THIRD DIVISION
|
ARMAND O. RAQUEL-SANTOS
and ANNALISSA MALLARI, Petitioners, - versus - COURT OF APPEALS and
FINVEST SECURITIES CO., INC., Respondents. x - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - x PHILIPPINE STOCK EXCHANGE,
INC., Petitioner, - versus - FINVEST SECURITIES CO.,
INC., Respondent. x - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - x FINVEST SECURITIES CO.,
INC., Petitioner, - versus - TRANS-PHIL MARINE ENT.,
INC. and ROLAND H. GARCIA, Respondents. |
G.R.
No. 174986
G.R.
No. 175071
G.R.
No. 181415
Present: YNARES-SANTIAGO, J.,
Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ. Promulgated: July 7,
2009 |
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Three petitions, arising from related
events, were consolidated by this Court: G.R. Nos. 174986 and 175071 are
petitions for review assailing the Court of Appeals (CA) Decision[1] in
CA-G.R. CV No. 85176 dated August 9, 2006, and Resolution dated October 11,
2006; and G.R. No. 181415 is a petition for review assailing the CA Decision[2] in
CA-G.R. CV No. 85430 dated September 3, 2007, and Resolution dated January 24,
2008. These cases cropped up from the
failure of Finvest Securities Co., Inc. (Finvest) to meet its obligations to
its clients and the Philippine Stock Exchange (PSE), allegedly caused by
mishandling of Finvest’s funds and property by its officers.
G.R. Nos. 174986 and 175071
Finvest is a stock brokerage
corporation duly organized under Philippine laws and is a member of the PSE
with one membership seat pledged to the latter. Armand O. Raquel-Santos (Raquel-Santos)
was Finvest’s President and nominee to the PSE from February 20, 1990 to July
16, 1998.[3]
Annalissa Mallari (Mallari) was Finvest’s Administrative Officer until December
31, 1998.[4]
In the course of its trading
operations, Finvest incurred liabilities to PSE representing fines and
penalties for non-payment of its clearing house obligations. PSE also received
reports that Finvest was not meeting its obligations to its clients.[5] Consequently, PSE indefinitely suspended
Finvest from trading. The Securities and Exchange Commission (SEC) also suspended
its license as broker.[6]
On June 17, 1998, PSE demanded from
Finvest the payment of its obligations to the PSE in the amount of P4,267,339.99
and to its (Finvest’s) clients within 15 days.[7]
PSE also ordered Finvest to replace its nominee, Raquel-Santos.[8]
Upon failure of Finvest to settle its
obligations, PSE sought authority from the SEC to take over the operations of
Finvest in accordance with PSE’s undertaking pursuant to Section 22(a)(5)[9] of
the Revised Securities Act. On July 22, 1998, SEC acted favorably on PSE’s request
and authorized it to take over the operations of Finvest in order to continue
preserving the latter’s assets. Finvest was duly informed of the SEC’s decision
and was advised to refrain from making any payment, delivery of securities, or
selling or otherwise encumbering any of its assets without PSE’s approval.[10]
As of August 11, 1998, Finvest’s total
obligation to PSE, representing penalties, charges and fines for violations of
pertinent rules, was pegged at P5,990,839.99.[11]
Finvest promised to settle all obligations to its clients and to PSE subject to
verification of the amount due, but Finvest requested a deadline of July 31,
1999.[12]
PSE granted Finvest’s request, with the warning that, should Finvest fail to
meet the deadline, PSE might exercise its right to sell Finvest’s membership
seat and use the proceeds thereof to settle its obligations to the PSE, its member-brokers
and its clients.[13] On the
same day, Finvest requested an appointment with PSE’s concerned officer to
reconcile, confirm and update the amount of the penalties, charges and fines
due PSE. Finvest also advised PSE that it would be represented by Mr. Ernesto
Lee, its consultant, during the said meeting.[14]
After consultation with Mr. Lee, PSE revised its computation of the penalties,
charges and fines and reduced the amount due to P3,540,421.17.[15]
In a Letter dated September 8, 1998,
Finvest appealed to PSE for the approval of the following: (1) that it be given
a period of up to March 30, 1999 to settle claims of clients, subject to proper
documents and verification of balance; and (2) that it be allowed to settle its
liabilities to PSE at an amount lower than P4,212,921.13 (representing
penalties, charges and fines at P3,540,421.17 plus sanctions for
violation of rules at P675,500.00), considering that it had never unduly
exposed PSE to any legal and financial risks in connection with its clearing
accounts.[16]
In reply, PSE required Finvest to
acknowledge within 30 days, in whole or in part, clients’ claims that had been
filed with the PSE and to settle all duly acknowledged claims by December 31,
1998. PSE resolved to consider the request for a reduction of its liabilities
to PSE only after it had settled all duly acknowledged claims of its clients.[17]
On February 3, 1999, PSE inquired from
Finvest if it had already settled all duly acknowledged claims of its clients
and its liabilities to PSE.[18]
PSE also demanded that Finvest settle its liabilities to it not later than
March 31, 1999. Finvest responded by proposing that the amount of assessed
penalties, charges and fines be reduced to 10%, that is, P354,042.17; and
that full payment of the clients’ claims be deferred to June 30, 1999.[19]
Previously, Finvest had also requested a written clearance from PSE for renewal
of the registration of its brokers and dealers with the SEC.[20]
In its Letter of February 23, 1999,
PSE informed Finvest that it would only issue a written clearance after Finvest
had settled its obligations to PSE and paid all acknowledged liabilities to
various clients.[21] In
response, Finvest repeated its appeal to be allowed to fully operate again and to
pay a reduced amount on the ground that it had no adequate funds because it had
been the victim of fraud committed by its employees.[22]
On April 21, 1999, PSE again sent a
demand letter to Finvest, reminding the latter of the March 31, 1999 deadline.[23]
On April 26, 1999, Finvest requested
a hearing to determine the amount of its liability and to exhaust the
possibility of arriving at a reasonable solution, and reiterated its appeal for
the resumption of its operations.[24]
PSE brushed aside Finvest’s request, urging it instead to settle all of its
obligations by May 31, 1999; otherwise, PSE would be forced to recommend to the
SEC the liquidation of its assets and sell its seat at public auction,[25]
pursuant to its Pledge Agreement with Finvest. Finvest protested the imposition
of the deadline for being arbitrary on the ground that the claims against it had
not yet been established.[26]
At this juncture, Finvest filed a
Complaint with the SEC for accounting and damages with prayer for a temporary
restraining order and/or preliminary injunction and mandamus against
Raquel-Santos, Mallari and PSE. The complaint alleged that Raquel-Santos and
Mallari took undue advantage of their positions by diverting to their personal
use and benefit the unaccounted stock certificates and sales proceeds referred
to in Annex “X” of the complaint, which was a list of the claims of Finvest’s
clients as of December 31, 1998. Finvest prayed that Raquel-Santos and Mallari
be ordered to account for the missing stock certificates and sales proceeds and
to pay the profits that would have accrued to Finvest. As against PSE, the
complaint alleged that PSE violated Finvest’s right to due process by illegally
and arbitrarily suspending Finvest’s operations, thus compounding its inability
to meet the demands of its clients; and by unilaterally and arbitrarily
imposing upon Finvest fines and penalties, without a hearing. The complaint
prayed that an injunction be issued to prevent PSE from initiating the
liquidation of Finvest and selling Finvest’s seat at public auction.
Alleging that Raquel-Santos and
Mallari failed to file their Answer within the reglementary period, Finvest
moved for a partial judgment against them.[27]
On February 4, 2000, SEC, through a Hearing Panel, rendered a Partial Judgment[28]
against Raquel-Santos and Mallari, ordering them to account for the missing
stock certificates and pay the damages that Finvest may sustain.
Raquel-Santos and Mallari filed
separate motions to set aside the partial judgment, alleging non-receipt of
summons. In an Order dated April 10, 2000, SEC denied due course to the two
motions.[29]
Thereafter, the SEC Hearing Panel issued a writ of execution.[30]
Consequently, notices of garnishment and
sale were issued against Raquel-Santos’ Manila Golf Shares and Sta. Elena Golf
Shares.[31]
Raquel-Santos moved for the cancellation of the notice of sale, arguing that
there was no basis for the sale of his shares as there was no money judgment
involved, only an accounting of the allegedly missing stock certificates. According
to him, only after it is established that there were missing certificates should
he be held accountable. In the same motion, Raquel-Santos also endeavored to
make an accounting of the stock certificates through the following documents:
(a) a 35-page Stock Ledger of an inventory of securities/stock certificates as
of July 31, 1998; (b) a 24-page inventory as of July 31, 1998 of stocks in the
vault of Finvest; and (c) a 5-page inventory of the securities on deposit with
the Philippine Central Depository, Inc.[32]
On June 29, 2000, the parties entered into an
Agreement,[33]
approved by the SEC en banc in its
Order[34]
of July 11, 2000, to remand the case to the Securities Investigation and Clearing
Division for service of summonses to Raquel-Santos and Mallari. In turn,
Raquel-Santos and Mallari agreed not to dispose of or transfer the garnished
properties in the meantime, but the writs of garnishment would remain in force
during the pendency of the case.
Meanwhile, on June 5, 2000, the SEC
Hearing Panel granted Finvest’s motion for the issuance of a preliminary
injunction to enjoin PSE from initiating the liquidation of Finvest and from
selling its membership seat. The SEC Hearing Panel ratiocinated that PSE’s plan
to sell Finvest’s membership seat at public auction, despite the fact that its
claims against Finvest were yet to be determined in these proceedings, was
reason enough for the issuance of a preliminary injunction.[35]
Upon posting of the required bond, the SEC Hearing Panel issued a writ of
preliminary injunction on June 21, 2000.[36]
With the enactment of the Securities
Regulation Code, the case was transferred to the Regional Trial Court (RTC),
On October 2, 2001, the RTC issued an
Order lifting the garnishment of Raquel-Santos’ Manila Golf Club share on the
ground that there must be a proper accounting to determine the amount for which
Raquel-Santos and Mallari were to be
held jointly and severally liable to Finvest before a writ
of garnishment may be validly issued.[37] As
a result, Finvest filed a motion for reconsideration and a motion to respect the
SEC en banc Order dated July 11,
2000. The motions were denied by the RTC in its May 30, 2002 Order.[38] Through
a petition for certiorari, the
October 2, 2001 Order of the RTC was subsequently modified by the CA on
December 9, 2002. The CA held that the
sale of Raquel-Santos’ share in Manila Golf Club was valid, subject to the
outcome of the main case (Civil Case No. 00-1589). The parties were further
enjoined to comply with their obligations under the July 11, 2000 Order of the
SEC en banc.[39]
In the meantime, PSE filed a Motion
to Dissolve the Writ of Preliminary Injunction and/or Motion for
Reconsideration[40] on the
ground that it had the legal obligation to make the appropriate recommendations
to the SEC on whether or not it would be to the best interest of all concerned
for Finvest to be liquidated at the soonest possible time.
On April 28, 2003, the RTC issued a
judgment in Civil Case No. 00-1589 in favor of Finvest:
WHEREFORE, judgment is rendered directing that the writ of preliminary injunction issued on June 21, 2000 be declared permanent. Respondents Raquel-Santos and Mallari are ordered to render an accounting of the stock certificates listed in Annex A of the Complaint.
SO ORDERED.[41]
The trial court noted that Finvest had
not been remiss in addressing its dispute with the PSE. When PSE manifested its
intent to liquidate Finvest and sell its seat at public auction, the amount of
Finvest’s liability was still unsettled, which thus makes it doubtful whether
Section 22(a)(5) would apply. On the issue between Finvest and its officers
(Raquel-Santos and Mallari), the trial court held that Finvest could rightfully
demand an accounting from them and hold them liable for unaccounted securities since
Raquel-Santos exercised control and supervision over the trading operations of
Finvest and he and Mallari had custody of all securities traded.
On
September 12, 2003, Finvest sought a partial reconsideration of the RTC
Judgment praying that: (a) Finvest’s indefinite suspension by PSE be lifted;
(b) Raquel-Santos and Mallari be ordered to render an accounting of the stock
certificates within 60 days from receipt of the judgment, and upon failure to
do so, to jointly and severally pay Finvest P18,184,855.89, the value of
the stocks as of December 31, 1998; and (c) Raquel-Santos be ordered to
liquidate his cash advances amounting to P3,143,823.63 within 60 days
from receipt of the judgment or, in case of failure to do so, to consider the
same as unliquidated cash advances.[42]
On
the prayer to lift the indefinite suspension of Finvest by PSE, the trial court
found that there was, in fact, a need to allow Finvest’s operation to continue
to enable it to negotiate the terms and modes of payments with its claimants,
settle its obligations and fully ascertain its financial condition. On the
prayer to set a period within which to render the accounting, the trial court
held that there was no need to set a period as Section 4, Rule 39 of the Rules
on Civil Procedure already directs when such kind of judgment is enforceable.
Accordingly, the RTC modified its earlier decision in its Order dated February
1, 2005, thus:
WHEREFORE, plaintiff’s Motion for Partial Reconsideration is partially granted as follows –
a) The indefinite suspension of operation of plaintiff Finvest Corporation by the defendant Philippine Stock Exchange is lifted; and
b) The “Annex A” in the dispositive portion of the Judgment dated April 28, 2003 is modified to read as “Annex X.”
All other reliefs are denied.[43]
PSE appealed to the CA. Finvest
likewise filed a partial appeal. Raquel-Santos and Mallari also filed an appeal
with the CA but the same was deemed abandoned when they failed to file their
appellants’ brief.[44]
The appeals of Finvest and PSE were docketed as CA-G.R. CV No. 85176.
On August 9, 2006, the CA rendered a
Decision granting Finvest’s petition, thus:
WHEREFORE,
plaintiff-appellant Finvest’s partial appeal of the April 28, 2003 Judgment of
the Regional Trial Court of Makati City, Branch 138 is hereby GRANTED to the
effect that defendants-appellants Armand O. Raquel-Santos and Annalissa Mallari
are hereby given a period of sixty (60) days from the finality of this decision
to render an accounting and in the event that they will fail to do so, they are
hereby ordered to jointly and severally pay Finvest the amount of eighteen
million one hundred eighty-four thousand eight hundred fifty-five pesos and
eighty-nine centavos (P18,184,855.89), and for defendant-appellant
Raquel-Santos to pay three million one hundred forty-three thousand eight
hundred twenty-three pesos and sixty-three centavos (P3,143,823.63). As
for the appeal of defendant-appellant Philippine Stock Exchange, the same is
hereby DENIED for lack of merit.
SO ORDERED.[45]
For expediency and in the interest of speedy disposition of
justice, the CA set a 60-day period within which Raquel-Santos and Mallari
would render an accounting. The appellate court agreed that Raquel-Santos and
Mallari were guilty of gross negligence or bad faith for the wrongful
disposition of the proceeds of the sale of the shares of stock that were in
their custody. According to the CA, this circumstance justified the order for
them to pay P18,184,855.89, representing the various claims of clients,
and for Raquel-Santos to pay P3,143,823.63, representing unliquidated
cash advances, in the event they failed to render the necessary accounting within
the given period. Significantly, the CA also noted that Raquel-Santos and
Mallari did not even dispute the affidavit of Mr. Ernesto Lee regarding the
schedule of claims.
The CA opined that paragraph 5(a) of
the Pledge Agreement, giving PSE the right to sell Finvest’s seat in case of
default, pertained to default in the payment of obligations already determined
and established. The validity of the fines and penalties imposed by the PSE was
yet to be substantiated. PSE could not insist on selling Finvest’s seat unless
its claims had been resolved with finality. It was, thus, proper to enjoin PSE
from exercising whatever rights it had under the Pledge Agreement.
In their motion for reconsideration,[46] Raquel-Santos and Mallari protested the CA’s
order to hold them jointly and severally liable for the claims of Finvest’s
clients on the ground that this relief was not even prayed for in Finvest’s
complaint. They insisted that the proper procedure to render an accounting was
to specify the beginning balance, tack the values therefor, render an
accounting, and adjudge them liable for the deficiency, if any. They averred
that the beginning balance must be set out by the parties or, in case of
dispute, by the courts. PSE likewise filed a motion for reconsideration[47] reiterating
its arguments.
On October 11, 2006, the CA denied
the respective motions for reconsideration of the PSE and Raquel-Santos and
Mallari.[48] The CA
dismissed PSE’s motion for reconsideration for being a mere rehash of its
arguments. As for the issues raised by Raquel-Santos and Mallari, the CA
pronounced that its order to hold Raquel-Santos and Mallari liable for the
claims in case they failed to account for them was well within the reliefs
prayed for by Finvest in its Complaint. The CA added that Raquel-Santos and
Mallari could follow the proposed accounting procedure when they rendered an
accounting pursuant to the court’s order.
Raquel-Santos and Mallari and the PSE
filed separate petitions for review on certiorari
with this Court, docketed as G.R. Nos. 174986 and 175071, respectively,
assailing the August 9, 2006 CA Decision and October 11, 2006 Resolution. This
Court directed the consolidation of the two petitions.
G.R. No.
181415
The Court likewise directed the
consolidation of G.R. No. 181415, which stems from a case between Finvest and two
of its clients, Trans-Phil
Marine Enterprises, Inc. (TMEI) and Roland Garcia. The facts of the case are as
follows:
TMEI and Roland Garcia filed a
complaint against Finvest with the SEC praying for the delivery of stock
certificates and payment of dividends on the stocks they purchased. The
Complaint alleged that, from February 4, 1997 to July 31, 1997, TMEI and Roland
Garcia purchased shares of stock of Piltel Corporation through Finvest. In
particular, TMEI purchased 63,720 shares for P1,122,863.13 while Garcia
purchased 40,000 shares for P500,071.25. Finvest failed to deliver to
them the stock certificates despite several demands. TMEI and Roland Garcia also
claimed that they were entitled to the dividends declared by Piltel from the
time they purchased the shares of stock.
In its Answer, Finvest asserted that
it could not have complied with complainants’ demand for the delivery of the
stock certificates because it was under indefinite suspension since October
1997 and it had no means to verify or validate their claims.
During the pre-trial stage, TMEI
amended its complaint by modifying its prayer for a refund of the value of the
undelivered shares of stock, instead of the delivery of the stock certificates
plus payment of dividends.[49] In
the hearing conducted by the trial court for the purpose of determining the
propriety of admitting the amended complaint, Finvest manifested that it had no
objection to the admission of the amended complaint, and that it would no
longer file an amended answer. Both parties manifested that they were no longer
presenting any additional evidence; hence, the case was submitted for decision.[50]
On April 29, 2003, the RTC rendered a
Decision in Civil Case No. 00-1579, the dispositive portion of which reads:
WHEREFORE,
judgment is rendered ordering the respondent to return to complainant Trans-[Phil]
Marine Enterprises[,] Inc.[,] the value of the undelivered shares of stock of
Piltel equivalent to P1,122,863.13 and to complainant Roland H. Garcia
the value of the undelivered shares of stock of Piltel equivalent to P500,071.25,
both with interest thereon at the legal rate from the date of the filing of the
Complaint.
SO ORDERED.[51]
On June 6, 2005, the RTC modified its
earlier decision. The amount of P1,122,863.13 in the dispositive portion
was reduced to P1,078,313.13 based on evidence showing that 2,025 Piltel
shares, equivalent to P44,550.00, had been delivered to TMEI, which fact
was not denied by the latter.[52]
Finvest appealed to the CA. On September 3, 2007, the CA rendered a
Decision[53]
affirming the RTC Decision. Applying Article 1191 of the Civil Code, the CA
declared that since Finvest failed to comply with its obligation to deliver to
TMEI and Garcia the shares of stock, Finvest was bound to return the amounts
paid by them.
On January 24, 2008, the CA denied
Finvest’s motion for reconsideration;[54]
hence, the petition for review on certiorari,
docketed as G.R. No. 181415.
The Petition in G.R. No. 174986
Petitioners Raquel-Santos
and Mallari raise the following issues:
A. THE HONORABLE COURT OF APPEALS ERRED IN NOT FIXING A BEGINNING BALANCE FOR THE ACCOUNTING ORDERED.
B. THE HONORABLE COURT OF APPEALS HAD NO JURISDICTION TO ORDAIN THE PAYMENT OF THE SUPPOSED UNLIQUIDATED ADVANCES OF PETITIONER RAQUEL-SANTOS.[55]
While conceding that they have to
render an accounting of the claims stated in Annex “X,” petitioners bewail the
lack of statement of the beginning balance therefor. They aver that a sweeping
order for them to answer all these claims does not meet the standards of fair
play. They insist that, as pointed out in their motion for reconsideration
filed with the CA, the proper procedure is to specify the beginning balance
first.[56]
Petitioners, therefore, pray that judgment be rendered fixing the beginning
balance for the accounting ordered.
Petitioners further aver that the CA
exceeded its jurisdiction when it ordered them to pay unliquidated cash
advances. Petitioners point out that said unliquidated cash advances were not
alleged, and payment thereof was not prayed for, in the complaint.[57] The
alleged cash advances were only mentioned in the Supplemental Affidavit
submitted by Mr. Ernesto Lee to the trial court.[58]
They, therefore, pray that the order for Raquel-Santos to liquidate or pay his
cash advances be deleted.
The Petition in G.R. No. 175071
PSE assigns the following errors:
I.
THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER THE EVIDENCE CLEARLY SHOWING THAT THE AMOUNT OF LIABILITY OF RESPONDENT HAD ALREADY BEEN DETERMINED, SUBSTANTIATED AND ESTABLISHED NOT ONLY BY PETITIONER BUT ALSO WITH THE FULL KNOWLEDGE AND PARTICIPATION OF RESPONDENT.
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ENJOINING PETITIONER PSE FROM ENFORCING AND EXERCISING ITS RIGHT UNDER THE PLEDGE AGREEMENT.
III.
APPEAL BY CERTIORARI UNDER RULE 45 IS PROPER CONSIDERING THAT THE HONORABLE COURT OF APPEALS MISAPPREHENDED THE FACTS OF THE CASE.[59]
PSE contends that appeal by certiorari is proper considering that
the CA misapprehended the facts of the case. For one, the CA failed to consider
the fact that PSE’s claim against Finvest had been duly ascertained, computed
and substantiated. PSE points out that it has made several demands on Finvest
for the payment of its obligations and the amount due has been computed after
consultation with Finvest’s representative, Mr. Ernesto Lee. In fact, in his
Letter dated September 8, 1998, Finvest’s Chairman, Mr. Abelardo Licaros,
already acknowledged the amount of Finvest’s liabilities and obligations to PSE
in the amount of P4,212,921.13. Finvest even proposed that its
outstanding obligations to PSE be reduced to 10% of the total amount due and
the deadline for its payment be extended. Considering, therefore, that Finvest
already acknowledged and ascertained its obligations with PSE and yet it
defaulted in the payment thereof, PSE had the right to sell at public auction
Finvest’s pledged seat pursuant to the Pledge Agreement and in accordance with
Article 2112 of the Civil Code.
The Petition in G.R. No. 181415
In this petition, Finvest raises the
following grounds:
I.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE DECISION OF THE TRIAL COURT WHICH ORDERED THE RETURN OF THE VALUE OF THE UNDELIVERED SHARES OF STOCK AT THE TIME OF THE PURCHASE, WHICH AWARD OF DAMAGES HAVE NOT BEEN ESTABLISHED BY EVIDENCE.
II.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RENDERING THE DECISION WHICH TENDS TO BE IN CONFLICT WITH ANOTHER DECISION OF THE HONORABLE COURT OF APPEALS (SPECIAL FOURTEENTH DIVISION) IN CA-G.R. CV NO. 85176 (NOW PENDING BEFORE THE HONORABLE SUPREME COURT AS G.R. NO. 174986) INSOFAR AS THE AWARD OF DAMAGES TO RESPONDENTS IS CONCERNED, WHICH CONFLICTING FINDING WAS THE SAME SITUATION HEREIN PETITIONER SOUGHT TO AVOID WHEN IT MOVED FOR THE CONSOLIDATION OF BOTH CASES BEFORE THE TRIAL COURT.[60]
Finvest insists that the trial court
and the CA had no basis in awarding in favor of respondents damages equivalent
to the value of the undelivered shares of stock purchased by TMEI and Garcia.
Finvest posits that there was no evidence to show that respondents were
entitled thereto.
Finvest further contends that the
order for them to pay the said shares of stock is in conflict with the CA Decision
in CA-G.R. CV No. 85176, ordering Finvest’s officers to render an accounting or
to pay the value of stock certificates that included those covering the shares
of stock purchased by TMEI and Garcia. According to Finvest, the two judgments
caused an apparent confusion as to who would ultimately be held liable for the
subject shares.
Respondents
counter that they have sufficiently proven the value of the shares of stock
through the buy confirmation slips, vouchers and official receipts, which they
presented in evidence. They submit that liability for these undelivered shares
of stock of its officers is a corporate liability that Finvest may not pass on
to its erring officers.
The Court’s Ruling
G.R. No. 174986
The petition of Raquel-Santos and
Mallari has no merit.
The CA properly shunned petitioners’
prayer to further modify the assailed judgment to include a beginning balance
for the accounting ordered. It is well to note that petitioners’ appeal from
the decision of the lower court was deemed abandoned when they failed to file
their appellants’ brief. Not having filed an appeal, petitioners could not have
obtained any affirmative relief from the appellate court other than what they
obtained, if any, from the lower court. After all, a party who does not appeal from a judgment can no
longer seek modification or reversal of the same. He may oppose the
appeal of the other party only on grounds consistent with the judgment.[61] The
appealed decision becomes final as to the party who does not appeal.
Moreover, we find no reason, at this
point, to amend or modify the judgment of the CA just to include a statement of
the beginning balance for the accounting ordered. This pertains to the manner in
which petitioners would comply with the order to render an accounting upon its
execution, which matter should not concern this Court at the moment.
In any case, the Court is not in a
position to grant the relief prayed for since the proper beginning balance, if
indeed necessary, is not determinable from the records. In fact, petitioners,
being in possession of the records relative to the missing stock certificates,
have the means to determine the beginning balance. In their motion for
reconsideration of the CA Decision, petitioners themselves acknowledge that the
parties must set the beginning balance and only in case of dispute will the
courts be called upon to intervene.[62]
Although petitioners may no longer
seek affirmative relief from the trial court’s decision, they may, however,
oppose any modification of, or advance such arguments as may be necessary to
uphold or maintain, the said decision. Considering that the order directing the
payment of unliquidated cash advances is a modification of the trial court’s
decision, petitioners have every right to oppose the same.
To recall, respondent Finvest’s cause
of action against petitioners was for accounting and damages, arising from the
allegedly missing stock certificates. In relation to such cause of action,
Finvest alleged in the Complaint that petitioners had sole authority and
custody of the stock certificates and that they took undue advantage of their
positions in diverting to their personal benefit the proceeds from the sale of
the shares of stock. Finvest, therefore, prayed that Raquel-Santos and Mallari
be held “jointly and severally liable to account for and/or to pay for all
missing stock certificates and payables listed in Annex X [of the Complaint]
and for any other subsequent claims and the corresponding profits that could
have accrued to the corporation”; and “damages that the corporation may sustain
by reason of and/or in relation to such missing or unaccounted stock
certificates, payables, and any other subsequent claims.”
In refuting petitioners’ stance that
the CA erred in granting a relief not prayed for in the Complaint, respondent
argues that the order for Raquel-Santos to liquidate or pay his cash advances
was well within its prayer for the payment of damages that Finvest will sustain
in relation to the missing stock certificates.
It is true that lack of prayer for a
specific relief will not deter the court from granting that specific relief. Even without the prayer for a particular remedy,
proper relief may be granted by the court if the facts alleged in the complaint
and the evidence adduced so warrant. The prayer in the complaint for other
reliefs equitable and just in the premises justifies the
grant of a relief not otherwise specifically prayed for.[63]
Admittedly, even if an issue has not
been raised in the complaint but evidence has been presented thereon, the trial
court may grant relief on the basis of such evidence. A court may rule and render
judgment on the basis of the evidence before it, even though the relevant
pleading has not been previously amended, provided that no surprise or
prejudice to the adverse party is thereby caused.[64]
So long as the basic requirements of fair play have
been met, as where litigants were
given full opportunity to support their respective contentions and to object to
or refute each other’s evidence, the court may validly treat the pleadings as
if they have been amended to conform to the evidence and proceed to adjudicate
on the basis of all the evidence before it.[65]
Notably, the Complaint did not allege
that petitioner Raquel-Santos obtained from Finvest cash advances that he
failed to liquidate. The alleged cash advances were disclosed to the court in
the Supplemental Affidavit[66] that
Mr. Ernesto Lee submitted to the court. Attached to the Supplemental Affidavit
were copies of disbursement vouchers and checks representing the cash advances
made by petitioner Raquel-Santos.
We note that petitioner Raquel-Santos
did not protest the order for him to pay the cash advances in his Motion for
Reconsideration of the CA Decision. He raises the issue for the first time in
this petition, which should not be allowed. A question that was never raised in
courts below cannot be allowed to be raised for the first time on appeal
without offending basic rules of fair play, justice and due process.[67] In
any case, petitioner Raquel-Santos had every opportunity to refute the
Supplemental Affidavit, together with the vouchers and checks, but he did not
submit any counter evidence. Petitioner is clearly estopped from questioning
the order for him to pay the cash advances.
G.R.
No. 175071
PSE’s petition is without merit.
Article 1159 of the Civil
Code provides that contracts have the force of law between the contracting
parties and should be complied with in good faith. Being the primary law
between the parties, the contract governs the adjudication of
their rights and obligations. A court has no alternative but to enforce
the contractual stipulations in the manner they have been agreed upon and
written.[68]
The
Pledge Agreement between PSE and Finvest was entered into pursuant to PSE’s
by-laws which requires a member to pledge its membership seat to secure the
payment of all debts or obligations due PSE and its other members arising out
of, or in connection with, the present or future contracts of such member with
PSE and its members. In case of default in the payment of obligations, the
Pledge Agreement explicitly grants PSE the right to sell Finvest’s pledged seat,
viz.:
5. Default. In the event of a default by the PLEDGOR in respect to the Obligations or upon the failure of the PLEDGOR to comply with any of the provisions of this Agreement, the PLEDGEE may
(a) cause the public sale at any time as the PLEDGEE may elect at its place of business or elsewhere and the PLEDGEE may, in all allowable cases, acquire or purchase the Pledged Seat and hold the same thereafter in its own right free from any claim of the PLEDGOR;
(b) apply, at its option, the proceeds of any said sale, as well as all sums received or collected by the PLEDGEE from or on account of such Pledged Seat to (i) the payment of expenses incurred or paid by the PLEDGEE in connection with any sale, transfer or delivery of the Pledged Seat, and (ii) payment of the Obligations and all unpaid interests, penalties, damages, expenses, and charges accruing on the Obligations or pursuant to the By-laws and this Agreement. The balance shall be returned to the PLEDGOR.[69]
Article 2112 of the Civil Code also
gives the pledgee the same right to sell the thing pledged in case the
pledgor’s obligation is not satisfied in due time.
Under the law on contracts, mora solvendi or debtor’s default is defined as a delay in the fulfillment of an obligation, by reason of a cause imputable to the debtor. There are three
requisites necessary for a finding of default. First, the obligation
is demandable and liquidated; second, the debtor delays performance; and
third, the creditor judicially
or extrajudicially requires the debtor’s performance.[70]
In
the present petition, PSE insists that Finvest’s liability for fines, penalties
and charges has been established, determined and substantiated, hence, liquidated.
We note however that both
trial court and CA have ruled otherwise. Factual findings of the trial court,
particularly when affirmed by the CA, are generally binding on the Court.[71] This
is because the trial court’s findings of fact are deemed conclusive and we are
not duty-bound to analyze and weigh all over again the
evidence already considered in the proceedings below.[72] The
Court is not a trier of facts and does not normally undertake a re-examination
of the evidence presented by the contending parties during the trial of the
case.[73] The
Court’s jurisdiction over a petition for review on certiorari
is limited to reviewing only errors of law, not of fact, unless the factual
findings complained of are devoid of support from the evidence on record or the
assailed judgment is based on a misapprehension of facts.[74]
The findings
of fact of both the trial court and the CA are fully supported by the records.
They plainly show that the parties were negotiating to determine the exact
amount of Finvest’s obligations to PSE, during which period PSE repeatedly
moved the deadlines it imposed for Finvest to pay the fines, penalties and
charges, apparently to allow for more time to thresh out
the details of the
computation of said penalties. In the
middle of those talks,
PSE unceremoniously took steps to sell the pledged seat at public auction,
without allowing the negotiations to come to a conclusion. This sudden decision
of PSE deprived Finvest a sporting chance to settle its accountabilities before
forfeiting its seat in the stock exchange. Without that seat, Finvest will lose
its standing to trade and do business in the stock exchange.
A debt is liquidated when the amount
is known or is determinable by inspection of the terms and conditions of
relevant documents.[75]
Under the attendant circumstances, it cannot be said that Finvest’s debt is
liquidated. At the time PSE left the negotiating table, the exact amount of
Finvest’s fines, penalties and charges was still in dispute and as yet
undetermined. Consequently, Finvest cannot be deemed to have incurred in delay
in the payment of its obligations to PSE. It cannot be made to pay an
obligation the amount of which was not fully explained to it. The public sale
of the pledged seat would, thus, be premature.
G.R. No. 181415
Finvest’s petition is denied.
The CA was
correct in applying Article 1191 of the Civil Code, which indicates the
remedies of the injured party in case there is a breach of contract:
ART. 1191. The power to rescind obligations
is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
The injured party
may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after
he has chosen fulfillment, if the latter should become impossible.
Initially, respondents sought the
fulfillment of Finvest’s obligation to deliver the stock certificates, instead
of a rescission. They changed their minds later and amended the prayer in their
complaint and opted for a refund of the purchase price plus damages. The trial
court allowed the amendment, there being no objection from Finvest.
The right of a party to rescission under Article 1191 of the Civil Code is predicated on a breach
of faith by the other party who violates the reciprocity
between them.[76] In a contract of sale, the seller obligates itself to transfer the
ownership of and deliver a determinate thing, and the buyer
to pay therefor a price certain in money or its equivalent.
In some contracts of sale, such as the sale of real property, prior physical
delivery of the thing sold or its representation is not legally required, as the
execution of the Deed of Sale
effectively transfers ownership of the property to the
buyer through constructive delivery. Hence, delivery of the certificate of
title covering the real property is not necessary to transfer ownership.
In
the sale of shares of stock, physical delivery of a stock certificate is one of
the essential requisites for the transfer of ownership of the stocks purchased.
Section 63 of the Corporation Code
provides thus:
SEC. 63. Certificate of stock and transfer of shares. — The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.
No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.[77]
For a valid transfer of stocks, the
requirements are as follows: (a) there must be delivery of the stock
certificate; (b) the certificate must be endorsed by the owner or his
attorney-in-fact or other persons legally authorized to make the transfer; and
(c) to be valid against third parties, the transfer must be recorded in the
books of the corporation.[78]
Clearly, Finvest’s failure to deliver
the stock certificates representing the shares of stock purchased by TMEI and
Garcia amounted to a substantial breach of their contract which gave rise to a
right to rescind the sale.
Rescission creates the obligation to
return the object of the contract. This is evident from Article 1385 of the
Civil Code which provides:
ART. 1385.
Rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the price with
its interest; consequently, it can be carried out only when he who demands
rescission can return whatever he may be obliged to restore.
Neither
shall rescission take place when the things which are the
object of the contract are legally in the possession of third persons who did
not act in bad faith.
In this case, indemnity for damages may
be demanded from the person causing the loss.
To rescind is to declare a contract
void at its inception and to put an end to it as though it never was. Rescission
does not merely terminate the contract and release the parties from further
obligations to each other, but abrogates it from the beginning and restores the
parties to their relative positions as if no contract has been made.[79]
Mutual
restitution entails the return of the benefits that each party may have
received as a result of the contract. In
this case, it is the purchase price that Finvest must return. The amount paid
was sufficiently proven by the buy confirmation receipts, vouchers, and
official/provisional receipts that respondents presented in evidence. In
addition, the law awards damages to the injured party, which could be in the
form of interest on the price paid,[80]
as the trial court did in this case.
Lastly, we address respondents’
concern over Finvest’s attempt to pass its liability for the undelivered stock
certificates to its officers. We find
that, contrary to Finvest’s stance, the CA Decision in CA-G.R. CV No. 85176,
which is the subject of the two other petitions for review before this Court,
is not in conflict with our present resolution.
While the decision in the other case adjudges Finvest’s officers liable
to Finvest for the missing stock certificates, the assailed decision in this
petition makes Finvest directly responsible to its clients for undelivered
stock certificates. Moreover, even if Finvest’s officers are blameworthy, we
cannot hold them solidarily liable, as they were not impleaded as parties to
this case. Consolidation of cases does not make the parties to one case parties
to the other.
WHEREFORE, the
petitions in G.R. No. 174986 and G.R. No. 175071 are DENIED. The CA Decision in CA-G.R. CV No. 85176 dated August 9,
2006 and Resolution dated October 11, 2006 are AFFIRMED.
The petition in G.R. No. 181415 is likewise
DENIED. The CA Decision in CA-G.R.
CV No. 85430 dated September 3, 2007 and Resolution dated January 24, 2008 are AFFIRMED.
SO ORDERED.
ANTONIO
EDUARDO B. NACHURA
Associate
Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate
Justice
Chairperson
|
MINITA V. CHICO-NAZARIO Associate
Justice |
PRESBITERO J. VELASCO, JR. Associate
justice |
DIOSDADO M. PERALTA
Associate
Justice
A T T E S T A T I O N
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
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution
and the Division Chairperson's Attestation, I certify that the conclusions in
the above Decision had been 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 Ramon M. Bato, Jr., with Associate Justices Edgardo P. Cruz and Vicente Q. Roxas, concurring; rollo (G.R. No. 174986), pp. 29-39.
[2] Penned by Associate Justice Celia
C. Librea-Leagogo, with Associate Justices Amelita G. Tolentino and Regalado
[3] Records (Civil Case No. 00-1589), Vol. I, p. 1.
[4]
[5]
[6]
[7]
[8]
[9] Sec. 22(a)(5) of the Revised Securities Act (now Sec. 33.1[d] of The Securities Regulation Code) provides:
SEC. 22. Registration of exchange. — (a) Any exchange may be registered with the Commission as an exchange under the terms and conditions hereinafter provided in this Section, by filing a registration statement in such form as the Commission may prescribe, setting forth the information and accompanied by the following supporting documents below specified:
x x x x
(5) An undertaking that in the event a member firm becomes insolvent or when the exchange shall have found that the financial condition of its member firm has so deteriorated that it cannot readily meet the demands of its customers for the delivery of securities and/or payment of sales proceeds, the exchange shall, upon order of the Commission, take over the operation of the insolvent member firm and immediately proceed to settle the member firm’s liabilities to its customers: Provided, That stock exchanges in operation upon the effectivity of this Act shall have one year within which to submit the undertaking.
[10] Records (Civil Case No. 00-1589), Vol. I, pp. 117-119.
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]
[24]
[25]
[26]
[27] Records (Civil Case No. 00-1589), Vol. I, pp. 153-155.
[28]
[29]
[30]
[31]
[32]
[33] Records (Civil Case No. 00-1589), Vol. II, p. 7.
[34]
[35] Records (Civil Case No. 00-1589), Vol. I, pp. 387-393.
[36]
[37] Records (Civil Case No. 00-1589), Vol. II, pp. 61-66.
[38]
[39] Records (Civil Case No. 00-1589), Vol. III, p. 251.
[40] Records (Civil Case No. 00-1589), Vol. II, pp. 68-76.
[41] Records (Civil Case No. 00-1589), Vol. III, p. 285.
[42]
[43] CA rollo (CA G.R. CV No. 85176), p. 61.
[44]
[45] Rollo (G.R. No. 174986), p. 38.
[46] CA rollo (CA G.R. CV No. 85176), pp. 181-184.
[47]
[48] Rollo (G.R. No. 174986), pp. 41-42.
[49] Records (Civil Case No. 00-1579), pp. 120-121.
[50]
[51] Rollo (G.R. No. 181415), pp. 60-61.
[52]
[53] Supra note 2.
[54] Rollo (G.R. No. 181415), pp. 57-58.
[55] Rollo (G.R. No. 174986), p. 171.
[56]
[57]
[58]
[59] Rollo (G.R. No. 175071), pp. 201-202.
[60] Rollo (G.R. No. 181415), p. 21.
[61]
[62] CA
rollo (CA G.R. CV No. 85176), p. 183.
[63] United Overseas Bank of the
[64] Vlason Enterprises Corporation
v. CA, 369 Phil. 269, 304-305 (1999).
[65] Talisay-Silay Milling Co., Inc. v Asociacion de Agricultores de Talisay-Silay, Inc. G.R. No. 91852, August 15, 1995, 247 SCRA 361, 378.
[66] Records, Vol. II, Civil Case No. 00-1589, pp. 250-260.
[67] Ysmael v. Court of Appeals, 376 Phil. 323, 335 (1999).
[68] Pryce Corporation v. Philippine Amusement and Gaming Corporation, G.R. No. 157480, May 6, 2005, 458 SCRA 164, 175-176.
[69] Rollo (G.R. No. 175071), p. 93.
[70] Selegna Management and Development Corporation v. United Coconut Planters Bank, G.R. No. 165662, May 3, 2006, 489 SCRA 125, 138.
[71] Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No. 153874, March 1, 2007, 517 SCRA 180, 186.
[72] Calicdan v. Cendaña, G.R. No. 155080, February 5, 2004, 422 SCRA 272, 276.
[73] Delos
[74] Concepcion v. Court of Appeals, 381 Phil. 90, 96 (2000).
[75] Selegna Management and Development Corporation v. United Coconut Planters Bank, supra note 72, at 141.
[76] Sps. Velarde v. Court of Appeals, 413 Phil. 360, 373 (2001).
[77] Emphasis supplied.
[78] Bitong v. CA, 354 Phil. 516, 541 (1998).
[79] Sps. Velarde v. Court of Appeals, supra note 75, at 375.
[80] See Congregation of the Religious of the Virgin Mary v. Orola, G.R. No. 169790, April 30, 2008, 553 SCRA 578.