G.R. No. 179121, 9 November 2015
Respondents claimed that Cuaycong, a salesman in securities, had engaged in fraudulent and deceitful activities with the complicity and knowledge of the defendant stock market brokerage firms, and the other individual defendants resulting in the loss of respondents’ investments. Respondent Cacho-Olivares also furnished the PSE with copies of letter-complaints which alleged that the brokerage firms committed massive stock market fraud on her and her family. The PSE-CRG stated though that the subject brokerage firms may have committed administrative and procedural lapses in violation of the Revised Securities Act and/or existing SEC Rules.
Parenthetically the Cuaycong brothers, had filed earlier a case for Consignation and Damages against respondents. Cuaycong admitted that he was in possession of the funds owned by respondents in the total amount of Php 7,040,645.2215 and offered to deposit the same with the court. In his defense, he alleged that he acted as fund manager for the respondents, who knew that he commingled their funds with those of his other clients.
In a Joint Manifestation, the Cuaycong brothers and the respondents manifested that they had amicably settled their differences and entered into a Compromise Agreement. The trial court conducted a clarificatory hearing where respondents manifested their intention to pursue the case against the remaining defendants. However, the trial court holds that Cuaycong brothers were indispensable parties sued with the other defendants, under a common cause of action, the trial court dismissed the Amended and Supplemental Complaint.
Whether the dismissal of the case as against the Cuaycong brothers benefits the other defendants.
Yes. The Original Complaint and the Amended and Supplemental Complaint allege the same essential cause of action against the Cuaycong brothers and the petitioners-that is, stock market fraud committed by Cuaycong principally through misappropriation, with the complicity and indispensable cooperation of the defendant stock market brokerage firms and the individual defendants. Thus, as with the Original Complaint, the allegations of the Amended and Supplemental Complaint, though they dropped the Cuaycong brothers as defendants, and refer to them now as “erstwhile defendants,” nevertheless still plead that the acts and omissions of petitioners and the Cuaycong brothers are inextricably connected and interrelated.
The foregoing allegations plead the substantive unity in the alleged fraud and deceit that the Cuaycong brothers and the petitioners committed against respondents, which resulted in a single injury-the loss of investments in the amount of Php 7,040,645.22. Each of the petitioners performed an indispensable act that aided and abetted the illegal activities of the Cuaycong brothers, without which the latter would not be able to successfully consummate their fraudulent scheme. In their Appellants’ Brief, respondents acknowledged that conspiracy existed between the Cuaycong brothers and the petitioners.
The inseparability of the liabilities of the Cuaycong brothers and the petitioners finds further support in law. Section 58 of the Securities Regulation Code punishes persons primarily liable for fraudulent transactions. Here, the allegations of both the Original Complaint and the Amended and Supplemental Complaint show that Cuaycong is the main actor in the misappropriation of the money and shares of stock of the respondents. He is the person primarily liable under Section 58, while petitioners who substantially assisted and indispensably cooperated in the conduct of his wrongful acts are the aiders or abettors under Sections 51.4 and 51.5. Cuaycong and the petitioners engaged in a “transaction, practice or course of business which operates or would operate as a fraud or deceit” upon the respondents.” Thus, Cuaycong and the petitioners should be held solidarity liable for the resulting damage to the respondents. Respondents cannot condone Cuaycong’s liability and proceed only against his aiders or abettors because the liability of the latter are tied up with the former. Liability attaches to the aider or abettor precisely because of the existence of the liability of the person primarily liable.
*Case Digest by Meriam Rika R. Wong, JD – 4, Andres Bonifacio College, SY 2019-2020