G.R. No. 90707 February 1, 1993
ONAPAL PHILIPPINES COMMODITIES, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS and SUSAN CHUA, respondents.

FACTS

Petitioner ONAPAL Philippines Commodities, Inc., a corporation licensed by the SEC as a futures commission merchant/broker, entered into a “Trading Contract” with private respondent Susan Chua on April 27, 1983, for commodity futures trading. Chua deposited P500,000 upon the representation of ONAPAL’s account executive that the business was profitable and she could withdraw her money anytime. She was made to sign documents without understanding the risks, being told they were for “formality sake.” After being informed of an initial profit, she was later told she needed to deposit an additional P300,000 to cover price differences or lose her original deposit. After depositing a total of P800,000, she was able to withdraw only P470,000. Chua stopped trading in September 1983, believing she was engaged in gambling, and sued to recover her losses. The transactions involved only ONAPAL and Chua; orders were purportedly telexed to ONAPAL’s principal, Frankwell Enterprises in Hongkong, but the money was kept in a local bank account in the Philippines. The trial court and the Court of Appeals found the contract to be a form of gambling and null and void, ordering ONAPAL to refund Chua’s losses.

ISSUE

Whether the commodity futures trading contract between ONAPAL and Chua is a valid and enforceable contract or an illegal gambling/wagering agreement that is null and void.

RULING

The Supreme Court DISMISSED the petition and AFFIRMED the decision of the Court of Appeals. The commodity futures contract in question was a gambling agreement and therefore null and void. The Court ruled that the transactions were “futures” contracts of the speculative kind where no actual delivery of commodities was intended; they were mere wagers on price movements, settled by payments of differences (“margins”). Such contracts are simple speculation, gambling, or wagering on prices and are illegal as against public policy. The Court found that ONAPAL failed to prove that Chua’s orders and money were actually transmitted to its principal abroad, as the funds were kept locally. Under Article 2018 of the Civil Code, Chua, as the loser, was entitled to recover from ONAPAL, the winner, what she had paid. The Court held that the contract was not governed by the Civil Code provisions on sales of future goods or the Revised Securities Act in a manner that would validate this gambling transaction.