Forest Hills Golf & Country Club vs. Vertex Sales and Trading, Inc.

A corporation whose shares of stock are the subject of a sale is not a party to the transaction and cannot be held liable to return the purchase price upon rescission of the sale, except to the extent it received payment for specific privileges actually enjoyed by the buyer.

Forest Hills Golf & Country Club is a domestic non-profit stock corporation operating a golf and country club in Antipolo City, created through a joint venture between Kings Properties Corporation (40% shares) and Fil-Estate Golf and Development, Inc. (FEGDI) (60% shares). In August 1997, FEGDI sold one Class "C" common share to RS Asuncion Construction Corporation (RSACC), which subsequently transferred its interests to Vertex Sales and Trading, Inc.

Forest Hills Golf & Country Club operates a golf and country club in Antipolo City, created through a joint venture between Kings Properties Corporation and Fil-Estate Golf and Development, Inc. (FEGDI). In August 1997, FEGDI sold one Class "C" common share to RS Asuncion Construction Corporation (RSACC) for P1.1 million. Before full payment, RSACC transferred its interests to Vertex Sales and Trading, Inc. FEGDI requested Forest Hills to recognize Vertex as a shareholder, which the club did, allowing Vertex to enjoy membership privileges. The share, however, remained in FEGDI's name.

Vertex demanded the issuance of a stock certificate in its name, but its demand went unheeded. It filed a complaint for rescission with damages against Forest Hills, FEGDI, and Fil-Estate Land, Inc. (FELI), alleging default in the obligation to issue the certificate. Forest Hills denied transacting with Vertex, while FEGDI admitted non-issuance but claimed Vertex was already recognized as a stockholder. FEGDI also stated that a stock certificate was eventually issued in January 2002, but Vertex refused to accept it.

The Regional Trial Court dismissed the complaint, ruling that the non-issuance of a stock certificate was a casual breach that did not warrant rescission. The Court of Appeals reversed, declaring that physical delivery of a stock certificate is essential for the transfer of ownership, and ordered the rescission of the sale and the return of the amounts paid by Vertex. Forest Hills moved for reconsideration, which was denied, prompting the present petition.

• Substantial Breach Requirement: Petitioner argued that rescission should be allowed only for substantial breaches defeating the object of the agreement, and the delay in issuing the stock certificate was not substantial since Vertex enjoyed stockholder privileges.
• Lack of Party Liability: Petitioner claimed it was not a party to the contract of sale and did not receive any amount from Vertex, so it should not be ordered to return the purchase price.

• Reciprocal Obligation: Respondent argued that its compliance with paying the price triggered the defendants' obligation to deliver the stock certificate, and their three-year delay justified rescission.
• Solidary Liability: Respondent claimed Forest Hills should be solidarily liable with FEGDI and FELI for restitution because the delay was caused by Forest Hills' refusal to issue the share.

• Standing to Appeal Rescission: Whether petitioner Forest Hills, as the corporation whose share was sold but not a party to the sale, has the standing to appeal the ruling rescinding the sale.
• Liability for Restitution: Whether Forest Hills can be held liable to return the amounts paid by respondent Vertex by reason of the rescinded sale.

• Standing to Appeal Rescission: No. Forest Hills is not a party to the sale and its interest in the share was not injuriously affected by the rescission; thus, it has no standing to appeal the rescission.
• Liability for Restitution: No. Forest Hills is not obligated to return the purchase price or other fees paid to FEGDI and FELI, as it was not a party to the sale and did not receive those amounts, except for the membership fee which it may retain for privileges enjoyed.

• Standing to Appeal Rescission: Under Section 63 of the Corporation Code, a corporation whose shares are sold need not be a party to the transaction. The parties to the sale were FEGDI and Vertex. The remedy of appeal is available only to an aggrieved party whose interest is injuriously affected by the judgment. The rescission of the sale does not prejudice Forest Hills in this manner. Since FEGDI did not appeal the rescission, the CA's ruling on rescission became final.
• Liability for Restitution: A necessary consequence of rescission is restitution, requiring parties to return what they received. Forest Hills, not being a party to the rescinded contract, is under no obligation to return the amounts paid by Vertex for the sale. Vertex failed to prove Forest Hills received the purchase price or other fees to make it solidarily liable. However, Forest Hills received P150,000 as a membership fee, which it may retain because Vertex's nominees enjoyed club privileges for three years, serving as sufficient consideration.

• Standing to Appeal — A party is deemed aggrieved or prejudiced when his interest, recognized by law in the subject matter of the lawsuit, is injuriously affected by the judgment. A corporation whose shares are the subject of a sale is not a party to the transaction and its interest is not injuriously affected by the rescission of that sale.
• Restitution in Rescission — A necessary consequence of rescission is restitution, where parties to a rescinded contract must return what they received. A non-party to the contract cannot be obligated to make restitution, except for amounts received for which sufficient consideration was given and privileges were actually enjoyed.

• "The corporation whose shares of stock are the subject of a transfer transaction (through sale, assignment, donation, or any other mode of conveyance) need not be a party to the transaction, as may be inferred from the terms of Section 63 of the Corporation Code." — This clarifies the role of a corporation in the transfer of its own shares and establishes why it lacks standing to appeal the rescission of such a sale.
• "Not being a party to the rescinded contract, however, Forest Hills is under no obligation to return the amount paid by Vertex by reason of the sale." — This states the ratio decidendi regarding the liability of a non-party corporation for restitution upon rescission of a share sale.

• Gabatin vs. Land Bank of the Philippines, 486 Phil. 366 (2004) — Cited to define the standing of an aggrieved party who may appeal a judgment, establishing that Forest Hills was not prejudiced by the rescission.
• Laperal vs. Solid Homes, Inc., 499 Phil. 167 (2005) — Cited for the principle that rescission entails restitution, requiring parties to return what they received under the contract.

• Section 63, Corporation Code — Governs the certificate of stock and transfer of shares, providing that shares may be transferred by delivery of the endorsed certificate, but no transfer is valid against third parties until recorded in the corporation's books. It was applied to show that the corporation need not be a party to the sale.

Carpio (Chairperson), Del Castillo, Perez, and Perlas-Bernabe, JJ., concur.