G.R. No. 202205 - FOREST HILLS GOLF & COUNTRY CLUB, VS. VERTEX SALES AND TRADING, INC..D E C I S I O N - Supreme Court E-Library

Ruling

Accordingly, Kings and FEGDI owned the shares of stock of Forest Hills, holding 40% and 60% of the shares, respectively. In August 1997, FEGDI sold to RS Asuncion Construction Corporation ( RSACC ) one (1) Class C common share of Forest Hills for P1.1 million. Prior to the full payment of the purchase price, RSACC transferred its interests over FEGDI's Class C common share to respondent Vertex Sales and Trading, Inc. ( Vertex ). [4] RSACC advised FEGDI of the transfer and FEGDI, in turn, requested Forest Hills to recognize Vertex as a shareholder. Forest Hills acceded to the request, and Vertex was able to enjoy membership privileges in the golf and country club. Despite the sale of FEGDI's Class C common share to Vertex, the share remained in the name of FEGDI, prompting Vertex to demand for the issuance of a stock certificate in its name . [5] As its demand went unheeded, Vertex filed a complaint [6] for rescission with damages against defendants Forest Hills, FEGDI, and Fil-Estate Land, Inc. ( FELI ) the developer of the Forest Hills golf course. Vertex averred that the defendants defaulted in their obligation as sellers when they failed and refused to issue the stock certificate covering the Class C common share. It prayed for the rescission of the sale and the return of the sums it paid; it also claimed payment of actual damages for the defendants unjustified refusal to issue the stock certificate. Forest Hills denied transacting business with Vertex and claimed that it was not a party to the sale of the share; FELI claimed the same defense. While admitting that no stock certificate was issued, FEGDI alleged that Vertex nonetheless was recognized as a stockholder of Forest Hills and, as such, it exercised rights and privileges of one. FEGDI added that during the pendency of Vertex's action for rescission, a stock certificate was issued in Vertex's name, [7] but Vertex refused to accept it. THE RTC RULING In its March 1, 2007 decision, [8] the Regional Trial Court (RTC) dismissed Vertex's complaint after finding that the failure to issue a stock certificate did not constitute a violation of the essential terms of the contract of sale that would warrant its rescission. The RTC noted that the sale was already consummated notwithstanding the non-issuance of the stock certificate. The issuance of a stock certificate is a collateral matter in the consummated sale of the share; the stock certificate is not essential to the creation of the relation of a shareholder. Hence, the RTC ruled that the non- issuance of the stock certificate is a mere casual breach that would not entitle Vertex to rescind the sale. [9] THE CA RULING Vertex appealed the RTC's dismissal of its complaint. In its February 22, 2012 decision, [10] the CA reversed the RTC . It declared that in the sale of shares of stock, physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased. [11] It based its