as its

ter0s are %overne b" special laws, notabl" the Revise Securities &ct an the Revise Rulesan Re%ulations on Co00oit" 9utures !rain% issue b" the Securities an E2chan%e

Co00ission 7SEC( an approve b" the Monetar" :oar of the Central :an1/ hence, the Civil

Coe is not the controllin% piece of le%islation.

9ro0 the recors, ;e %ather the followin% anteceent facts an proceein%s.

!he petitioner, ON&P&< Philippines Co00oities, Inc. 7petitioner(, a ul" or%ani=e an

e2istin% corporation, was license as co00ission 0erchant>bro1er b" the SEC, to en%a%e in

co00oit" futures train% in Cebu Cit" uner Certificate of Re%istration No. CE:)8. On

&pril ?, 8-@, petitioner an private responent conclue a 6!rain% Contract6.

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of how to trae business an her account. She was then 0ae to si%n the

!rain% Contract an other ocu0ents without 0a1in% her

aware>unerstan the ris1s involve/ that at the ti0e the" let her si%n6those papers6 the" were tellin% her that those papers were for 6for0alit"

sa1e6/ that when she was tol later on that she 0ae a profit of P+,#+.++

in a span of three a"s in the first transaction, the" tol her that thebusiness is 6ver" profitable6 7tsn, 9rancisco, March 8#, 8-$, p. 88(.

On une , 8-@, plaintiff was infor0e b" Miss Dia= that she ha to

eposit an aitional a0ount of P@++,+++.++ 6to pa" the ifference6 in

prices, otherwise she will lose her ori%inal eposit of P$++,+++.++/9earin% the loss of her ori%inal eposit, plaintiff was constraine to eposit

an aitional a0ount of P@++,+++.++ 7E2h. 6:6(/ Since she was 0ae to

unerstan that she coul withraw her eposit>invest0ent an"ti0e, shenot 1nowin% how the business is operate>0ana%e as she was not 0ae

to unerstan what the business was all about, she wante to withraw her

invest0ent/ but Eli=abeth Dia=, efenant5s &ccount E2ecutive, tol hershe coul not %et out because there are so0e accounts han%in% on the

transactions.

Plaintiff further testifie that she unerstoo the transaction of bu"in% an

sellin% as speculatin% in prices, an her pa"in% the ifference between%ains an losses without actual eliver" of the %oos to be %a0blin%, an

she woul li1e to withraw fro0 this 1in of business, the ris1 of which

she was not 0ae aware of. Plaintiff further testifie that she stoppe

train% in co00oit" futures in Septe0ber, 8-@ when she reali=e shewas en%a%e in %a0blin%. She was able to %et onl" P#?+,+++.++ out of her

total eposit of P++,+++.++. In orer to recover the loss of P@@+,+++.++,she file this case an en%a%e the services of counsel for P#+,+++.++ ane2pects to incur e2penses of liti%ation in the su0 of P+,+++.++.6 &

& co00oit" futures contract is a specie of securities inclue in the broa efinition of what

constitutes securities uner Section of the Revise Securities &ct.3

Sec. . . .'

7a( Securities shall inclue bons, . . ., co00oit" futures contracts, . . . .

!he Revise Rules an Re%ulations on Co00oit" 9utures !rain% issue b" theSEC an approve b" the Monetar" :oar of the Central ban1 efines such

contracts as follows'

6Co00oit" 9utures Contract6 shall refer to an a%ree0ent to bu" or sell aspecifie 4uantit" an %rae of a co00oit" at a future ate at a price

establishe at the floor of the e2chan%e.

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!he petitioner is a ul" license co00oit" futures bro1er as efine uner the

Revise Rules an Re%ulations on Co00oit" 9utures !rain% as follows'

69utures Co00ission Merchant>:ro1er6 shall refer to a corporation orpartnership, which 0ust be re%istere an license as a 9utures

Co00ission Merchant>:ro1er an is en%a%e in solicitin% or in acceptin%orers for the purchase or sale of an" co00oit" for future eliver" on or

sub3ect to the rules of the contract 0ar1et an that, in connection withsuch solicitation or acceptance of orers, accepts an" 0one", securities or

propert" 7or e2tens creit in lieu thereof( to 0ar%in, %uarantee or secure

an" trae or contract that results or 0a" result therefro0.

&t the ti0e private responent entere into the transaction with the petitioner, she

si%ne a ocu0ent eno0inate as 6!rain% Contract6 in printe for0 as

prepare b" the petitioner represente b" its :ranch Mana%er, &lbert Chia0,

incorporatin% the Rules for Co00oit" !rain%. & cop" of sai contract was

furnishe to the private responent but the contents thereof were not e2plaine tothe for0er, be"on what was tol her b" the petitioner5s &ccount E2ecutive

Eli=abeth Dia=. Private responent was also tol that the petitioner5s principal was9ran1well Enterprises with offices in Bon%1on% but the private responent5s

0one" which was suppose to have been trans0itte to Bon%1on%, was 1ept b"

petitioner in a separate account in a local ban1.

Petitioner now contens that co00oit" futures train% is a le%iti0ate business practice in thenite States, reco%ni=e b" the SEC an per0itte uner the Civil Coe, specificall" &rticle

8#F thereof, 4uote as follows'

!he %oos which for0 the sub3ect of a contract of sale 0a" be eithere2istin% %oos, owne or possesse b" the seller, or %oos to be0anufacture, raise or ac4uire b" the seller after the perfection of the

contract of sale, in this !itle calle 6future %oos6.

!here 0a" be a contract of sale of %oos, whose ac4uisition b" the seller

epens upon a contin%enc" which 0a" or 0a" not happen.

Petitioner further ar%ues that the SEC, in the e2ercise of its powers, authori=e the operation of

co00oit" e2chan%es to supervise an re%ulate co00oit" futures train%.'

!he contract between the parties falls uner the 1in co00onl" calle 6futures6. In the late8+5s, train% in futures beca0e ra0pant in the purchase an sale of cotton an %rain in thenite States, %ivin% rise to unre%ulate train% e2chan%es 1nown as 6buc1et shops6. !hese were

co00on in Chica%o an New Gor1 Cit" where cotton fro0 the South an %rain fro0 the Mi)

west were constantl" trae in. !he na0e of the part" to who0 the seller was to 0a1e eliver"when the future contract of sale was close or fro0 who0 he was to receive eliver" in case of

purchase is not %iven the 0e0oranu0 7contract(. !he business ealin%s between the parties

were ter0inate b" the closin% of the transaction of purchase an sale of co00oities without

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irections of the bu"er because his 0ar%ins were e2hauste. (ner the rules of the train%

e2chan%es, wee1l" settle0ents were re4uire if there was an" ifference in the prices of the

cotton between those obtainin% at the ti0e of the contract an at the ate of eliver" so thatuner the contract 0ae b" the purchaser, if the price of cotton ha avance, he woul have

receive in cash fro0 the seller each wee1 the avance 7increase( in price an if cotton prices

ecline, the purchaser ha to 0a1e li1e pa"0ents to the seller. In the ter0inolo%" of thee2chan%e, these pa"0ents are calle 60ar%ins6.)Either the seller or the bu"er 0a" elect to 0a1e

or e0an eliver" of the cotton a%ree to be sol an bou%ht, but in %eneral, it see0s

practicall" a unifor0 custo0 that settle0ents are 0ae b" pa"0ents an receipts of ifference inprices at the ti0e of eliver" fro0 that prevailin% at the ti0e of pa"0ent of the past wee1l"

60ar%ins6. !hese settle0ents are 0ae b" 6closin% out6 the contracts.7;here the bro1er

represente the bu"er in bu"in% an sellin% cotton for future eliver" with hi0self e2tenin%

creit 0ar%ins, an so0e of the transactions were close at a profit while the others at a loss,pa"0ents bein% 0ae of the ifference in prices arisin% out of their rise or fall above or below

the contract price, an the facts showe that no actual eliver" of cotton was conte0plate, such

contracts are of the 1in co00onl" calle 6futures6.*Ma1in% contracts for the purchase an sale

of co00oities for future eliver", the parties not intenin% an actual eliver", or contracts of the1in co00onl" calle futures, are unenforceable.9

!he ter0 6futures6 has %rown out of those purel" speculative transactions in which there are

no0inal contracts to sell for future eliver", but where in fact no eliver" is intene ore2ecute. !he no0inal seller oes not have or e2pect to have a stoc1 of 0erchanise he purports

to sell nor oes the no0inal bu"er e2pect to receive it or to pa" for the price. Instea of that, a

percenta%e or 0ar%in is pai, which is increase or i0inishe as the 0ar1et rates %o up anown, an accounte for to the bu"er. !his is si0ple speculation, %a0blin% or wa%erin% on prices

within a %iven ti0e/ it is not bu"in% an sellin% an is ille%al as a%ainst public polic".10

!he facts as isclose b" the evience on recor show that private responent 0aearran%e0ents with Eli=abeth Dia=, &ccount E2ecutive of petitioner for her to see Mr. &lbertChia0, petitioner5s :ranch Mana%er. !he contract si%ne b" private responent purports to be for

the eliver" of %oos with the intention that the ifference between the price stipulate an the

e2chan%e or 0ar1et price at the ti0e of the pretene eliver" shall be pai b" the loser to thewinner. ;e 4uote with approval the followin% finin%s of the trial court as cite in the Court of

&ppeals ecision'

!he evience of the plaintiff ten to show that in her transactions with the

efenant, the parties never intene to 0a1e or accept eliver" of an"particular co00oit" but the parties 0erel" 0ae a speculation on the rise

or fall in the 0ar1et of the contract price of the co00oit", sub3ect of the

transaction, on the pretene ate of eliver" so that if the forecast wascorrect, one part" woul 0a1e a profit, but if the forecast was wron%, one

part" woul lose 0one". ner this sche0e, plaintiff was onl" able to

recover P#?+,+++.++ out of her ori%inal an 6aitional6 eposit of

P++,+++.++ with the efenant.

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!he efenant a0its that in all the transactions that it ha with the

plaintiff, there was 7sic( no actual eliveries an that it has 0ae no

arran%e0ent with the Central :an1 for the re0ittance of its custo0er5s0one" abroa but efenant contens in its efense that the 0ere fact that

there were no actual eliveries 0ae in the transactions which plaintiff ha

with the efenant, i not 0ean that no such actual eliveries wereintene b" the parties since para%raph 8+ of the rules for co00oit"

train%, attache to the train% contract which plaintiff si%ne before she

trae with the efenant, a0pl" provies for actual eliver" of theco00oit" sub3ect of the transaction.

!he court has, therefore, to fin out fro0 all the facts an circu0stances of

this case, whether the parties reall" intene to 0a1e or accept eliveries

of the co00oities trae or whether the efenant 0erel" place aprovision for eliver" in its rules for co00oit" futures train% so as to

escape fro0 bein% calle a buc1et shop, . . .

222 222 222

. . . the court is convince that the parties never reall" intene to 0a1e or

accept eliver" of an" co00oit" bein% trae as, in fact, the unrebuttetesti0on" of Mr. *o is to the effect that all the efenant5s custo0ers were

0ere speculators who 0erel" forecast the rise or fall in the 0ar1et of the

co00oit", sub3ect of the transaction, below or above the contract priceon the pretene ate of eliver" an, in fact, the efenant even

iscoura%es its custo0ers fro0 ta1in% or acceptin% eliver" of an"

co00oit" b" 0a1in% it har, if not i0possible, for the0 to 0a1e or

accept eliver" of an" co00oit". Proof of this is para%raph 8+7( ofefenant5s rules for co00oit" train% which provies that the custo0er

shall appl" for the necessar" licenses an ocu0ents with the proper%overn0ent a%enc" for the i0portation an e2portation of an" particular

co00oit".11

!he train% contract si%ne b" private responent an &lbert Chia0, representin% petitioner, is a

contract for the sale of proucts for future eliver", in which either seller or bu"er 0a" elect to0a1e or e0an eliver" of %oos a%ree to be bou%ht an sol, but where no such eliver" is

actuall" 0ae. :" eliver" is 0eant the act b" which the resor sub3ect is place in the actual or

constructive possession or control of another. It 0a" be actual as when ph"sical possession is

%iven to the venee or his representative/ or constructive which ta1es place without actualtransfer of %oos, but inclues s"0bolic eliver" or substitute eliver" as when the evience of

title to the %oos, the 1e" to the warehouse or bill of lain%>warehouse receipt is elivere. 1&&s

a contract in printe for0, prepare b" petitioner an serve on private responent, for thelatter5s si%nature, the train% contract bears all the inicia of a vali train% contract because it

co0plies with the Rules an Re%ulations on Co00oit" 9utures !rain% as prescribe b" the

SEC. :ut when the transaction which was carrie out to i0ple0ent the written contract eviatesfro0 the true i0port of the a%ree0ent as when no such eliver", actual or constructive, of the

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co00oit" or %oos is 0ae, an final settle0ent is 0ae b" pa"0ent an receipt of onl" the

ifference in prices at the ti0e of eliver" fro0 that prevailin% at the ti0e the sale is 0ae, the

ealin%s in futures beco0e 0ere speculative contracts in which the parties 0erel" %a0ble on therise or fall in prices. & contract for the sale or purchase of %oos>co00oit" to be elivere at

future ti0e, if entere into without the intention of havin% an" %oos>co00oit" pass fro0 one

part" to another, but with an unerstanin% that at the appointe ti0e, the purchaser is 0erel" toreceive or pa" the ifference between the contract an the 0ar1et prices, is a transaction which

the law will not sanction, for bein% ille%al.13

!he written train% contract in 4uestion is not ille%al but the transaction between the petitioner

an the private responent purportel" to i0ple0ent the contract is in the nature of a %a0blin%a%ree0ent an falls within the a0bit of &rticle +8 of the New Civil Coe, which is 4uote

hereuner'

If a contract which purports to be for the eliver" of %oos, securities or

shares of stoc1 is entere into with the intention that the ifference

between the price stipulate an the e2chan%e or 0ar1et price at the ti0eof the pretene eliver" shall be pai b" the loser to the winner, the

transaction is null an voi. !he loser 0a" recover what he has pai.

!he facts clearl" establish that the petitioner is a irect participant in the transaction, actin%throu%h its authori=e a%ents. It receive the custo0er5s orers an private responent5s 0one".

&s per ter0s of the train% contract, custo0er5s orers shall be irectl" trans0itte b" the

petitioner as bro1er to its principal, 9ran1well Enterprises co00oit" sub3ect 0atterof the transaction. If private responent5s speculation was correct, she woul be the winner an

the petitioner, the loser, so petitioner woul have to pa" private responent the 60ar%in6. :ut if

private responent was wron% in her speculation then she woul e0er%e as the loser an the

petitioner, the winner. !he petitioner woul 1eep the 0one" or collect the ifference fro0 theprivate responent. !his is clearl" a for0 of %a0blin% provie for with un0ista1eable certaint"

uner &rticle +8 abovestate. It woul thus be %overne b" the New Civil Coe an not b" the

Revise Securities &ct nor the Rules an Re%ulations on Co00oit" 9utures !rain% lai ownb" the SEC.

&rticle 8#F of the New Civil Coe oes not %overn this case because the sai provision

conte0plates a contract of sale of specific %oos where one of the contractin% parties bins

hi0self to transfer the ownership of an eliver a eter0inate thin% an the other to pa"therefore a price certain in 0one" or its e4uivalent. 1'!he sai article re4uires that there be

eliver" of %oos, actual or constructive, to be applicable. In the transaction in 4uestion, there

was no such eliver"/ neither was there an" intention to eliver a eter0inate thin%.

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!he transaction is not what the parties call it but what the law efines it to be. 1(

&fter consierin% all the evience in this case, it appears that petitioner an private responent

i not inten, in the eals of purchasin% an sellin% for future eliver", the actual orconstructive eliver" of the %oos>co00oit", espite the pa"0ent of the full price therefor. !he

contract between the0 falls uner the efinition of what is calle 6futures6. !he pa"0ents 0aeuner sai contract were pa"0ents of ifference in prices arisin% out of the rise or fall in the

0ar1et price above or below the contract price thus 0a1in% it purel" %a0blin% an eclare nullan voi b" law.1)

In En%lan an &0erica where contracts co00onl" calle futures ori%inate, such contracts

were at first hel vali an coul be enforce b" resort to courts.

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8 &nne2 & of Petition/Rollo, pp. $)-.

Rollo, pp. #$)#F.

@ :atas Pa0bansa :l%. 8?.

# See P.D. No. -+)&.

$