G.R. No. 202205; March 6, 2013
Forest Hills Golf & Country Club, Petitioner, vs. Vertex Sales and Trading, Inc., Respondent.

FACTS

Petitioner Forest Hills is a non-profit stock corporation. Respondent Vertex acquired a Class “C” common share from RS Asuncion Construction Corporation, which had purchased it from Fil-Estate Golf and Development, Inc. (FEGDI). Forest Hills recognized Vertex as a shareholder, allowing it membership privileges. However, the stock certificate remained in FEGDI’s name. Vertex demanded the issuance of a certificate in its name, and upon failure, filed a complaint for rescission with damages against Forest Hills, FEGDI, and Fil-Estate Land, Inc.
The Regional Trial Court dismissed the complaint, ruling the sale was consummated despite the non-issuance of the stock certificate, which was a collateral matter and a mere casual breach not warranting rescission. The Court of Appeals reversed, rescinding the sale. It held that under Section 63 of the Corporation Code, physical delivery of a stock certificate is essential for the valid transfer of ownership. The CA ordered the defendants to return the purchase price to Vertex.

ISSUE

Whether the Court of Appeals erred in ordering the rescission of the sale of the share of stock and in holding Forest Hills solidarily liable for the return of the purchase price.

RULING

The Supreme Court granted the petition in part. It upheld the CA’s finding that rescission was proper but modified the liability for restitution. The Court clarified that rescission under Article 1191 of the Civil Code is a remedy for breach of reciprocal obligations, available when the breach is substantial and fundamental. The seller’s obligation in a sale of shares includes the delivery of the stock certificate, which is a determinate thing. The three-year delay in issuing the certificate, despite Vertex’s full payment, constituted a substantial breach going to the essence of the contract, justifying rescission.
However, the Court ruled that Forest Hills could not be held solidarily liable for the return of the purchase price. Solidary liability does not arise from mere contractual breach but must be expressly stipulated or imposed by law. The contract of sale was solely between Vertex and FEGDI (through its predecessor). Forest Hills, the issuing corporation, was not a party to that contract and did not receive the purchase price from Vertex. The payments were made to FEGDI and other entities, not Forest Hills. Therefore, only FEGDI, as the seller, was obligated to return the price upon rescission. The case was remanded to the trial court to determine the exact amount to be returned by FEGDI to Vertex.