6 RaquelSantos vs. Court of Appeals

2/19/2016 SUPREMECOURTREPORTSANNOTATEDVOLUME592

http://www.central.com.ph/sfsreader/session/00000152f8b766ecadb32007003600fb002c009e/t/?o=False 1/33

Petition granted, Civil Case No. 05112452 entitled AnitaCheng vs. Sps. William Sy and Tesse Sy reinstated.

Note.When a party files a criminal case for violationof Batas Pambansa Blg. 22, his civil action for recovery ofthe amount of the dishonored check is impliedly institutedtherein pursuant to Section 1(b) of Rules 111 of the 2000Rules on Criminal Procedure. (Chieng vs. Santos, 531SCRA 730 [2007])

o0o

G.R. No. 174986.July 7, 2009.*

ARMAND O. RAQUELSANTOS and ANNALISSAMALLARI, petitioners, vs. COURT OF APPEALS andFINVEST SECURITIES CO., INC., respondents.

G.R. No. 175071.July 7, 2009.*

PHILIPPINE STOCK EXCHANGE, INC., petitioner, vs.FINVEST SECURITIES CO., INC., respondent.

G.R. No. 181415.July 7, 2009.*

FINVEST SECURITIES CO., INC., petitioner, vs. TRANSPHIL MARINE ENT., INC. and ROLAND H. GARCIA,respondents.

Pleadings and Practice It is well to note that petitionersappeal from the decision of the lower court was deemed abandonedwhen they failed to file their appellants brief.The CA properlyshunned petitioners prayer to further modify the assailedjudgment to include a beginning balance for the accountingordered. It is well to note that petitioners appeal from thedecision of the lower court was



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*THIRD DIVISION.

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170 SUPREME COURT REPORTS ANNOTATED

RaquelSantos vs. Court of Appeals

deemed abandoned when they failed to file their appellants brief.Not having filed an appeal, petitioners could not have obtainedany affirmative relief from the appellate court other than whatthey obtained, if any, from the lower court. After all, a party whodoes not appeal from a judgment can no longer seek modificationor reversal of the same. He may oppose the appeal of the otherparty only on grounds consistent with the judgment. Theappealed decision becomes final as to the party who does notappeal.

Courts The Court is not in a position to grant the reliefprayed for since the proper beginning balance, if indeed necessary,is not determinable from the records.The Court is not in aposition to grant the relief prayed for since the proper beginningbalance, if indeed necessary, is not determinable from the records.In fact, petitioners, being in possession of the records relative tothe missing stock certificates, have the means to determine thebeginning balance. In their motion for reconsideration of the CADecision, petitioners themselves acknowledge that the partiesmust set the beginning balance and only in case of dispute willthe courts be called upon to intervene.

Same Even without the prayer for a particular remedy, properrelief may be granted by the court if the facts alleged in thecomplaint and evidence adduced so warrant.It is true that lackof prayer for a specific relief will not deter the court from grantingthat specific relief. Even without the prayer for a particularremedy, proper relief may be granted by the court if the factsalleged in the complaint and the evidence adduced so warrant.The prayer in the complaint for other reliefs equitable and just inthe premises justifies the grant of a relief not otherwisespecifically prayed for. Admittedly, even if an issue has not beenraised in the complaint but evidence has been presented thereon,the trial court may grant relief on the basis of such evidence. Acourt may rule and render judgment on the basis of the evidence



before it, even though the relevant pleading has not beenpreviously amended, provided that no surprise or prejudice to theadverse party is thereby caused. So long as the basicrequirements of fair play have been met, as where litigants weregiven full opportunity to support their respective contentions andto object to or refute each others evidence, the court may validlytreat the pleadings as if they have been amended to conform tothe evidence and proceed to adjudicate on the basis of all theevidence before it.

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Same Contracts A court has no alternative but to enforce thecontractual stipulations in the manner they have been agreed uponand written.Article 1159 of the Civil Code provides thatcontracts have the force of law between the contracting partiesand should be complied with in good faith. Being the primary lawbetween the parties, the contract governs the adjudication of theirrights and obligations. A court has no alternative but to enforcethe contractual stipulations in the manner they have been agreedupon and written.

Same Same Obligations Under the law on contracts, morasolvendi or debtors default is defined as a delay in the fulfillmentof an obligation, by reason of a cause imputable to the debtor.Article 2112 of the Civil Code also gives the pledgee the sameright to sell the thing pledged in case the pledgors obligation isnot satisfied in due time. Under the law on contracts, morasolvendi or debtors default is defined as a delay in the fulfillmentof 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 debtordelays performance and third, the creditor judicially orextrajudicially requires the debtors performance.

Same Obligations A debt is liquidated when the amount isknown or is determinable by inspection of the terms and conditionsof relevant documents.A debt is liquidated when the amount isknown or is determinable by inspection of the terms andconditions of relevant documents. Under the attendantcircumstances, it cannot be said that Finvests debt is liquidated.At the time PSE left the negotiating table, the exact amount of



Finvests fines, penalties and charges was still in dispute and asyet undetermined. Consequently, Finvest cannot be deemed tohave incurred in delay in the payment of its obligations to PSE. Itcannot be made to pay an obligation the amount of which was notfully explained to it. The public sale of the pledged seat would,thus, be premature.

Obligations Contracts Rescission The right of a party torescission under Article 1191 of the Civil Code is predicated on abreach of faith by the other party who violates the reciprocitybetween them.The right of a party to rescission under Article1191 of the Civil Code is predicated on a breach of faith by theother party who violates the reciprocity between them. In acontract of sale, the seller

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obligates itself to transfer the ownership of and deliver adeterminate thing, and the buyer to pay therefor a price certain inmoney or its equivalent. In some contracts of sale, such as the saleof real property, prior physical delivery of the thing sold or itsrepresentation is not legally required, as the execution of theDeed of Sale effectively transfers ownership of the property to thebuyer through constructive delivery. Hence, delivery of thecertificate of title covering the real property is not necessary totransfer ownership.

Sales Shares of Stock In the sale of shares of stock, physicaldelivery of a stock certificate is one of the essential requisites forthe transfer of ownership of the stocks purchased.In the sale ofshares of stock, physical delivery of a stock certificate is one of theessential requisites for the transfer of ownership of the stockspurchased. Section 63 of the Corporation Code provides thus:SEC. 63. Certificate of stock and transfer of shares.The capitalstock of stock corporations shall be divided into shares for whichcertificates signed by the president or vicepresident,countersigned by the secretary or assistant secretary, and sealedwith the seal of the corporation shall be issued in accordance withthe bylaws. Shares of stock so issued are personal property andmay be transferred by delivery of the certificate or certificatesindorsed by the owner or his attorneyinfact or other personlegally authorized to make the transfer. No transfer, however,



shall be valid, except as between the parties, until the transfer isrecorded in the books of the corporation so as to show the namesof the parties to the transaction, the date of the transfer, thenumber of the certificate or certificates and the number of sharestransferred. No shares of stock against which the corporationholds any unpaid claim shall be transferable in the books of thecorporation.

Same Same Breach of Contract Finvests failure to deliverthe stock certificates representing the shares of stock purchased byTMEI and Garcia amounted to a substantial breach of theircontract which gave rise to a right to rescind the sale.For a validtransfer of stocks, the requirements are as follows: (a) there mustbe delivery of the stock certificate (b) the certificate must beendorsed by the owner or his attorneyinfact or other personslegally authorized to make the transfer and (c) to be valid againstthird parties, the transfer must be recorded in the books of thecorporation. Clearly, Finvests failure to deliver the stockcertificates representing the shares of stock

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purchased by TMEI and Garcia amounted to a substantial breachof their contract which gave rise to a right to rescind the sale.

Obligations Contracts Rescission Rescission creates theobligation to return the object of the contract.Rescission createsthe obligation to return the object of the contract. This is evidentfrom Article 1385 of the Civil Code which provides: ART. 1385.Rescission creates the obligation to return the things which werethe object of the contract, together with their fruits, and the pricewith its interest consequently, it can be carried out only when hewho demands rescission can return whatever he may be obliged torestore. Neither shall rescission take place when the things whichare the object of the contract are legally in the possession of thirdpersons who did not act in bad faith. In this case, indemnity fordamages may be demanded from the person causing the loss. Torescind is to declare a contract void at its inception and to put anend to it as though it never was. Rescission does not merelyterminate the contract and release the parties from furtherobligations to each other, but abrogates it from the beginning andrestores the parties to their relative positions as if no contract has



been made.

PETITIONS for review on certiorari of the decisions andresolutions of the Court of Appeals.

The facts are stated in the opinion of the Court. Efren C. Carag for petitioners Armand O. Raquel

Santos, et al. Rodrigo, Berenguer & Guno for petitioner Philippine

Stock Exchange, Inc. Martinez and Perez Law Offices for Finvest Securities,

Co., Inc. Marlon B. Mercado for TransPhil Marine Ent., Inc., et

al.

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174 SUPREME COURT REPORTS ANNOTATEDRaquelSantos vs. Court of Appeals

NACHURA,J.:Three petitions, arising from related events, were

consolidated by this Court: G.R. Nos. 174986 and 175071are petitions for review assailing the Court of Appeals (CA)Decision1 in CAG.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 Decision2in CAG.R. CV No. 85430 dated September 3, 2007, andResolution dated January 24, 2008. These cases cropped upfrom the failure of Finvest Securities Co., Inc. (Finvest) tomeet its obligations to its clients and the Philippine StockExchange (PSE), allegedly caused by mishandling ofFinvests funds and property by its officers.

G.R. Nos. 174986 and 175071

Finvest is a stock brokerage corporation duly organizedunder Philippine laws and is a member of the PSE with onemembership seat pledged to the latter. Armand O. RaquelSantos (RaquelSantos) was Finvests President andnominee to the PSE from February 20, 1990 to July 16,1998.3 Annalissa Mallari (Mallari) was FinvestsAdministrative Officer until December 31, 1998.4

In the course of its trading operations, Finvest incurredliabilities to PSE representing fines and penalties for nonpayment of its clearing house obligations. PSE also



received reports that Finvest was not meeting itsobligations to its

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1 Penned by Associate Justice Ramon M. Bato, Jr., with AssociateJustices Edgardo P. Cruz and Vicente Q. Roxas, concurring Rollo (G.R.No. 174986), pp. 2939.

2Penned by Associate Justice Celia C. LibreaLeagogo, with AssociateJustices Amelita G. Tolentino and Regalado E. Maambong, concurringRollo (G.R. No. 181415), pp. 3553.

3Records (Civil Case No. 001589), Vol. I, p. 1.4Id., at p. 2.

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clients.5 Consequently, PSE indefinitely suspended Finvestfrom trading. The Securities and Exchange Commission(SEC) also suspended its license as broker.6

On June 17, 1998, PSE demanded from Finvest thepayment of its obligations to the PSE in the amount ofP4,267,339.99 and to its (Finvests) clients within 15 days.7PSE also ordered Finvest to replace its nominee, RaquelSantos.8

Upon failure of Finvest to settle its obligations, PSEsought authority from the SEC to take over the operationsof Finvest in accordance with PSEs undertaking pursuantto Section 22(a)(5)9 of the Revised Securities Act. On July22, 1998, SEC acted favorably on PSEs request andauthorized it to take over the operations of Finvest in orderto continue preserving

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5Id., at p. 19.6Id., at p. 18.7Id., at p. 19.8Id., at p. 29.9 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 andconditions hereinafter provided in this Section, by filing a registrationstatement in such form as the Commission may prescribe, setting forththe information and accompanied by the following supporting documentsbelow specified:

xxxx(5)An undertaking that in the event a member firm becomes

insolvent or when the exchange shall have found that the financialcondition of its member firm has so deteriorated that it cannot readilymeet the demands of its customers for the delivery of securities and/orpayment of sales proceeds, the exchange shall, upon order of theCommission, take over the operation of the insolvent member firm andimmediately proceed to settle the member firms liabilities to itscustomers: Provided, That stock exchanges in operation upon theeffectivity of this Act shall have one year within which to submit theundertaking.

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the latters assets. Finvest was duly informed of the SECsdecision and was advised to refrain from making anypayment, delivery of securities, or selling or otherwiseencumbering any of its assets without PSEs approval.10

As of August 11, 1998, Finvests total obligation to PSE,representing penalties, charges and fines for violations ofpertinent rules, was pegged at P5,990,839.99.11 Finvestpromised to settle all obligations to its clients and to PSEsubject to verification of the amount due, but Finvestrequested a deadline of July 31, 1999.12 PSE grantedFinvests request, with the warning that, should Finvestfail to meet the deadline, PSE might exercise its right tosell Finvests membership seat and use the proceedsthereof to settle its obligations to the PSE, its memberbrokers and its clients.13 On the same day, Finvestrequested an appointment with PSEs concerned officer toreconcile, confirm and update the amount of the penalties,charges and fines due PSE. Finvest also advised PSE thatit 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 andfines 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 givena period of up to March 30, 1999 to settle claims of clients,subject to proper documents and verification of balanceand (2) that it be allowed to settle its liabilities to PSE atan amount lower than P4,212,921.13 (representingpenalties, charges and fines at P3,540,421.17 plussanctions for violation of rules at P675,500.00), consideringthat it had never unduly exposed

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10Records (Civil Case No. 001589), Vol. I, pp. 117119.11Id., at p. 21.12Id., at p. 22.13Id., at pp. 2425.14Id., at p. 27.15Id., at p. 28.

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PSE to any legal and financial risks in connection with itsclearing accounts.16

In reply, PSE required Finvest to acknowledge within 30days, in whole or in part, clients claims that had been filedwith the PSE and to settle all duly acknowledged claims byDecember 31, 1998. PSE resolved to consider the requestfor a reduction of its liabilities to PSE only after it hadsettled all duly acknowledged claims of its clients.17

On February 3, 1999, PSE inquired from Finvest if ithad already settled all duly acknowledged claims of itsclients and its liabilities to PSE.18 PSE also demanded thatFinvest settle its liabilities to it not later than March 31,1999. Finvest responded by proposing that the amount ofassessed penalties, charges and fines be reduced to 10%,that is, P354,042.17 and that full payment of the clientsclaims be deferred to June 30, 1999.19 Previously, Finvesthad also requested a written clearance from PSE forrenewal of the registration of its brokers and dealers withthe SEC.20

In its Letter of February 23, 1999, PSE informed Finvestthat it would only issue a written clearance after Finvest



had settled its obligations to PSE and paid allacknowledged liabilities to various clients.21 In response,Finvest repeated its appeal to be allowed to fully operateagain and to pay a reduced amount on the ground that ithad no adequate funds because it had been the victim offraud committed by its employees.22

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16Id., at pp. 3233.17Id., at pp. 3435.18Id., at p. 121.19Id., at p. 122.20Id., at p. 36.21Id., at p. 37.22Id., at pp. 3839.

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On April 21, 1999, PSE again sent a demand letter toFinvest, reminding the latter of the March 31, 1999deadline.23

On April 26, 1999, Finvest requested a hearing todetermine the amount of its liability and to exhaust thepossibility of arriving at a reasonable solution, andreiterated its appeal for the resumption of its operations.24PSE brushed aside Finvests request, urging it instead tosettle all of its obligations by May 31, 1999 otherwise, PSEwould be forced to recommend to the SEC the liquidation ofits assets and sell its seat at public auction,25 pursuant toits Pledge Agreement with Finvest. Finvest protested theimposition of the deadline for being arbitrary on the groundthat the claims against it had not yet been established.26

At this juncture, Finvest filed a Complaint with the SECfor accounting and damages with prayer for a temporaryrestraining order and/or preliminary injunction andmandamus against RaquelSantos, Mallari and PSE. Thecomplaint alleged that RaquelSantos and Mallari tookundue advantage of their positions by diverting to theirpersonal use and benefit the unaccounted stock certificatesand sales proceeds referred to in Annex X of the



complaint, which was a list of the claims of Finvests clientsas of December 31, 1998. Finvest prayed that RaquelSantos and Mallari be ordered to account for the missingstock certificates and sales proceeds and to pay the profitsthat would have accrued to Finvest. As against PSE, thecomplaint alleged that PSE violated Finvests right to dueprocess by illegally and arbitrarily suspending Finvestsoperations, thus compounding its inability to meet thedemands of its clients and by unilaterally and arbitrarilyimposing upon Finvest fines and penalties, without ahearing. The complaint prayed that an injunction be

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23Id., at p. 123.24Id., at p. 44.25Id., at p. 45.26Id., at pp. 4647.

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issued to prevent PSE from initiating the liquidation ofFinvest and selling Finvests seat at public auction.

Alleging that RaquelSantos and Mallari failed to filetheir Answer within the reglementary period, Finvestmoved for a partial judgment against them.27 On February4, 2000, SEC, through a Hearing Panel, rendered a PartialJudgment28 against RaquelSantos and Mallari, orderingthem to account for the missing stock certificates and paythe damages that Finvest may sustain.

RaquelSantos and Mallari filed separate motions to setaside the partial judgment, alleging nonreceipt ofsummons. In an Order dated April 10, 2000, SEC denieddue course to the two motions.29 Thereafter, the SECHearing Panel issued a writ of execution.30

Consequently, notices of garnishment and sale wereissued against RaquelSantos Manila Golf Shares and Sta.Elena Golf Shares.31 RaquelSantos moved for thecancellation of the notice of sale, arguing that there was nobasis for the sale of his shares as there was no moneyjudgment involved, only an accounting of the allegedlymissing stock certificates. According to him, only after it is



established that there were missing certificates should hebe held accountable. In the same motion, RaquelSantosalso endeavored to make an accounting of the stockcertificates through the following documents: (a) a 35pageStock Ledger of an inventory of securities/stock certificatesas of July 31, 1998 (b) a 24page inventory as of July 31,1998 of stocks in the vault of Finvest and (c) a 5pageinventory of the securities on deposit with the PhilippineCentral Depository, Inc.32

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27Records (Civil Case No. 001589), Vol. I, pp. 153155.28Id., at pp. 157162.29Id., at p. 256.30Id., at pp. 268271.31Id., at pp. 366371.32Id., at pp. 392394.

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On June 29, 2000, the parties entered into anAgreement,33 approved by the SEC en banc in its Order34 ofJuly 11, 2000, to remand the case to the SecuritiesInvestigation and Clearing Division for service ofsummonses to RaquelSantos and Mallari. In turn, RaquelSantos and Mallari agreed not to dispose of or transfer thegarnished properties in the meantime, but the writs ofgarnishment would remain in force during the pendency ofthe case.

Meanwhile, on June 5, 2000, the SEC Hearing Panelgranted Finvests motion for the issuance of a preliminaryinjunction to enjoin PSE from initiating the liquidation ofFinvest and from selling its membership seat. The SECHearing Panel ratiocinated that PSEs plan to sell Finvestsmembership seat at public auction, despite the fact that itsclaims against Finvest were yet to be determined in theseproceedings, was reason enough for the issuance of apreliminary injunction.35 Upon posting of the requiredbond, the SEC Hearing Panel issued a writ of preliminaryinjunction on June 21, 2000.36



With the enactment of the Securities Regulation Code,the case was transferred to the Regional Trial Court (RTC),Makati City, and docketed as Civil Case No. 001589.

On October 2, 2001, the RTC issued an Order lifting thegarnishment of RaquelSantos Manila Golf Club share onthe ground that there must be a proper accounting todetermine the amount for which RaquelSantos andMallari were to be held jointly and severally liable toFinvest before a writ of garnishment may be validlyissued.37 As a result, Finvest filed a motion forreconsideration and a motion to respect the SEC en bancOrder dated July 11, 2000. The motions were denied

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33Records (Civil Case No. 001589), Vol. II, p. 7.34Id., at p. 6.35Records (Civil Case No. 001589), Vol. I, pp. 387393.36Id., at p. 457.37Records (Civil Case No. 001589), Vol. II, pp. 6166.

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by the RTC in its May 30, 2002 Order.38 Through a petitionfor certiorari, the October 2, 2001 Order of the RTC wassubsequently modified by the CA on December 9, 2002. TheCA held that the sale of RaquelSantos share in ManilaGolf Club was valid, subject to the outcome of the maincase (Civil Case No. 001589). The parties were furtherenjoined 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 theWrit of Preliminary Injunction and/or Motion forReconsideration40 on the ground that it had the legalobligation to make the appropriate recommendations to theSEC on whether or not it would be to the best interest of allconcerned for Finvest to be liquidated at the soonestpossible time.

On April 28, 2003, the RTC issued a judgment in CivilCase No. 001589 in favor of Finvest:

WHEREFORE, judgment is rendered directing that the writ



of preliminary injunction issued on June 21, 2000 be declaredpermanent. Respondents RaquelSantos and Mallari are orderedto render an accounting of the stock certificates listed in Annex Aof the Complaint.

SO ORDERED.41

The trial court noted that Finvest had not been remissin addressing its dispute with the PSE. When PSEmanifested its intent to liquidate Finvest and sell its seatat public auction, the amount of Finvests liability was stillunsettled, which thus makes it doubtful whether Section22(a)(5) would apply. On the issue between Finvest and itsofficers (RaquelSantos and Mallari), the trial court heldthat Finvest could rightfully demand an accounting fromthem and hold them

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38Id., at p. 414.39Records (Civil Case No. 001589), Vol. III, p. 251.40Records (Civil Case No. 001589), Vol. II, pp. 6876.41Records (Civil Case No. 001589), Vol. III, p. 285.

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liable for unaccounted securities since RaquelSantosexercised control and supervision over the tradingoperations of Finvest and he and Mallari had custody of allsecurities traded.

On September 12, 2003, Finvest sought a partialreconsideration of the RTC Judgment praying that: (a)Finvests indefinite suspension by PSE be lifted (b)RaquelSantos and Mallari be ordered to render anaccounting of the stock certificates within 60 days fromreceipt of the judgment, and upon failure to do so, to jointlyand severally pay Finvest P18,184,855.89, the value of thestocks as of December 31, 1998 and (c) RaquelSantos beordered to liquidate his cash advances amounting toP3,143,823.63 within 60 days from receipt of the judgmentor, in case of failure to do so, to consider the same asunliquidated 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 needto allow Finvests operation to continue to enable it tonegotiate the terms and modes of payments with itsclaimants, settle its obligations and fully ascertain itsfinancial condition. On the prayer to set a period withinwhich to render the accounting, the trial court held thatthere was no need to set a period as Section 4, Rule 39 ofthe Rules on Civil Procedure already directs when suchkind of judgment is enforceable. Accordingly, the RTCmodified its earlier decision in its Order dated February 1,2005, thus:

WHEREFORE, plaintiffs Motion for Partial Reconsideration ispartially granted as follows

a)The indefinite suspension of operation of plaintiff FinvestCorporation by the defendant Philippine Stock Exchange islifted and

b)The Annex A in the dispositive portion of the Judgmentdated April 28, 2003 is modified to read as Annex X.

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42Id., at p. 290.

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All other reliefs are denied.43

PSE appealed to the CA. Finvest likewise filed a partialappeal. RaquelSantos and Mallari also filed an appealwith the CA but the same was deemed abandoned whenthey failed to file their appellants brief.44 The appeals ofFinvest and PSE were docketed as CAG.R. CV No. 85176.

On August 9, 2006, the CA rendered a Decision grantingFinvests petition, thus:

WHEREFORE, plaintiffappellant Finvests partial appeal ofthe April 28, 2003 Judgment of the Regional Trial Court ofMakati City, Branch 138 is hereby GRANTED to the effect thatdefendantsappellants Armand O. RaquelSantos and AnnalissaMallari are hereby given a period of sixty (60) days from thefinality of this decision to render an accounting and in the eventthat they will fail to do so, they are hereby ordered to jointly and



severally pay Finvest the amount of eighteen million one hundredeightyfour thousand eight hundred fiftyfive pesos and eightynine centavos (P18,184,855.89), and for defendantappellantRaquelSantos to pay three million one hundred fortythreethousand eight hundred twentythree pesos and sixtythreecentavos (P3,143,823.63). As for the appeal of defendantappellantPhilippine Stock Exchange, the same is hereby DENIED for lackof merit.

SO ORDERED.45

For expediency and in the interest of speedy dispositionof justice, the CA set a 60day period within which RaquelSantos and Mallari would render an accounting. Theappellate court agreed that RaquelSantos and Mallariwere guilty of gross negligence or bad faith for the wrongfuldisposition of the proceeds of the sale of the shares of stockthat were in their custody. According to the CA, thiscircumstance justified the order for them to payP18,184,855.89, representing the various claims of clients,and for RaquelSantos to pay

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43CA Rollo (CA G.R. CV No. 85176), p. 61.44Id., at p. 162.45Rollo (G.R. No. 174986), p. 38.

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P3,143,823.63, representing unliquidated cash advances, inthe event they failed to render the necessary accountingwithin the given period. Significantly, the CA also notedthat RaquelSantos and Mallari did not even dispute theaffidavit of Mr. Ernesto Lee regarding the schedule ofclaims.

The CA opined that paragraph 5(a) of the PledgeAgreement, giving PSE the right to sell Finvests seat incase of default, pertained to default in the payment ofobligations already determined and established. Thevalidity of the fines and penalties imposed by the PSE wasyet to be substantiated. PSE could not insist on sellingFinvests seat unless its claims had been resolved with



finality. It was, thus, proper to enjoin PSE from exercisingwhatever rights it had under the Pledge Agreement.

In their motion for reconsideration,46 RaquelSantos andMallari protested the CAs order to hold them jointly andseverally liable for the claims of Finvests clients on theground that this relief was not even prayed for in Finvestscomplaint. They insisted that the proper procedure torender an accounting was to specify the beginning balance,tack the values therefor, render an accounting, and adjudgethem liable for the deficiency, if any. They averred that thebeginning balance must be set out by the parties or, in caseof dispute, by the courts. PSE likewise filed a motion forreconsideration47 reiterating its arguments.

On October 11, 2006, the CA denied the respectivemotions for reconsideration of the PSE and RaquelSantosand Mallari.48 The CA dismissed PSEs motion forreconsideration for being a mere rehash of its arguments.As for the issues raised by RaquelSantos and Mallari, theCA pronounced that its order to hold RaquelSantos andMallari liable for the claims in case they failed to accountfor them was well within the

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46CA Rollo (CA G.R. CV No. 85176), pp. 181184.47Id., at pp. 186194.48Rollo (G.R. No. 174986), pp. 4142.

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reliefs prayed for by Finvest in its Complaint. The CAadded that RaquelSantos and Mallari could follow theproposed accounting procedure when they rendered anaccounting pursuant to the courts order.

RaquelSantos and Mallari and the PSE filed separatepetitions for review on certiorari with this Court, docketedas G.R. Nos. 174986 and 175071, respectively, assailing theAugust 9, 2006 CA Decision and October 11, 2006Resolution. This Court directed the consolidation of the twopetitions.

G.R. No. 181415



The Court likewise directed the consolidation of G.R. No.181415, which stems from a case between Finvest and twoof its clients, TransPhil Marine Enterprises, Inc. (TMEI)and Roland Garcia. The facts of the case are as follows:

TMEI and Roland Garcia filed a complaint againstFinvest with the SEC praying for the delivery of stockcertificates and payment of dividends on the stocks theypurchased. The Complaint alleged that, from February 4,1997 to July 31, 1997, TMEI and Roland Garcia purchasedshares of stock of Piltel Corporation through Finvest. Inparticular, TMEI purchased 63,720 shares forP1,122,863.13 while Garcia purchased 40,000 shares forP500,071.25. Finvest failed to deliver to them the stockcertificates despite several demands. TMEI and RolandGarcia also claimed that they were entitled to thedividends declared by Piltel from the time they purchasedthe shares of stock.

In its Answer, Finvest asserted that it could not havecomplied with complainants demand for the delivery of thestock certificates because it was under indefinitesuspension since October 1997 and it had no means toverify or validate their claims.

During the pretrial stage, TMEI amended its complaintby modifying its prayer for a refund of the value of theundelivered shares of stock, instead of the delivery of thestock cer

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tificates plus payment of dividends.49 In the hearingconducted by the trial court for the purpose of determiningthe propriety of admitting the amended complaint, Finvestmanifested that it had no objection to the admission of theamended complaint, and that it would no longer file anamended answer. Both parties manifested that they wereno longer presenting any additional evidence hence, thecase was submitted for decision.50

On April 29, 2003, the RTC rendered a Decision in CivilCase No. 001579, the dispositive portion of which reads:

WHEREFORE, judgment is rendered ordering the respondentto return to complainant Trans[Phil] Marine Enterprises[,] Inc.[,]



the value of the undelivered shares of stock of Piltel equivalent toP1,122,863.13 and to complainant Roland H. Garcia the value ofthe undelivered shares of stock of Piltel equivalent toP500,071.25, both with interest thereon at the legal rate from thedate 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 wasreduced to P1,078,313.13 based on evidence showing that2,025 Piltel shares, equivalent to P44,550.00, had beendelivered to TMEI, which fact was not denied by thelatter.52

Finvest appealed to the CA. On September 3, 2007, theCA rendered a Decision53 affirming the RTC Decision.Applying Article 1191 of the Civil Code, the CA declaredthat since Finvest failed to comply with its obligation todeliver to TMEI and Garcia the shares of stock, Finvestwas bound to return the amounts paid by them.

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49Records (Civil Case No. 001579), pp. 120121.50Id., at p. 251.51Rollo (G.R. No. 181415), pp. 6061.52Id., at p. 63.53Supra note 2.

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On January 24, 2008, the CA denied Finvests motion forreconsideration54 hence, the petition for review oncertiorari, docketed as G.R. No. 181415.

The Petition in G.R. No. 174986

Petitioners RaquelSantos and Mallari raise thefollowing issues:

A.THE HONORABLE COURT OF APPEALS ERRED INNOT FIXING A BEGINNING BALANCE FOR THEACCOUNTING ORDERED.



B.THE HONORABLE COURT OF APPEALS HAD NOJURISDICTION TO ORDAIN THE PAYMENT OF THESUPPOSED UNLIQUIDATED ADVANCES OFPETITIONER RAQUELSANTOS.55

While conceding that they have to render an accountingof the claims stated in Annex X, petitioners bewail thelack of statement of the beginning balance therefor. Theyaver that a sweeping order for them to answer all theseclaims does not meet the standards of fair play. They insistthat, as pointed out in their motion for reconsideration filedwith the CA, the proper procedure is to specify thebeginning balance first.56 Petitioners, therefore, pray thatjudgment be rendered fixing the beginning balance for theaccounting ordered.

Petitioners further aver that the CA exceeded itsjurisdiction when it ordered them to pay unliquidated cashadvances. Petitioners point out that said unliquidated cashadvances were not alleged, and payment thereof was notprayed for, in the complaint.57 The alleged cash advanceswere only mentioned in the Supplemental Affidavitsubmitted by Mr.

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54Rollo (G.R. No. 181415), pp. 5758.55Rollo (G.R. No. 174986), p. 171.56Id., at pp. 171173.57Id., at pp. 173175.

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Ernesto Lee to the trial court.58 They, therefore, pray thatthe order for RaquelSantos to liquidate or pay his cashadvances be deleted.


PSE assigns the following errors:

I.THE HONORABLE COURT OF APPEALS FAILED TO



CONSIDER THE EVIDENCE CLEARLY SHOWING THAT THEAMOUNT OF LIABILITY OF RESPONDENT HAD ALREADYBEEN DETERMINED, SUBSTANTIATED AND ESTABLISHEDNOT ONLY BY PETITIONER BUT ALSO WITH THE FULLKNOWLEDGE AND PARTICIPATION OF RESPONDENT.

II.THE HONORABLE COURT OF APPEALS GRAVELY ERREDIN ENJOINING PETITIONER PSE FROM ENFORCING ANDEXERCISING ITS RIGHT UNDER THE PLEDGEAGREEMENT.

III.APPEAL BY CERTIORARI UNDER RULE 45 IS PROPERCONSIDERING THAT THE HONORABLE COURT OFAPPEALS MISAPPREHENDED THE FACTS OF THE CASE.59

PSE contends that appeal by certiorari is properconsidering that the CA misapprehended the facts of thecase. For one, the CA failed to consider the fact that PSEsclaim against Finvest had been duly ascertained, computedand substantiated. PSE points out that it has made severaldemands on Finvest for the payment of its obligations andthe amount due has been computed after consultation withFinvests representative, Mr. Ernesto Lee. In fact, in hisLetter dated September 8, 1998, Finvests Chairman, Mr.Abelardo

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58Id., at pp. 175176.59Rollo (G.R. No. 175071), pp. 201202.

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Licaros, already acknowledged the amount of Finvestsliabilities and obligations to PSE in the amount ofP4,212,921.13. Finvest even proposed that its outstandingobligations to PSE be reduced to 10% of the total amountdue and the deadline for its payment be extended.Considering, therefore, that Finvest already acknowledgedand ascertained its obligations with PSE and yet itdefaulted in the payment thereof, PSE had the right to sellat public auction Finvests pledged seat pursuant to the



Pledge Agreement and in accordance with Article 2112 ofthe Civil Code.


In this petition, Finvest raises the following grounds:

I.WITH ALL DUE RESPECT, THE HONORABLE COURT OFAPPEALS GRAVELY ERRED IN AFFIRMING THE DECISIONOF THE TRIAL COURT WHICH ORDERED THE RETURN OFTHE VALUE OF THE UNDELIVERED SHARES OF STOCK ATTHE TIME OF THE PURCHASE, WHICH AWARD OFDAMAGES HAVE NOT BEEN ESTABLISHED BY EVIDENCE.

II.WITH ALL DUE RESPECT, THE HONORABLE COURT OFAPPEALS GRAVELY ERRED IN RENDERING THE DECISIONWHICH TENDS TO BE IN CONFLICT WITH ANOTHERDECISION OF THE HONORABLE COURT OF APPEALS(SPECIAL FOURTEENTH DIVISION) IN CAG.R. CV NO. 85176(NOW PENDING BEFORE THE HONORABLE SUPREMECOURT AS G.R. NO. 174986) INSOFAR AS THE AWARD OFDAMAGES TO RESPONDENTS IS CONCERNED, WHICHCONFLICTING FINDING WAS THE SAME SITUATIONHEREIN PETITIONER SOUGHT TO AVOID WHEN IT MOVEDFOR THE CONSOLIDATION OF BOTH CASES BEFORE THETRIAL COURT.60

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60Rollo (G.R. No. 181415), p. 21.

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Finvest insists that the trial court and the CA had nobasis in awarding in favor of respondents damagesequivalent to the value of the undelivered shares of stockpurchased by TMEI and Garcia. Finvest posits that therewas no evidence to show that respondents were entitledthereto.

Finvest further contends that the order for them to paythe said shares of stock is in conflict with the CA Decision



in CAG.R. CV No. 85176, ordering Finvests officers torender an accounting or to pay the value of stockcertificates that included those covering the shares of stockpurchased by TMEI and Garcia. According to Finvest, thetwo judgments caused an apparent confusion as to whowould ultimately be held liable for the subject shares.

Respondents counter that they have sufficiently proventhe value of the shares of stock through the buyconfirmation slips, vouchers and official receipts, whichthey presented in evidence. They submit that liability forthese undelivered shares of stock of its officers is acorporate liability that Finvest may not pass on to itserring officers.

The Courts Ruling

G.R. No. 174986The petition of RaquelSantos and Mallari has no merit.The CA properly shunned petitioners prayer to further

modify the assailed judgment to include a beginningbalance for the accounting ordered. It is well to note thatpetitioners appeal from the decision of the lower court wasdeemed abandoned when they failed to file their appellantsbrief. Not having filed an appeal, petitioners could not haveobtained any affirmative relief from the appellate courtother than what they obtained, if any, from the lower court.After all, a party who does not appeal from a judgment canno longer seek modification or reversal of the same. Hemay oppose the appeal of the other party only on groundsconsistent with the

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judgment.61 The appealed decision becomes final as to theparty who does not appeal.

Moreover, we find no reason, at this point, to amend ormodify the judgment of the CA just to include a statementof the beginning balance for the accounting ordered. Thispertains to the manner in which petitioners would complywith 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, ifindeed necessary, is not determinable from the records. Infact, petitioners, being in possession of the records relativeto the missing stock certificates, have the means todetermine the beginning balance. In their motion forreconsideration of the CA Decision, petitioners themselvesacknowledge that the parties must set the beginningbalance and only in case of dispute will the courts be calledupon to intervene.62

Although petitioners may no longer seek affirmativerelief from the trial courts decision, they may, however,oppose any modification of, or advance such arguments asmay be necessary to uphold or maintain, the said decision.Considering that the order directing the payment ofunliquidated cash advances is a modification of the trialcourts decision, petitioners have every right to oppose thesame.

To recall, respondent Finvests cause of action againstpetitioners was for accounting and damages, arising fromthe allegedly missing stock certificates. In relation to suchcause of action, Finvest alleged in the Complaint thatpetitioners had sole authority and custody of the stockcertificates and that they took undue advantage of theirpositions in diverting to their personal benefit the proceedsfrom the sale of the shares of stock. Finvest, therefore,prayed that RaquelSantos

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61Silliman University v. FonteloPaalan, G.R. No. 170948, June 26,2007, 525 SCRA 759, 771.

62CA Rollo (CA G.R. CV No. 85176), p. 183.

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and Mallari be held jointly and severally liable to accountfor and/or to pay for all missing stock certificates andpayables listed in Annex X [of the Complaint] and for anyother subsequent claims and the corresponding profits thatcould have accrued to the corporation and damages thatthe corporation may sustain by reason of and/or in relationto 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 RaquelSantos toliquidate or pay his cash advances was well within itsprayer for the payment of damages that Finvest willsustain in relation to the missing stock certificates.

It is true that lack of prayer for a specific relief will notdeter the court from granting that specific relief. Evenwithout the prayer for a particular remedy, proper reliefmay be granted by the court if the facts alleged in thecomplaint and the evidence adduced so warrant. Theprayer in the complaint for other reliefs equitable and justin the premises justifies the grant of a relief not otherwisespecifically prayed for.63

Admittedly, even if an issue has not been raised in thecomplaint but evidence has been presented thereon, thetrial court may grant relief on the basis of such evidence. Acourt may rule and render judgment on the basis of theevidence before it, even though the relevant pleading hasnot been previously amended, provided that no surprise orprejudice to the adverse party is thereby caused.64 So longas the basic requirements of fair play have been met, aswhere litigants were given full opportunity to support theirrespective conten

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63United Overseas Bank of the Philippines v. Rosemoor Mining andDevelopment Corporation, G.R. No. 172651, October 2, 2007, 534 SCRA528, 551.

64Vlason Enterprises Corporation v. Court of Appeals, 369 Phil. 269,304305 310 SCRA 26, 59 (1999).

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tions and to object to or refute each others evidence, thecourt may validly treat the pleadings as if they have beenamended to conform to the evidence and proceed toadjudicate on the basis of all the evidence before it.65

Notably, the Complaint did not allege that petitionerRaquelSantos obtained from Finvest cash advances that



he failed to liquidate. The alleged cash advances weredisclosed to the court in the Supplemental Affidavit66 thatMr. Ernesto Lee submitted to the court. Attached to theSupplemental Affidavit were copies of disbursementvouchers and checks representing the cash advances madeby petitioner RaquelSantos.

We note that petitioner RaquelSantos did not protestthe order for him to pay the cash advances in his Motion forReconsideration of the CA Decision. He raises the issue forthe first time in this petition, which should not be allowed.A question that was never raised in courts below cannot beallowed to be raised for the first time on appeal withoutoffending basic rules of fair play, justice and due process.67In any case, petitioner RaquelSantos had everyopportunity to refute the Supplemental Affidavit, togetherwith the vouchers and checks, but he did not submit anycounter evidence. Petitioner is clearly estopped fromquestioning the order for him to pay the cash advances.G.R. No. 175071

PSEs petition is without merit.Article 1159 of the Civil Code provides that contracts

have the force of law between the contracting parties andshould be

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65 TalisaySilay Milling Co., Inc. v Asociacion de Agricultores deTalisaySilay, Inc., G.R. No. 91852, August 15, 1995, 247 SCRA 361, 378.

66Records, Vol. II, Civil Case No. 001589, pp. 250260.67Ysmael v. Court of Appeals, 376 Phil. 323, 335 318 SCRA 215, 227

(1999).

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complied with in good faith. Being the primary lawbetween the parties, the contract governs the adjudicationof their rights and obligations. A court has no alternativebut to enforce the contractual stipulations in the mannerthey have been agreed upon and written.68

The Pledge Agreement between PSE and Finvest wasentered into pursuant to PSEs bylaws which requires amember to pledge its membership seat to secure the



payment of all debts or obligations due PSE and its othermembers arising out of, or in connection with, the presentor future contracts of such member with PSE and itsmembers. In case of default in the payment of obligations,the Pledge Agreement explicitly grants PSE the right tosell Finvests pledged seat, viz.:

5.Default. In the event of a default by the PLEDGOR in respect tothe Obligations or upon the failure of the PLEDGOR to comply with anyof the provisions of this Agreement, the PLEDGEE may

(a)cause the public sale at any time as the PLEDGEE mayelect at its place of business or elsewhere and thePLEDGEE may, in all allowable cases, acquire or purchasethe Pledged Seat and hold the same thereafter in its ownright free from any claim of the PLEDGOR

(b)apply, at its option, the proceeds of any said sale, as wellas all sums received or collected by the PLEDGEE from oron account of such Pledged Seat to (i) the payment ofexpenses incurred or paid by the PLEDGEE in connectionwith 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 theObligations or pursuant to the Bylaws and this Agreement.The balance shall be returned to the PLEDGOR.69

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68Pryce Corporation v. Philippine Amusement and GamingCorporation, G.R. No. 157480, May 6, 2005, 458 SCRA 164, 175176.

69Rollo (G.R. No. 175071), p. 93.

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Article 2112 of the Civil Code also gives the pledgee thesame right to sell the thing pledged in case the pledgorsobligation is not satisfied in due time.

Under the law on contracts, mora solvendi or debtorsdefault is defined as a delay in the fulfillment of anobligation, by reason of a cause imputable to the debtor.There are three requisites necessary for a finding ofdefault. First, the obligation is demandable and liquidatedsecond, the debtor delays performance and third, the



creditor judicially or extrajudicially requires the debtorsperformance.70

In the present petition, PSE insists that Finvestsliability for fines, penalties and charges has beenestablished, determined and substantiated, hence,liquidated.

We note however that both trial court and CA haveruled otherwise. Factual findings of the trial court,particularly when affirmed by the CA, are generallybinding on the Court.71 This is because the trial courtsfindings of fact are deemed conclusive and we are not dutybound to analyze and weigh all over again the evidencealready considered in the proceedings below.72 The Court isnot a trier of facts and does not normally undertake a reexamination of the evidence presented by the contendingparties during the trial of the case.73 The Courtsjurisdiction over a petition for review on certiorari islimited to reviewing only errors of law, not of fact, unlessthe factual findings complained of are devoid of sup

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70 Selegna Management and Development Corporation v. UnitedCoconut Planters Bank, G.R. No. 165662, May 3, 2006, 489 SCRA 125,138.

71Titan Construction Corporation v. UniField Enterprises, Inc., G.R.No. 153874, March 1, 2007, 517 SCRA 180, 186.

72Calicdan v. Cendaa, G.R. No. 155080, February 5, 2004, 422 SCRA272, 276.

73Delos Santos v. Elizalde, G.R. Nos. 141810, February 2, 2007, 514SCRA 14, 33.

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port from the evidence on record or the assailed judgmentis based on a misapprehension of facts.74

The findings of fact of both the trial court and the CAare fully supported by the records. They plainly show thatthe parties were negotiating to determine the exact amountof Finvests obligations to PSE, during which period PSErepeatedly moved the deadlines it imposed for Finvest to



pay the fines, penalties and charges, apparently to allowfor more time to thresh out the details of the computationof said penalties. In the middle of those talks, PSEunceremoniously took steps to sell the pledged seat atpublic auction, without allowing the negotiations to come toa conclusion. This sudden decision of PSE deprived Finvesta sporting chance to settle its accountabilities beforeforfeiting its seat in the stock exchange. Without that seat,Finvest will lose its standing to trade and do business inthe stock exchange.

A debt is liquidated when the amount is known or isdeterminable by inspection of the terms and conditions ofrelevant documents.75 Under the attendant circumstances,it cannot be said that Finvests debt is liquidated. At thetime PSE left the negotiating table, the exact amount ofFinvests fines, penalties and charges was still in disputeand as yet undetermined. Consequently, Finvest cannot bedeemed to have incurred in delay in the payment of itsobligations to PSE. It cannot be made to pay an obligationthe amount of which was not fully explained to it. Thepublic sale of the pledged seat would, thus, be premature.G.R. No. 181415

Finvests petition is denied.

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74Concepcion v. Court of Appeals, 381 Phil. 90, 96 324 SCRA 85, 91(2000).

75 Selegna Management and Development Corporation v. UnitedCoconut Planters Bank, supra note 72, at p. 141.

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The CA was correct in applying Article 1191 of the CivilCode, which indicates the remedies of the injured party incase there is a breach of contract:

ART.1191.The power to rescind obligations is implied inreciprocal ones, in case one of the obligors should not comply withwhat is incumbent upon him.

The injured party may choose between the fulfillment and therescission of the obligation, with the payment of damages in



either case. He may also seek rescission, even after he has chosenfulfillment, if the latter should become impossible.

Initially, respondents sought the fulfillment of Finvestsobligation to deliver the stock certificates, instead of arescission. They changed their minds later and amendedthe prayer in their complaint and opted for a refund of thepurchase price plus damages. The trial court allowed theamendment, there being no objection from Finvest.

The right of a party to rescission under Article 1191 ofthe Civil Code is predicated on a breach of faith by theother party who violates the reciprocity between them.76 Ina contract of sale, the seller obligates itself to transfer theownership of and deliver a determinate thing, and thebuyer to pay therefor a price certain in money or itsequivalent. In some contracts of sale, such as the sale ofreal property, prior physical delivery of the thing sold or itsrepresentation is not legally required, as the execution ofthe Deed of Sale effectively transfers ownership of theproperty to the buyer through constructive delivery. Hence,delivery of the certificate of title covering the real propertyis not necessary to transfer ownership.

In the sale of shares of stock, physical delivery of a stockcertificate is one of the essential requisites for the transferof

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76Sps. Velarde v. Court of Appeals, 413 Phil. 360, 373 361 SCRA 56,68 (2001).

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ownership of the stocks purchased. Section 63 of theCorporation Code provides thus:

SEC.63.Certificate of stock and transfer of shares.Thecapital stock of stock corporations shall be divided into shares forwhich certificates signed by the president or vicepresident,countersigned by the secretary or assistant secretary, and sealedwith the seal of the corporation shall be issued in accordance withthe bylaws. Shares of stock so issued are personal property and



may be transferred by delivery of the certificate or certificatesindorsed by the owner or his attorneyinfact or other personlegally authorized to make the transfer. No transfer, however,shall be valid, except as between the parties, until the transfer isrecorded in the books of the corporation so as to show the namesof the parties to the transaction, the date of the transfer, thenumber of the certificate or certificates and the number of sharestransferred.

No shares of stock against which the corporation holds anyunpaid claim shall be transferable in the books of thecorporation.77

For a valid transfer of stocks, the requirements are asfollows: (a) there must be delivery of the stock certificate(b) the certificate must be endorsed by the owner or hisattorneyinfact or other persons legally authorized to makethe transfer and (c) to be valid against third parties, thetransfer must be recorded in the books of the corporation.78

Clearly, Finvests failure to deliver the stock certificatesrepresenting the shares of stock purchased by TMEI andGarcia amounted to a substantial breach of their contractwhich gave rise to a right to rescind the sale.

Rescission creates the obligation to return the object ofthe contract. This is evident from Article 1385 of the CivilCode which provides:

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77Emphasis supplied.78Bitong v. Court of Appeals, 354 Phil. 516, 541 292 SCRA 503, 529

(1998).

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ART.1385.Rescission creates the obligation to return thethings which were the object of the contract, together with theirfruits, and the price with its interest consequently, it can becarried out only when he who demands rescission can returnwhatever he may be obliged to restore.

Neither shall rescission take place when the things which arethe object of the contract are legally in the possession of thirdpersons who did not act in bad faith.



In this case, indemnity for damages may be demanded from theperson causing the loss.

To rescind is to declare a contract void at its inceptionand to put an end to it as though it never was. Rescissiondoes not merely terminate the contract and release theparties from further obligations to each other, butabrogates it from the beginning and restores the parties totheir relative positions as if no contract has been made.79

Mutual restitution entails the return of the benefits thateach party may have received as a result of the contract. Inthis case, it is the purchase price that Finvest must return.The amount paid was sufficiently proven by the buyconfirmation receipts, vouchers, and official/provisionalreceipts that respondents presented in evidence. Inaddition, the law awards damages to the injured party,which could be in the form of interest on the price paid,80 asthe trial court did in this case.

Lastly, we address respondents concern over Finvestsattempt to pass its liability for the undelivered stockcertificates to its officers. We find that, contrary toFinvests stance, the CA Decision in CAG.R. CV No. 85176,which is the subject of the two other petitions for reviewbefore this Court, is not in conflict with our presentresolution. While the decision in the

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79Sps. Velarde v. Court of Appeals, supra note 76, at p. 375 pp. 6970.80See Congregation of the Religious of the Virgin Mary v. Orola, G.R.

No. 169790, April 30, 2008, 553 SCRA 578.

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other case adjudges Finvests officers liable to Finvest forthe missing stock certificates, the assailed decision in thispetition makes Finvest directly responsible to its clients forundelivered stock certificates. Moreover, even if Finvestsofficers are blameworthy, we cannot hold them solidarilyliable, as they were not impleaded as parties to this case.Consolidation of cases does not make the parties to onecase parties to the other.



WHEREFORE, the petitions in G.R. No. 174986 andG.R. No. 175071 are DENIED. The CA Decision in CAG.R.CV No. 85176 dated August 9, 2006 and Resolution datedOctober 11, 2006 are AFFIRMED.

The petition in G.R. No. 181415 is likewise DENIED.The CA Decision in CAG.R. CV No. 85430 datedSeptember 3, 2007 and Resolution dated January 24, 2008are AFFIRMED.

SO ORDERED.

YnaresSantiago (Chairperson), ChicoNazario,Velasco, Jr. and Peralta, JJ., concur.

Petitions denied, judgment in CA G.R. CV No. 85430dated September 3, 2007 and resolution dated January 24,2008 affirmed.

Note.The terms of a contract have the force of lawbetween the parties. (Co Chien vs. Sta Lucia Realty andDevelopment, Inc., 513 SCRA 570 [2007])

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6 RaquelSantos vs. Court of Appeals