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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--vis the
fruits that should be accounted for.
O

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