De Erquiaga v. CA

DE ERQUIAGA vs CA GR ## GR No. 47206 Petitioners: Gloria M. De Erquiaga (administratrix), Santiago De Erquiage (deceased), and Hon. Feliciano S. Gonzalez Respondents: Hon. Court of Appeals, Africa Valdez Vda de Reynoso, Jose V. Reynoso, Jr., Ernesto Reynoso, Benedict Reynoso, Sylvia Reynoso, Lourdes Reynoso, Cecile Reynoso, Edna Reynoso, Erlinda Reynoso, and Emily Reynoso Date September 27, 1989 Grino-Aquino DOCTRINE Pursuant to the rescission decreed in the final judgment, there should be simultaneous mutual restitution of the principal object of the contract to sell and of the consideration paid. (SHORT VERSION) Petitioner Erquiaga sold his shares in Erquiaga Development Corporation to Respondent Reynoso. Reynoso failed to pay the full amount when it was due. Erquiaga moved for rescission of the sale and the courts granted it but Erquiaga needs to return the payments already made by Reynoso in their supposed sale. FACTS Petitioner Santiago De Erquiaga entered into an agreement with Respondent Jose L. Reynoso to sell to the latter his 3,100 shares of Erquiaga Development Corporation for P900,000 payable in installments but not later than November 30, 1968 (which was eventually moved to December 17, 1969). In accordance to their contract, Reynoso pledges 1,500 of the 3,100 shares in favor of Erquiaga as security balance of his obligation. On December 17, 1969, Reynoso failed to pay the balance of P561,321.70. Erquiaga, through counsel, formally informed Reynoso that he was rescinding the sale of his shares in the Erquiaga Development Corporation. CA ruled in favor or Erquiaga, thus ordering the following among others: (1) The return of 3,100 shares to Erquiaga (2) Reynoso should make an accounting of the fruits of the said 3,100 and to return such fruits. (3) Erquiaga to return the payment made by Reynoso for the said shares

In accordance to this, Reynoso returned 1,500 of the shared which he previously pledge in favor of Erguiaga. The petitioners alleges that the order of the court that Erquiaga needs to return the payment made by Reynoso is inequitous ISSUES/HELD (1) WoN Erquiaga needs to return the said amount paid by Reynoso in accordance to their contract - YES RATIO (1) The order of the respondent court directing Erquiaga to return the price paid by Reynoso for the shares of stick is in full accord with Art 1385 of the Civil Code which provides: “Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. In this case, indemnity for damages may be demanded from the person causing the loss.” Pursuant to the rescission decreed in the final judgment, there should be simultaneous mutual restitution of the principal object of the contract to sell and of the consideration paid. DECISION Petition granted. NOTE The actual petition is about how much should be returned. Erquiaga wants to compute it vis-à-vis the fruits that should be accounted for. O