G.R. No. 172727 ; September 8, 2010
Queensland-Tokyo Commodities, Inc., Romeo Y. Lau, and Charlie Collado, Petitioners, vs. Thomas George, Respondent.

FACTS

Queensland-Tokyo Commodities, Inc. (QTCI), a licensed commodity futures broker, through its agents Guillermo Mendoza, Jr. and Oniler Lontoc, solicited an investment from respondent Thomas George. On July 7, 1995, George invested and signed a Customer’s Agreement with QTCI, represented by petitioner Charlie Collado. The agreement included a Special Power of Attorney appointing Mendoza as George’s attorney-in-fact to trade and manage his account. In 1996, the SEC issued a Cease-and-Desist Order against QTCI. George demanded the return of his investment and later discovered that Mendoza and Lontoc were not licensed commodity futures salesmen.
George filed a complaint for recovery of investment with damages before the SEC against QTCI and its officers, petitioners Romeo Y. Lau and Charlie Collado. The SEC Hearing Officer ruled in favor of George, declaring the Customer’s Agreement void and holding petitioners solidarily liable for the return of the investment plus damages. Petitioners’ appeal to the SEC en banc was dismissed on technical grounds. The Court of Appeals, while finding the dismissal improper, assumed jurisdiction and affirmed the SEC Hearing Officer’s decision in toto, prompting this petition.

ISSUE

The core issues are: (1) Whether petitioners are liable for allowing an unlicensed salesman to handle respondent’s account, thereby nullifying the Customer’s Agreement; and (2) Whether individual petitioners Lau and Collado can be held solidarily liable with the corporation.

RULING

The Supreme Court denied the petition but modified the awarded damages. Petitioners are liable. The Revised Rules and Regulations on Commodity Futures Trading explicitly prohibit any person from soliciting or accepting customer orders without a license and make it unlawful for a futures commission merchant to knowingly permit such unlicensed association. QTCI, through Collado who signed the agreement, knowingly permitted Mendoza, an unlicensed individual, to act as George’s attorney-in-fact with full trading authority. This direct violation of regulatory rules designed for public protection rendered the Customer’s Agreement void. Petitioners’ defense of estoppel fails, as the illegality of a contract is not cured by the parties’ consent or ratification.
On solidary liability, the Court affirmed that corporate officers, like petitioners Lau and Collado, can be held jointly and severally liable with the corporation for corporate acts that are illegal or ultra vires. Their active participation in the illegal act of allowing an unlicensed salesman to trade, which constituted fraud and bad faith, makes them personally accountable. The corporate veil cannot shield them from liability arising from their own wrongful and fraudulent acts. However, the Court found the moral and exemplary damages excessive and reduced them to ₱50,000.00 and ₱30,000.00, respectively, considering the circumstances of the case. The awards for actual damages and attorney’s fees were sustained.