Carolina Industries v. Cms Stock Brokerage

ANTONIO, J.:

Petition for review of the decision of the Court of Appeals in CA-G.R. No. 55680-R, promulgated on April 19, 1977, affirming with modification the judgment of the Court of First Instance of Rizal, Branch VIII, in Civil Case No. 12850, entitled "Carolina Industries, Inc, vs. CMS Stock Brokerage, Inc. (Formerly Sison, Luz & Jalbuena, Inc.), Carlos Moran Sison and Luis F. Sison". The factual findings of the Court of Appeals are as follows: têñ.£îhqw⣠Defendant CMS Stock Brokerage, Inc. (formerly Sison, Luz & Jalbuena, Inc.), for the calendar year 1969, was a licensed securities broker and dealer engaged, for compensation, in the business of buying and selling stocks and securities for and in behalf of investors, such as the plaintiff. The CMS Stock Brokerage, Inc. is a member firm of the Makati Stock Exchange.

Defendant Carlos Moran Sison is the president and at the same time the major and controlling stockholder of defendant corporation. Defendants, in admitting the foregoing facts, made the qualification that during the period from January 10 to August 29, 1969, Arsenio N. Luz III was the president of defendant corporation. On or about June 17, 1969, plaintiff opened a margin account with defendants for purchasing, carrying and selling stocks and securities listed in the Makati Stock Exchange, as evidenced by a "Margin Account Agreement"

executed on that date by plaintiff through its treasurer and controlling stockholder, Mariano T. Lim, and approved by defendant corporation, acting through its vice-president and general manager, defendant Luis F. Sison. In that Margin Account Agreement, it was agreed that: têñ.£îhqw⣠1. All transactions for my account tinder this agreement shall be subject to the constitution, rules, regulations, customs and usages of the Makati Stock Exchange, Inc. and its clearing house, and, where applicable, to the provisions of the Securities Act and the rules and regulations of the Securities & Exchange Commission, and also to such rules you may adopt from time to time.

x x x x x x x x x 5. I will at all times maintain such margins as you may in your discretion require from time to time and will pay on demand any debit balance of my account with you. 6.

I will liquidate in full the margin you extend to me within a period of ninety (90) days from the date of its opening or renewal, as the case may be, and, if I fail to do so, you may without notice to me either: têñ.£îhqw⣠(a) Close my account by seding so much of my securities held by you sufficient to cover in fun my debit barance; or (b) Sell and repurchase, at the same price, my securities held by you, thereby liquidating and renewing my margin account for another period of 90 days. 7. I will trade in securities with a volume of at least 150% of my margin line within a period of 90 days and should the volume of my transactions be less, you are hereby authorized on the 90th day, without notice, to effect the sale and repurchase, at the same price, of so much of my securities sufficient to cover the difference between 150% of my margin line and the volume of my transactions.

8. The debit balance of my account shall be charged with daily interest at the rate of twelve per cent (12%) per annum, compounded monthly, plus other charges for servicing my margin account and other expenses incidental thereto. (Exhibit "B").

On the following dates, plaintiff deposited to its margin account with defendant corporation the following sums: 1 June 17, 1969 O.R. No. 2354........... P 10,000.00 2. June 19, 1969 O.R. No. 2385.................

9,796.00 3. June 26, 1969 O.R. No. 2487............... 461,000.00 4.

June 26, 1969 O.R. No. 2488................. 79,000.00 5. July 2, 1969 O.R. No. 2580...................

27,000.00