Torres vs.
CA, 278 SCRA 793
FACTS:
The late Manuel A. Torres Jr. was the majority stockholder of Tormil Realty & Development
Corporation while private respondents who are the children of Judge Torres’ deceased brother
Antonio A. Torres, constituted the minority stockholders. In 1984, Judge Torres, in order to make
substantial savings in taxes, adopted an “estate planning” scheme under which he had assigned
to Tormil Realty & Development Corporation various real properties he owned and his shares of
stock in other corporations in exchange for 225,972 Tormil realty shares. Hence, on various
dates in July and August of 1984, 10 deeds of assignment were executed by the late Judge
Torres. Consequently, the aforelisted properties were duly recorded in the inventory of assets of
Tormil Realty and the revenues generated by the said properties were correspondingly entered
in the corporation’s books of account and financial records. Likewise, all the assigned parcel of
land were duly registered with the respective register of deeds in the name of Tormil Realty,
except for the ones located in Makati and Pasay City. Due to the insufficient number of shares of
stock issued to Judge Torres and the alleged refusal to private respondents to approved the
needed increase in the corporations authorized capital stock, on September 11, 1986 Judge
Torres revoked the two deeds of assignment covering the properties in Makati and Pasay City.
Noting the disappearance of the Makati and Pasay City properties from the corporations
inventory of assets and financial records private respondents, on March 31, 1987, were
constrained to file a complaint with the Securites and Exchange Commission (SEC) docketed as
SEC Case No. 3153 to compel Judge Torres to deliver to Tormil corporation the two deed of
assignment covering the aforementioned Makati and Pasay City properties which had
unilaterally revoked and to cause the registration of the corresponding titles in the name of
Tormil. The 1987 annual stockholders meeting and election of directors of Tormil corporation
was scheduled on March 25, 1987, in compliance with the provision of its by-laws. Pursuant
thereto, Judge Torres assigned from his own shares, one share each to petitioners. These
assigned shares were in the nature of “qualifying shares” for the sole purpose of meeting the
legal requirement to be able to elect them to the Board of directors as Torres nominees.
Held: No.
ISSUE/S:
Whether the revocation of the deeds of assignment involving the Makati and Pasay City
properties are valid.
Whether the issued qualifying shares are valid.
RULING:
NO.
The general rule is that rescission of a contract will not be permitted for a slight or carnal
breach, but only for substantial and fundamental breach as would defeat the very object of the
parties in making the agreement.
The shortage of 972 shares definitely is not substantial and fundamental breach as would defeat
the very object of the parties in entering into contract. Art 1355 of the civil code also provides:
“Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue influences.” There being no fraud, mistake, or
undue influence exerted on respondent Torres by Tormil and the latter having already issued to
the former its 225,000 shares, the most logical course of action is to declare as null and void the
deed of revocation on executed by respondent Torres.
