GR 47206; (September, 1989) (Digest)
G.R. No. 47206 September 27, 1989
GLORIA M. DE ERQUIAGA, administratrix of the estate of the late SANTIAGO DE ERQUIAGA & HON. FELICIANO S. GONZALES, petitioners, vs. HON. COURT OF APPEALS, AFRICA VALDEZ VDA. DE REYNOSO, JOSES V. REYNOSO, JR., ERNESTO, SYLVIA REYNOSO, LOURDES REYNOSO, CECILE REYNOSO, EDNA REYNOSO, ERLINDA REYNOSO & EMILY REYNOSO, respondents.
FACTS
Santiago de Erquiaga agreed to sell his 3,100 shares in Erquiaga Development Corporation, which owned Hacienda San Jose, to Jose L. Reynoso for P900,000. Reynoso paid P410,000, received the shares and possession of the hacienda, but pledged 1,500 shares as security for the unpaid balance. Upon Reynoso’s failure to pay the remaining P561,321.70, Erquiaga rescinded the contract. Erquiaga filed a complaint for rescission, and the trial court rendered a final and executory judgment on September 30, 1972, ordering mutual restitution: Reynoso to return the 3,100 shares and account for fruits received, and Erquiaga to return the P410,000 paid.
The protracted dispute centered on the execution of this judgment. The trial court later ordered that Erquiaga’s payment of the P410,000 be held in abeyance pending Reynoso’s accounting of the hacienda’s fruits. The Court of Appeals, however, ruled that the mutual restitution of the principal obligations—the shares and the purchase price—must be simultaneous and should not be delayed by the ancillary accounting of fruits.
ISSUE
Whether the mutual restitution of the principal objects of the rescinded contract (the shares and the purchase price) can be withheld pending the accounting and mutual restitution of their fruits.
RULING
The Supreme Court granted the petition, modifying the Court of Appeals’ decision. It affirmed the legal principle that upon rescission, mutual restitution of the principal considerations must be simultaneous, as mandated by Article 1385 of the Civil Code. Therefore, Erquiaga must return the P410,000 to Reynoso upon the latter’s reconveyance of all 3,100 shares. However, the Court introduced an equitable modification regarding the legal interest on this sum.
The final judgment obligated Erquiaga to return the P410,000 with legal interest. The Court ruled that while the principal sum must be returned simultaneously with the shares, the payment of the accrued legal interest should rightly await Reynoso’s accounting and restitution of the fruits (the hacienda’s produce) he received. This prevents the inequity of compelling Erquiaga to pay over two decades of interest on the purchase price while Reynoso has not accounted for the fruits of the property he possessed and allegedly squandered. The Court ordered the P62,000 for damages and attorney’s fees awarded to Erquiaga to be set off against the P410,000, leaving a balance of P348,000 payable by Erquiaga to Reynoso simultaneously with the share transfer, but with the interest payment contingent upon Reynoso’s fulfillment of his accounting obligation.