THIRD
DIVISION
|
FRANCISCO R. NUNGA, JR. and VICTOR D.
NUNGA, Petitioners, - versus
- FRANCISCO N. NUNGA III, Respondent. |
|
G.R. No. 178306 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ,
CHICO-NAZARIO, NACHURA, and
REYES, JJ. Promulgated: |
x- - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - -x
CHICO-NAZARIO, J.:
Before this
Court is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court assailing the Decision[1]
dated
Presented
hereunder are the factual antecedents of the case.
On
Quorum
having been established at the meeting, the stockholders proceeded with the
election of the RBA Board of Directors to serve for the fiscal year 1996. Francisco III was voted the Chairman of the
Board; with Ma. Elena Rueda, Ma. Rosario Elena Nacario, Cecilia Viray and
Dwight Nunga, the Members. In the same
meeting, stockholder Jesus Gonzalez (Gonzalez) made known his intention to sell
his shareholdings.
Victor,
thereafter, informed his father, Francisco Jr., of Gonzalez’s intention to sell
his shares. Francisco Jr. then
instructed Victor to inquire from Gonzalez the terms of the sale. After a series of negotiations, Gonzalez
ultimately agreed to sell his shares of stock to Francisco Jr.
On 19
February 1996, Gonzalez executed a Contract to Sell[5]
in favor of Francisco Jr., which pertinently provided:
KNOW ALL MEN BY THESE
PRESENTS:
This CONTRACT TO SELL, executed this 19th day of
February, 1996, at
JESUS J. GONZALE[Z], of legal age, Filipino
citizen, married to Cristina D. Gonzale[z], residing at
in favor of
FRANCISCO D. (sic) NUNGA, JR., of
legal age, single, residing at Poblacion, Masantol, Pampanga[,] hereinafter
referred to as the “PURCHASER”;
WITNESSETH:
That the VENDOR is the
absolute registered owner of several shares of stocks of the RURAL BANK OF
APALIT, INC. located at Apalit, Pampanga, more particularly described as
follows:
|
Stock Cert. No. |
No. of Shares Represented |
Date of Issue |
Journal Folio No. |
|
5 |
250 |
May, 1978 |
1 |
|
36 |
122 |
Jan., 1991 |
1 |
|
105 |
264 |
Feb., 1991 |
5 |
|
152 |
487 |
Nov.,
1993 |
7 |
|
166 |
8 |
Feb., 1994 |
7 |
|
181 |
525 |
July, 1994 |
8 |
|
213 |
336 |
|
|
That the VENDOR has offered to sell the abovestated (sic)
shares of stocks and the PURCHASER has agreed to purchase the same for a total
consideration of P200,000;
That it is hereby agreed that out of the total
consideration or contract price, the purchaser will pay the amount of FIFTY
THOUSAND PESOS (P50,000.00), receipt of which is herein acknowledged by
the purchaser, at the date and place below stated and the remaining balance of P150,000
will be paid in full on February, (sic) 28, 1996;
That it is further agreed that
the VENDOR will execute an authorization in favor of the herein purchaser or
his representative, Victor D. Nunga[,] to retrieve all the corresponding Stocks
(sic) Certificates as above indicated from the Apalit Rural Bank, Inc.
WHEREFORE, for and in consideration
of the total amount of P200,000 (sic) receipt in part of
which is herein acknowledged in the amount of P50,000.00, the vendor
hereby agrees to sell, cede and transfer all the above stated shares of stocks
to the PURCHASER, his heirs[,] successors, and assigns, absolutely free from
any encumbrance and lien whatsoever.
IN WITNESS WHEREOF, I have hereunto set
my signature this 19th day of FEBRUARY, (sic) 1996, at Quezon
City, Philippines.
(signed)
JESUS
J. GONZALES
Vendor
On even
date, Victor gave the initial payment of P50,000.00 to Gonzalez, who
duly acknowledged the same.[6] In exchange, Gonzalez handed Victor RBA Stock
Certificates No. 105, No. 152 and No. 166.
As to the four other certificates that were in the possession of the
RBA, Gonzalez issued a letter[7]
addressed to Isabel Firme (Firme), the RBA Corporate Secretary, which
instructed the latter to turn over to Victor the remaining stock certificates
in Gonzalez’s name. Upon being presented
with Gonzalez’s letter, Firme gave Victor Stock Certificate No. 181, but
alleged that Stock Certificates No. 5 and No. 36 could no longer be located in
the files of RBA. Firme advised Victor
to merely reconstitute the missing stock certificates.[8] A reading of the said Contract to Sell would
reveal, however, that the same was only notarized on 28 February
1996.
Before
Francisco Jr. and Victor could pay the balance of the contract price for
Gonzalez’s RBA shares of stock, Gonzalez entered into another contract
involving the very same shares. It would
appear that on 27 February 1996, Gonzalez executed a Deed of Assignment[9]
of his RBA shares of stock in favor of Francisco III, the relevant terms of
which recite:
KNOW ALL MEN BY THESE
PRESENTS:
For value (sic) consideration received, the undersigned
ASSIGNOR JESUS GONZALE[Z], of legal age, Filipino and resident of #10
2ND AVENUE, CUBAO, QUEZON CITY, METRO MANILA hereby sells, assigns and
transfers unto FRANCISCO N. NUNGA III (AS ASSIGNEE), Filipino, of legal age and
with postal address at 1122 Alhambra St., Ermita 1000 Metro Manila, his assigns
and successors, all their rights, titles and interests to the following shares
of stocks owned by the ASSIGNOR in Apalit Rural Bank, Inc., with par value of
one hundred pesos only (P100.00) per share, free from all liens and
encumbrances.
|
Date |
SC.
No. |
No. of Shares |
Amount |
|
May 24, 1969 |
4 (sic) |
250 |
|
|
January 02, 1975 |
36 |
122 |
12,200.00 |
|
February 19, 1991 |
105 |
264 |
26,400.00 |
|
November 10, 1993 |
152 |
487 |
48,700.00 |
|
February 22, 1994 |
166 |
8 |
800.00 |
|
July
25, 1994 |
181 |
525 |
52,500.00 |
|
February 2, 1996 |
213 |
336 |
33,600.00 |
IN WITNESS WHEREOF, the ASSIGNOR have (sic) cause (sic)
these presents to be signed at Quezon City, this 27 day of February,
1996.
(signed)
JESUS J. GONZALE[Z]
Assignor
At the same
time the afore-quoted Deed was executed, Francisco III paid in full the agreed
purchase price of P300,000.00 using a BPI (Bank of the Philippine
Islands) Family Bank Check No. 0347505 issued in favor of Gonzalez. An acknowledgment receipt signed by Gonzalez
and witnessed by his wife Cristina D. Gonzalez evidenced the payment.[10] Since the stock certificates covering the
shares were already in Victor’s possession, Gonzalez immediately wrote Victor a
letter,[11]
demanding that Victor hand over the said stock certificates to Francisco III,
the supposed new owner of the shares.
The next
day, on 28 February 1996, Francisco Jr. arrived from the United States of
America. He and Victor then promptly
proceeded to the residence of Gonzalez in order to pay the balance of P150,000.00
of the purchase price stated in their Contract to Sell with Gonzalez. Gonzalez, however, informed them that he
already sold his shares of stock to Francisco III.[12] After discussing the matter, Gonzalez was
somehow convinced to accept the balance of the purchase price and sign his name
at the dorsal portion of the stock certificates to endorse the same to
Francisco Jr. Gonzalez also executed a Deed
of Absolute Sale[13]
in favor of Francisco Jr., which states:
DEED OF ABSOLUTE SALE
KNOW ALL MEN BY THESE
PRESENTS:
This
DEED OF ABSOLUTE SALE, executed this 28th day of February, 1996, at
JESUS J. GONZALE[Z], of legal age, Filipino
citizen, married to Cristina D. Gonzale[z], residing at
in favor of
FRANCISCO R. NUNGA, JR., of legal
age, married, residing at Poblacion, Masantol, Pampanga[,] hereinafter referred
to as the “PURCHASER”[;]
WITNESSETH:
That
the VENDOR is the absolute registered owner of several shares of stocks of the
RURAL BANK OF APALIT, INC. located at Apalit, Pampanga, more particularly
described as follows:
|
Stock
Cert. No. |
No. of SharesRepresented |
Date of Issue |
Journal
Folio No. |
|
5 |
250 |
May, 1978 |
1 |
|
36 |
122 |
Jan., 1991 |
1 |
|
105 |
264 |
Feb., 1991 |
5 |
|
152 |
487 |
Nov., 1993 |
7 |
|
166 |
8 |
Feb., 1994 |
7 |
|
181 |
525 |
July, 1994 |
8 |
|
213 |
336 |
|
|
That
Stock Certificate Nos. 5 and 36 respectively representing 250 and 122 shares of
the Rural Bank of Apalit[,] Inc. were lost and is (sic) currently in the
process of reconstitution;
That
the VENDOR has offered to sell the abovestated (sic) shares of stocks and the
PURCHASER has agreed to purchase the same.
WHEREFORE,
for and in consideration of the total amount of TWO HUNDRED THOUSAND PESOS
(P 200,000.00), receipt of which in full is herein acknowledged, the
VENDOR hereby sells, cedes and transfers all the above stated shares of stocks
to the PURCHASER, his heirs, successors, and assigns, absolutely free from any
encumbrance and lien whatsoever.
IN
WITNESS WHEREOF, I have hereunto set my signature this 28 day of FEB
(sic), 1996, at SAN JUAN, MM, Philippines.
(signed)
JESUS J. GONZALE[Z]
Vendor
Incidentally,
on that same day, Francisco III delivered to Firme the Deed of Assignment which
Gonzalez executed in his favor, and a copy of Gonzalez’s letter to Victor dated
Victor
refused to comply with Firme’s request and instead demanded that the sale of
shares of stock by Gonzalez in favor of Francisco Jr. on 28 February 1996 be
entered into the Corporate Book of Transfer of RBA. Firme, in turn, rejected Victor’s demand,
alleging that Francisco III already bought Gonzalez’s shares.[15]
Consequently,
on 14 March 1996, Victor filed a Petition[16]
with the Securities and Exchange Commission (SEC) against Francisco III and
Firme, which was docketed as SEC Case No. 03-96-5288. Victor prayed that the SEC declare null and
void the Stockholders’ Meeting held on 30 January 1996 for lack of the required
majority quorum; as well as the votes cast for the shares of the deceased
stockholders, namely, Teodorico R. Nunga, Carmencita N. Nunga and Jesus Enrico
N. Nunga. Victor additionally requested
that the transfer of Gonzalez’s RBA shareholdings to Francisco Jr. be annotated
on the RBA Corporate Transfer Book and new stock certificates be issued in
favor of Francisco Jr. Victor finally
pleaded that Francisco III and Firme be ordered to jointly pay him P50,000.00
as attorney’s fees, damages and litigation expenses.
On the same
date, Francisco III likewise filed a Complaint[17]
against Gonzalez, Francisco Jr., and Victor before the SEC, which was docketed
as SEC Case No. 03-96-5292.
Francisco III sought the issuance of a Temporary Restraining Order (TRO)
against Francisco Jr. and Victor, who were allegedly conspiring to oust him and
the other members of the RBA Board of Directors. Francisco III also prayed, inter alia,
for judgment ordering (a) Victor to surrender Gonzalez’s stock certificates in
order that the same may be transferred to Francisco III’s name; and (b)
Francisco Jr. and Victor to desist from attempting to register the purported
sale by Gonzales of his RBA shares of stock to Francisco Jr., who had already
become a naturalized American citizen and was, thus, disqualified from owning
shares in RBA.
Francisco
III and Firme filed their joint Answer[18]
in SEC Case No. 03-96-5288, while Francisco Jr. and Victor filed their
Answer[19]
in SEC Case No. 03-96-5292.
Gonzalez, however, was considered in default in both SEC cases for
failure to file his answers despite notice.
Eventually,
Francisco Jr.[20]
and Victor filed a Motion for Consolidation[21]
of the two cases pending before the SEC, alleging that they involved common
questions of fact and law, which required the presentation of similar
evidence. Said Motion was granted in an
Order[22]
dated 30 September 1996. Thereafter, SEC
Cases No. 03-96-5288 and No. 03-96-5292 were jointly heard.
After the parties submitted their respective Offers
of Evidence, but before the SEC could rule on the same, the cases were
eventually turned over to the RTC pursuant to Administrative Circular AM No.
00-11-03[23]
of the Supreme Court dated
In the RTC, SEC Cases No. 03-96-5288 and No. 03-96-5292 were docketed as Commercial Cases No. 001 and No. 018, respectively.
Francisco Jr. and Victor subsequently filed a Motion to Resolve their Formal Offer of Exhibits, which the SEC was not able to act upon. In an Order[25] dated 30 April 2002, the RTC admitted the formal offers of evidence in both cases.
On
The Court, after a careful study on the evidences on record finds that
[herein petitioner Victor] failed to substantiate the allegation in the
petition. [Victor] failed to controvert the documentary
evidences presented by [herein respondent Francisco III] to wit: Minutes of the
Stockholders Meeting, showing the number of shares present in person or in
proxy[;] written
Proxy in favor of Dwight N. Nunga in (sic) behalf of deceased Teodorico R.
Nunga by virtue of the Extrajudicial Settlement of estate in (sic) behalf of
Carmencita Noel Nunga proxy executed by Ma. Del Carmen N. Leveriza in her
capacity as the Judicial Administratrix duly appointed by the RTC Branch 60,
Makati[,] Metro
As regards Commercial Case No. 018,[28] Francisco III’s Complaint, the RTC decreed:
The Court[,] after a careful study on the aforementioned evidences
(sic) on record[,] finds and holds that [herein petitioner Francisco Jr.] has a
better right over the subject shares considering that the Contract to Sell was executed
prior to the Deed of Assignment presented by the [herein respondent Francisco
III]. The Court gleaned also from the
evidences (sic) that the Deed of Assignment was executed in bad faith as
[Francisco III] is aware of the transaction between [herein petitioner Victor]
in (sic) behalf of his father and [Gonzalez], thus, the conclusion that the
Deed of Assignment was executed with malice.
The Contract to Sell may not be a public
instrument[29] but being a consensual contract it is, therefore,
valid there being a meeting of the mind (sic) between the parties. Further, there being no contention on (sic)
the contrary, on the validity of the Deed of Absolute Sale interposed by
[Gonzalez] coupled with the proof of full payment and the endorsement of the
Stock Certificate at the back by the owner[,] which is the only operative act
of valid transfer of shares of stock certificate provided for by law and
jurisprudence, clearly convinced the Court that the latter honored the
transaction between him and [Victor] in (sic) behalf of his father [Francisco
Jr.] and[,] to bind third parties, the fact of transfer should be registered
with the transfer book of the corporation.
x x x x
Further, with respect to the issue on the citizenship of
[Francisco Jr.], not being qualified to own such share (sic), the Court is inclined to give
credence on (sic) the contention of the latter[,] it being supported by R.A.
8179[,] known as “An Act to Further Liberalize Foreign Investment,[”] to wit:
"SEC. 9. Investment Rights of Former Natural-born
Filipinos. – For purposes of this Act, former natural born citizens of
the
Furthermore, insofar as
(sic) [Gonzalez], the same was (sic) considered as in default for failure to
appear and participate despite notice. (Emphasis ours.)
In the end, the RTC disposed of the two cases in this wise:
WHEREFORE, in view of the
foregoing, judgment is hereby rendered in Commercial Case No. 001
ordering the dismissal of the Petition filed by [herein petitioner Victor]
against [herein respondent Francisco III] and Isabel C. Firme.
Insofar as Commercial Case No. 018[,] judgment is hereby rendered in
favor of the [herein petitioners Victor and Francisco Jr.] and against
[Francisco III] ordering the following:
1) Ordering the Corporate
Secretary of the Rural Bank of Apalit, Inc, (sic) to register the fact of the
transfer of ownership in favor of [Francisco Jr.] and to cancel Stock
certificate (sic) in the name of Jesus [Gonzalez] and to issue a new one (sic)
in the name of [Francisco Jr.] upon presentation of Stock Certificate Nos. 105,
152, 166, 181, 213, 5 and 36 duly endorsed by Jesus [Gonzalez];
2) The [respondent Francisco
III] to pay the [petitioners Victor and Francisco Jr.] the amount of P100,000.00
[for] moral damages[;]
3) The amount of P100,000.00
[for] exemplary damages[;]
4) The amount of P50,000.00
[for] attorneys (sic) fees and the cost of suit.[30]
Francisco III filed a Motion for Partial
Reconsideration[31]
of the afore-quoted Decision, but it was denied by the RTC in an Order[32]
dated
Before the Court of Appeals, Francisco III argued that the RTC erred in: (1) ruling that Francisco Jr. had a better right over the disputed shares of stock, considering that the prior contract which he had entered into with Gonzalez was a mere contract to sell; (2) finding that the Deed of Assignment in Francisco III’s favor was executed in bad faith, inasmuch as it was not supported by any of the evidence presented by all the parties; and (3) giving retroactive effect to Republic Act No. 8179,[34] which grants former natural born citizens (such as Francisco Jr.) equal investment rights in rural banks of the Philippines as Philippine citizens. In relation to his third assignment of error, Francisco III pointed out that Republic Act No. 8179 took effect only on 16 April 1996, after Francisco Jr. entered into the questionable contracts with Gonzalez; hence, the said statute cannot benefit Francisco Jr.
On 31 January 2007, the Court of Appeals rendered its assailed Decision favoring Francisco III. It held that Francisco Jr. cannot invoke the provisions of Republic Act No. 8179 based on the following ratiocination:
In the instant case, there
is nothing in Republic Act No. 8179 [An Act to Further Liberalize Foreign Investment]
which provides that it should retroact to the date of effectivity of Republic
Act No. 7353 [The Rural Banks Act of 1992].
Neither is it necessarily implied from Republic Act No. 8179 that it or
any of its provisions should be given a retroactive effect. On the contrary, there is an express
provision in Republic Act No. 8179 that it “shall take effect fifteen (15) days
after publication in two (2) newspapers of general circulation in the
Philippines.” Being crystal clear on its
prospective application, it must be given its literal meaning and applied
without further interpretation (BPI
Leasing Corporation vs. Court of Appeals, 416 SCRA 4, 13 [2003]). Republic Act No. 8179 was published on March
31, 1996 at the Manila Times and Malaya;
hence, it took effect on April 15, 1996. x x x.
Republic
Act No. 7353 specifically states that “the capital stock of any rural bank
shall be fully owned and held directly or indirectly by citizens of the
Philippines xxx.” It bears stressing
that the use of the word “shall” alone, applying the rule on statutory
construction, already underscores the mandatory nature of the law, and hence;
(sic) requires adherence thereto. xxx
Therefore, it is Our considered view that the sale and the subsequent transfer
on February 28, 1996 of the shares of stock of JESUS [Gonzalez] to FRANCISCO,
JR., a naturalized American citizen, were made in patent violation of Republic
Act No. 7353. Considering that Republic
Act No. 7353 did not contain any provision authorizing the validity of the sale
and transfer of the shares of stock to a foreigner, specifically to a former
natural-born citizen of the Philippines, the same should be deemed null and
void pursuant to Article 5 of the Civil Code of the Philippines, which reads:
“ART. 5. Acts executed against the provisions of
mandatory or prohibitory laws shall be void, except when the law itself
authorizes their validity.”
x x
x The fact that Republic Act No. 8179 expressly granted to former natural-born
citizens of the
Furthermore,
there is no merit in the assertion of FRANCISCO JR. and VICTOR that Republic
Act No. 8179 should be given a retroactive effect in accordance with the
following rule:
“The
principle that a new law shall not have retroactive effect only governs rights
arising from acts done under the rule of the former law; but if a right be
declared for the first time by a new law it shall take effect from the time of
such declaration, even though it has arisen from acts subject to the former
laws, provided that it does not prejudice another acquired right of the same
origin.” x x x.
Republic
Act No. 8179 cannot be applied retroactively insofar as the instant case is
concerned, as its application would prejudice the (sic) FRANCISCO III who had
acquired vested right over the shares of stock prior to the effectivity of the
said law. Such right was vested to him
when the Deed of Assignment was executed by Jesus in his favor on February 27,
1996. Undoubtedly, FRANCISCO III had a
better right over the shares of stock of JESUS inasmuch as the validity of the
Deed of Assignment was not affected despite the prior execution of the Contract
to Sell in favor of FRANCISCO JR. on February 19, 1996. As previously adverted to, the said Contract,
as well as the Deed of Absolute Sale and the subsequent transfer of the shares
of stock to FRANCISCO JR., was null and void for violating a mandatory
provision of Republic Act No. 7353. x x
x.[35]
The Court of Appeals, however, decided to award Francisco III
only attorney’s fees and cost of suit, but not moral and exemplary damages:
We
hold that FRANCISCO III is not entitled to moral damages. FRANCISCO III made no mention in his
Complaint and during the hearing that he sustained mental anguish, serious
anxiety, wounded feelings and other emotional and mental sufferings by reason
of the double sale. x x x.
Likewise,
FRANCISCO III is not entitled to exemplary damages. x x x In the instant case,
FRANCISCO III failed to sufficiently prove his entitlement to moral, temperate
or compensatory damages. Hence, his
claim for exemplary damages must similarly fail.
However,
as to his claim for attorney’s fees and cost of suit, We find it to be tenable
as the records of the case clearly reveal that FRANCISCO III was compelled to
litigate or to incur expenses to protect his interest because of the double
sale. x x x. Under the circumstances
obtaining in the instant case, We deem that the award of P20,000.00 as
attorney’s fees is reasonable.[36]
The fallo of the Court of Appeals Decision
thus reads:
WHEREFORE, the foregoing premises
considered, the Decision dated
1) Victor Nunga
to surrender the stock certificates of Jesus Gonzalez to the Corporate
Secretary of Rural Bank of Apalit, Inc.;
2)
[T]he Corporate Secretary of Rural Bank of Apalit,
Inc. to register the assignment of shares of stock in favor of Francisco Nunga
III, to cancel the stock certificates of Jesus Gonzale[z], and to issue new
ones in the name of Francisco Nunga III; and,
3)
Jesus Gonzale[z], Francisco Nunga, Jr., and Victor
Nunga to pay, jointly and severally, the sum of P20,000.00 as attorney’s
fees, plus the cost of suit.[37]
Francisco Jr. and Victor, together with Gonzalez, filed a Motion for Reconsideration[38] of the foregoing Decision. Their Motion, however, was denied by the Court of Appeals in its assailed Resolution dated 4 June 2007.
Refusing to concede, Francisco Jr. and Victor filed the instant Petition,[39] which they anchor on the following assignment of errors:
I.
WHETHER OR NOT THE COURT OF
APPEALS ERRED IN DECLARING THE
II.
WHETHER OR NOT THE COURT OF
APPEALS GRAVELY ERRED IN HOLDING THAT FRANCISCO III HAS A VESTED RIGHT TO THE
SHARES OF STOCK OF GONZALE[Z], WHICH WOULD BE IMPAIRED BY THE RETROACTIVE
APPLICATION OF REPUBLIC ACT NO. 8179?
III.
WHETHER
OR NOT THE COURT OF APPEALS GRAVELY ERRED [IN] AWARDING DAMAGES TO FRANCISCO
III AND WITHDRAWING THE AWARD OF NOMINAL DAMAGES TO PETITIONERS BY THE TRIAL
COURT?
Essentially, the fundamental issue that this Court is called upon to resolve is who among the parties to this case has a better right to the disputed RBA shares of stock.
Francisco Jr. and Victor contend that the consummated sale of the RBA shares of stock by Gonzalez to Francisco Jr. gives the latter a superior right over the same, since the transaction complied with all the elements of a valid sale. Contrary to the ruling of the Court of Appeals, Francisco Jr. and Victor claim that there was no provision in Republic Act No. 7353, prior to its amendment, which explicitly prohibited any transfer of shares to individuals who were not Philippine citizens, or which declared such a transfer void. Hence, there was an implied recognition by the legislature that to declare the nullity of such acts would be more disadvantageous and harmful to the purposes of the law. Moreover, Francisco Jr. and Victor contend that the passage of Republic Act No. 8179, An Act to Further Liberalize Foreign Investment, cured whatever legal infirmity there may have been in the purchase by Francisco Jr. of the RBA shares of stock from Gonzalez. As Republic Act No. 8179 expressly creates and declares for the first time a substantive right, then it may be given retroactive effect. The Deed of Assignment between Francisco III and Gonzalez did not confer upon Francisco III a vested interest that could be impaired by the retroactive application of Republic Act No. 8179. The Deed was not only executed later in time, but the check issued for its payment was also never encashed. There was, therefore, a total absence of consideration, making the said contract between Francisco III and Gonzalez inexistent.
The Court finds the Petition devoid of merit.
As the Court of Appeals declared, Francisco Jr. was disqualified from acquiring Gonzalez’s shares of stock in RBA. The argument of Francisco Jr. and Victor that there was no specific provision in Republic Act No. 7353 which prohibited the transfer of rural bank shares to individuals who were not Philippine citizens or declared such transfer void, is both erroneous and unfounded.
Section 4 of Republic Act No. 7353 explicitly provides:
Section
4. x
x x With exception of shareholdings of corporations organized primarily to hold
equities in rural banks as provided for under Section 12-C of Republic Act 337,
as amended, and of Filipino-controlled domestic banks, the capital stock
of any rural bank shall be fully owned and held directly or indirectly by
citizens of the Philippines or corporations, associations or
cooperatives qualified under Philippine laws to own and hold such capital
stock: x x x. (Emphasis ours.)
Otherwise stated, the afore-quoted provision
categorically provides that only citizens of the
Even the subsequent enactment of Republic Act No.
8179 cannot benefit Francisco Jr. It is
true that under the Civil Code of the
The Court upholds the finding of the Court of
Appeals that Republic Act No. 8179 cannot be applied retroactively to the
present case, as to do so would prejudice the vested rights of Francisco III to
the disputed RBA shares of stock.
Francisco III, who is undeniably a citizen of the
It would not matter that Gonzalez executed the Contract to Sell in favor of Francisco Jr. prior to the Deed of Assignment in favor of Francisco III. As established in the previous discussion, the Contract to Sell between Gonzalez and Francisco Jr. was void and without force and effect for being contrary to law. It intended to effect a transfer, which was prohibited by Republic Act No. 7353. It is even irrelevant that the terms of said Contract to Sell had been fully complied with and performed by the parties thereto, and that a Deed of Absolute Sale was already executed by Gonzalez in favor of Francisco Jr. A void agreement will not be rendered operative by the parties' alleged performance (partial or full) of their respective prestations. A contract that violates the law is null and void ab initio and vests no rights and creates no obligations. It produces no legal effect at all.[44]
With
respect to the award of damages, the Court agrees in the findings of the Court
of Appeals that Francisco III failed to establish his entitlement to moral
damages in view of the absence of proof that he endured physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, or any similar injury.[45] As regards the grant of exemplary damages, we
likewise uphold the ruling of the appellate court that the same was not
warranted under the circumstances, as FRANCISCO III was not able to prove that he was entitled to moral,
temperate or compensatory damages. Exemplary
damages are imposed by way of example or correction for the public good, in
addition to moral, temperate, liquidated or compensatory damages.[46] In contracts and
quasi-contracts, exemplary damages may be awarded if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.[47] It cannot, however, be
considered as a matter of right; the court has to decide whether or not such
damages should be adjudicated.[48] Before the court may
consider an award for exemplary damages, the plaintiff must first show that he
is entitled to moral, temperate or compensatory damages; but it is not
necessary that he prove the monetary value
thereof.[49]
As to the contention
that the Court of Appeals erred in withdrawing the award of nominal damages to
the petitioners by the RTC, the Court finds the same to be utterly
misleading. The appellate court did not
decree any such withdrawal, as the RTC had not awarded any nominal damages in
favor of the petitioners in the first place.
However, as Francisco III was indeed compelled to litigate and incur
expenses to protect his interests,[50] the
Court sustains the award by the Court of Appeals of P20,000.00 as attorney’s
fees, plus costs of suit.
WHEREFORE,
premises considered, the Petition for Review under Rule 45 of
the Rules of Court is hereby DENIED. The
assailed Decision dated 31 January 2007
and Resolution dated 4 June 2007 of the Court
of Appeals in CA-G.R. CV No. 78424 are hereby AFFIRMED in toto. No costs.
SO ORDERED.
|
|
MINITA V. CHICO-NAZARIOAssociate Justice |
WE
CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
Associate Justice
Associate Justice
RUBEN T. REYES
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S.
PUNO
Chief Justice
[1] Penned by Associate Justice Jose C. Reyes, Jr. with Associate Justices Jose L. Sabio, Jr. and Myrna Dimaranan Vidal, concurring; rollo, pp. 8-26.
[2] Rollo, p. 29.
[3] Penned by Judge Pedro M. Sunga, Jr.; rollo, pp. 331-341.
[4] Rollo, pp. 116-118.
[5] Records, Vol. I, pp. 118-119.
[6] Rollo, p. 152.
[7]
[8] With respect to Stock Certificate No. 213, the same was not mentioned in Gonzalez’ letter, so Firme initially refused to give it to Victor. Said certificate was only delivered to the latter after the full payment of the agreed purchase price. (Rollo, p. 457)
[9] Rollo, p. 105.
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20] Victor alone filed the Petition in SEC Case No. 03-96-5288; however, Francisco Jr. joined him in subsequent pleadings, claiming to be also a petitioner in the said case.
[21] Records, Vol. 1, pp. 191-193.
[22]
[23] RESOLUTION
DESIGNATING CERTAIN BRANCHES OF REGIONAL TRIAL COURTS TO TRY AND DECIDE CASES
FORMERLY COGNIZABLE BY THE SECURITIES AND EXCHANGE COMMISSION EN BANC.
To implement the provision of
Sec. 5.2 of Republic Act No. 8799 (The Securities Regulation Code),
and in the interest of a speedy and efficient administration of justice and
subject to the guidelines hereinafter set forth, the following branches of the
Regional Trial Courts (RTC) are hereby designated to try and decide Securities
and Exchange Commission (SEC) cases enumerated in Sec. 5 of P.D. No. 902-A (Reorganization of the Securities and
Exchange Commission), arising within their respective territorial
jurisdictions with respect to the National Capital Judicial Region and within
the respective provinces in the First to the Twelfth Judicial Regions:
x
x x x
THIRD JUDICIAL REGION
x x x x
Pampanga (San Fernando)
(26) Br. 42, Judge Pedro M. Sunga, Jr.
[24] Francisco III filed his Offer of
Documentary Evidence (rollo, pp.
208-214) on
Before
the RTC of Manila, Branch 46, Francisco Jr. and Victor filed an Omnibus Motion
(Records, Vol. 1, pp. 229-230) on 26 September 2001, praying that SEC Case
No. 03-96-5288 be jointly tried
with SEC Case No. 03-96-5292.
This was, however, denied in an Order (Records, Vol. 1, p. 232) dated 28 September 2001. On
[25] Records, Vol. II, p. 12.
[26]
[27] This statement apparently refers to the written proxies executed in favor of Dwight Nunga by Teodorico R. Nunga, Carmencita N. Nunga and Ma. Rosario Elena N. Nacario. (Records, Vol. I., p. 5)
[28] Records, pp. 40-41.
[29] The Contract to Sell in favor of
Francisco Jr. and Victor was notarized only on
[30] Rollo,
pp. 41-42.
[31]
[32]
[33]
[34] An Act to Further Liberalize Foreign Investment.
[35] Rollo,
pp. 20-23.
[36]
[37]
[38]
[39]
[40] G.R. No. 164159,
[41] Art. 4. Laws shall have no retroactive effect, unless the contrary is provided.
[42] Frivaldo v. Commission on Elections, 327 Phil. 521, 556 (1996).
[43] Rattan Art & Decorations, Inc. v. Collector of Internal Revenue, 121 Phil. 605, 611 (1965).
[44] See Chavez v. Presidential Commission on Good Government, 366 Phil. 863, 868-869 (1999).
[45] Expertravel and Tours, Inc. v. Court of Appeals, G.R. No. 152392, 26 May 2005, 459 SCRA 147, 162.
[46] Civil Code, Article 2229.
[47] Civil Code, Article 2232.
[48] Civil Code, Article 2233.
[49] Article
2234 of the Civil Code provides:
Art. 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages.
[50] Article 2208 of the Civil Code provides:
Art. 2208. In the absence of
stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:
x x
x x
(2) When the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest.