Fil-Estate Golf and Development, Inc. &Filestate Land, Inc.

v.
Vertex Sales and Trading, Inc.
G.R. No. 202079
June 10, 2013
Facts:
Fil-Estate Land, Inc. (FELI) issued shares of stocks of Forest Hills Golf and Country Club
(Forest Hills) to Fil-Estate Golf and Development, Inc. (FEGDI) in consideration for the financing
support, and construction efforts rendered by the latter in the construction of the Forest Hills.
FEGDI in turned sold one (1) share to RS Asuncion Construction Corporation, which was
subsequently sold by the latter to the respondent, Vertex Sales and Trading, Inc. (Vertex) to
where the latter enjoyed membership rights and privileges. Vertex later on demanded for the
issuance of a stock certificate in its name, to which FELI never replied, thus forcing Vertex to file
a rescission of the sale with damages before the RTC. During its pendency, FELI issued the
requested certificates, but Vertex refused to receive the same. RTC dismissed the complaint
holding that there was no substantial breach since the sale has already been consummated, and
that a certificate of stock is not essential to the creation of the relation of shareholder. The CA
reversed the decision holding that there can be no valid transfer of shares when there is no
delivery of the stock certificate, and considered the delayed issuance a substantial breach,
entitling Vertex to rescind the sale.

Issue: Whether the delay in the issuance of a stock certificate can be considered a substantial
breach as to warrant the rescission of the sale.

Ruling: Yes.
Sec. 63 of the Corporation Code provides that Shares of stock so issued are personal
property and may be transferred by delivery of the certificate or certificates indorsed bythe
owner or his attorney-in-fact or other person legally authorized to make the transfer.1âwphi1 In
this case, Vertex fully paid the purchase price by February 11, 1999 but the stock certificate was
only delivered onJanuary 23, 2002 after Vertex filed an action for rescission against FEGDI.Under
these facts, considered in relation to the governing law, FEGDI clearly failed to deliver the stock
certificates,representing the shares of stock purchased by Vertex, within a reasonable time from
the point the shares shouldhave been delivered. This was a substantial breach of their contract
that entitles Vertex the right to rescind the saleunder Article 1191 of the Civil Code. It is not
entirely correct to say that a sale had already been consummated as Vertex already enjoyed the
rights a shareholder can exercise. The enjoyment of these rights cannot suffice wherethe law, by
its express terms, requires a specific form to transfer ownership.