Raquel-Santos vs. Court of Appeals

A creditor cannot exercise the right to sell a pledged membership seat under a Pledge Agreement and Article 2112 of the Civil Code when the underlying obligation is unliquidated and still subject to negotiation, as mora solvendi cannot arise from an obligation whose amount is undetermined. Furthermore, a corporate officer ordered to render an accounting cannot demand the prior fixation of a beginning balance as a condition precedent, nor challenge an order to pay unliquidated cash advances raised for the first time on appeal when supported by unrefuted documentary evidence falling under a general prayer for damages. Finally, failure to deliver stock certificates in a sale of shares constitutes a substantial breach entitling the buyer to rescission and a refund of the purchase price under Article 1191 of the Civil Code.

Finvest Securities Co., Inc., a stock brokerage and PSE member, incurred liabilities to the PSE and its clients due to the alleged mishandling of funds by its president, Armand O. Raquel-Santos, and administrative officer, Annalissa Mallari. PSE indefinitely suspended Finvest and demanded payment. When Finvest failed to settle, PSE sought to liquidate Finvest’s assets and sell its pledged membership seat, prompting Finvest to sue its officers for accounting and damages and to enjoin PSE from selling the seat. Separately, Finvest clients Trans-Phil Marine Enterprises, Inc. (TMEI) and Roland Garcia sued Finvest for failing to deliver purchased Piltel Corporation shares, later amending their complaint to seek a refund instead of specific performance.

• Finvest's Liabilities and PSE Actions: Finvest incurred liabilities to PSE representing fines and penalties for non-payment of clearing house obligations. PSE demanded payment and, upon Finvest's failure, sought SEC authority to take over Finvest's operations. PSE threatened to sell Finvest's membership seat pursuant to a Pledge Agreement. Finvest requested reductions and extensions, leading to ongoing negotiations regarding the exact amount of penalties and charges. PSE unilaterally moved to sell the seat while negotiations were pending.
• Accounting Suit: Finvest filed a complaint against Raquel-Santos, Mallari, and PSE for accounting and damages. Raquel-Santos and Mallari failed to file an answer, resulting in a partial judgment. They later submitted an inventory of securities, but the case was remanded for proper service of summons.
• Client Suit: TMEI and Garcia purchased Piltel shares through Finvest. Finvest, under suspension, failed to deliver the certificates. TMEI amended its complaint to seek a refund instead of delivery, which Finvest did not oppose.
• Lower Court Dispositions: The RTC permanently enjoined PSE from selling the seat and ordered the officers to account. The CA modified the judgment by setting a 60-day period for the accounting, with an alternative order to pay the value of the missing certificates and the unliquidated cash advances of Raquel-Santos. The CA also affirmed the RTC ruling ordering Finvest to refund TMEI and Garcia.

• Beginning Balance (Raquel-Santos and Mallari): Petitioners argued that the CA erred in not fixing a beginning balance for the accounting, insisting that a proper accounting requires specifying the beginning balance first, and that a sweeping order to answer claims violates fair play.
• Relief Not Prayed For (Raquel-Santos and Mallari): Petitioners maintained that the CA exceeded its jurisdiction by ordering Raquel-Santos to pay unliquidated cash advances, as this was neither alleged in the complaint nor prayed for.
• Liquidated Obligation (PSE): PSE argued that Finvest's liability had been established, acknowledged, and substantiated through consultations with Finvest's representative; thus, PSE had the right to sell the pledged seat upon Finvest's default under the Pledge Agreement and Article 2112 of the Civil Code.
• Damages Unproven (Finvest): Finvest contended that there was no evidentiary basis for awarding damages equivalent to the value of the undelivered shares to TMEI and Garcia.
• Conflicting Judgments (Finvest): Finvest asserted that ordering it to pay its clients conflicted with the CA decision ordering its officers to account for or pay for the same missing certificates, creating confusion regarding ultimate liability.

• General Prayer for Damages (Finvest): Respondent Finvest countered that the order for Raquel-Santos to pay cash advances was well within the prayer for damages sustained in relation to the missing stock certificates.
• Corporate Liability (TMEI and Garcia): Respondents TMEI and Garcia argued that the value of the shares was sufficiently proven by buy confirmation slips, vouchers, and receipts. They maintained that liability for undelivered shares is a corporate liability that Finvest may not pass on to its erring officers.

• Accounting Procedure: Whether the Court of Appeals erred in not fixing a beginning balance for the accounting ordered against corporate officers.
• Relief Not Prayed For: Whether the Court of Appeals erred in ordering the payment of unliquidated cash advances not specifically prayed for in the complaint.
• Pledge and Default: Whether the PSE can enforce the Pledge Agreement and sell the pledged seat when the amount of the debtor's obligation is still under negotiation and unliquidated.
• Rescission of Sale of Shares: Whether a buyer is entitled to rescind the contract and recover the purchase price when the broker fails to deliver the stock certificates.

• Accounting Procedure: The petition lacks merit. Petitioners failed to file an appeal from the trial court's decision, precluding them from seeking affirmative relief. The fixation of a beginning balance is a matter of execution to be determined by the parties, and the Court cannot ascertain it from the records. Petitioners, being in possession of the relevant records, are in the best position to determine the beginning balance.
• Relief Not Prayed For: The order to pay unliquidated cash advances was proper. Courts may grant relief not specifically prayed for if warranted by the facts alleged and evidence adduced, provided no surprise or prejudice is caused. The cash advances were supported by documentary evidence submitted without objection, falling under the general prayer for damages. Petitioners are estopped from raising this issue for the first time on appeal.
• Pledge and Default: PSE cannot sell the pledged seat. Mora solvendi requires a demandable and liquidated obligation. Because the exact amount of fines and penalties was still under negotiation, the debt was unliquidated. PSE prematurely initiated the sale, depriving Finvest of the opportunity to settle its accountabilities.
• Rescission of Sale of Shares: Finvest's failure to deliver the stock certificates constituted a substantial breach, entitling the buyers to rescission under Article 1191 of the Civil Code. Rescission requires mutual restitution; hence, Finvest must return the purchase price. The liability of Finvest to its clients is distinct from the liability of Finvest's officers to Finvest, and consolidation of cases does not make parties in one case parties to the other.

• Mora solvendi — Defined as a delay in the fulfillment of an obligation by reason of a cause imputable to the debtor. The three requisites are: (1) the obligation is demandable and liquidated; (2) the debtor delays performance; and (3) the creditor judicially or extrajudicially requires performance. A debt is liquidated when the amount is known or determinable from the terms and conditions of relevant documents. Applied to hold that PSE could not declare Finvest in default because the fines and penalties were still under negotiation and unliquidated.
• Rescission in Reciprocal Obligations (Art. 1191, Civil Code) — The power to rescind is implied in reciprocal obligations if one obligor does not comply with what is incumbent upon him. The injured party may choose between fulfillment and rescission, with damages in either case. Applied to uphold the right of TMEI and Garcia to rescind the sale and demand a refund upon Finvest's failure to deliver the stock certificates.
• Relief Not Prayed For — A court may grant relief not specifically prayed for if the facts alleged in the complaint and the evidence adduced so warrant, provided no surprise or prejudice is caused to the adverse party. A general prayer for "other reliefs equitable and just" justifies the grant of unprayed-for relief. Applied to sustain the order for Raquel-Santos to pay unliquidated cash advances supported by unrefuted documentary evidence.

• "A debt is liquidated when the amount is known or is determinable by inspection of the terms and conditions of relevant documents. 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."
• "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."
• "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."

• Silliman University v. Fontelo-Paalan, G.R. No. 170948 (2007) — Cited as controlling precedent for the rule that a party who does not appeal from a judgment cannot seek affirmative relief or modification of that judgment, and may only oppose the other party's appeal on grounds consistent with the judgment.
• Selegna Management and Development Corporation v. United Coconut Planters Bank, G.R. No. 165662 (2006) — Followed for the definition and requisites of mora solvendi, and the principle that a debt is liquidated when its amount is known or determinable from relevant documents.
• United Overseas Bank of the Philippines v. Rosemoor Mining and Development Corporation, G.R. No. 172651 (2007) — Followed for the doctrine that courts may grant relief not specifically prayed for if warranted by the allegations and evidence, under a general prayer for just and equitable relief.

• Article 1191, Civil Code — Governs rescission of reciprocal obligations. Applied to uphold the right of TMEI and Garcia to rescind the purchase of shares and obtain a refund upon Finvest's failure to deliver certificates.
• Article 1385, Civil Code — Provides that rescission creates the obligation to return the object of the contract, together with their fruits, and the price with its interest. Applied to justify the restitution of the purchase price paid by the buyers.
• Article 2112, Civil Code — Gives the pledgee the right to sell the thing pledged if the pledgor does not satisfy the obligation in due time. Applied to determine the conditions for PSE's sale of Finvest's seat, which were not met due to the absence of default.
• Article 1159, Civil Code — Provides that contracts have the force of law between the parties and should be complied with in good faith. Cited to enforce the Pledge Agreement between PSE and Finvest according to its terms.
• Section 63, Corporation Code — Prescribes the requirements for the valid transfer of shares of stock (delivery, endorsement, and recording). Applied to establish that physical delivery of stock certificates is essential for transferring ownership of shares.

Ynares-Santiago, Chairperson; Chico-Nazario; Velasco, Jr.; Peralta