Philippine Stock Exchange, Inc. vs. Litonjua & Litonjua, Jr. Case Digest

Philippine Stock Exchange, Inc. vs. Antonio K. Litonjua and Aurelio K. Litonjua, Jr.

G.R. No. 204014. December 5, 2016

Facts

On 20 April 1999, the Litonjua Group wrote a letter-agreement to Trendline Securities, Inc. (Trendline) through its President Priscilla D. Zapanta (Zapanta), confirming a previous agreement for the acquisition of the 85% majority equity of Trendline's membership seat in PSE. In a letter-confirmation dated 21 April 1999, the Litonjua Group undertook to pay the amount of Pl8,547,643.81 directly to PSE within three working days upon confirmation that it will be for the full settlement of all claims and outstanding obligations including interest of Trendline to lift its membership suspension and the resumption to normal trading operation. Further in the letter, Trendline was obligated to secure the approval and written confirmation of PSE for a new corporation to be incorporated that will own a seat.

On 29 April 1999, the PSE, through Atty. Ruben L. Almadro (Atty. Almadro), Vice-President for Compliance and Surveillance Department, sent a letter to Trendline advising the latter that PSE has resolved to accept the amount of Pl9,000,000.00 as full and final settlement of its outstanding obligation. In compliance, the Litonjua Group in a letter dated 12 May 1999, delivered to PSE through Atty. Almadro three check payments, all dated 13 May 1999 and payable to PSE, totaling to an amount of Pl9,000,000.00.

Despite several exchange of letters of conformity and delivery of checks representing payment of full settlement of Trendline's obligations, PSE failed to lift the suspension imposed on Trendline's seat. On 30 July 2006, the Litonjua Group, through a letter, requested PSE to reimburse the P19,000,000.00 it had paid with interest, upon knowledge that the specific performance by PSE of transferring the membership seat under the agreement will no longer be possible. PSE, however, refused to refund the claimed amount as without any legal basis. As a result, the Litonjua Group on 10 October 2006 filed a Complaint for Collection of Sum of Money with Damages against PSE before the RTC of Pasig City.

Declining reimbursement, PSE in its Answer Ad Cautelam raised primarily that it received the amount not from the Litonjua Group but from Trendline as a settlement of its obligation. It insisted that the cause of action of the Litonjua Group is against Trendline and not the exchange, the latter being a non-party to the letter agreement.

After conclusion of trial, the trial court rendered a decision granting that the Litonjua Group is entitled to claim a refund from PSE based on the principle of solutio indebiti as defined in Article No. 2154 of the New Civil Code.

On 23 May 2012, the CA affirmed, in the result, the challenged decision of the trial court. The appellate court principally relied on the principle of constructive trust instead of solutio indebiti as an appropriate remedy against the unjust enrichment of PSE.

Before this Court, PSE posits the following issues: ( 1) The contemporaneous and subsequent acts of the PSE are not tantamount to rendering the PSE a party to the letter-agreement; (2) the case of Smith, Bell and Co. is not applicable to the present case; (3) the provision of Article 1236 should not be read together with Article 1293; (4) Trendline should be considered as an indispensable party; (5) PSE was not unjustly enriched by its receipt of the amount of P19,000,000.00; (6) no constructive trust exists between the PSE and the Litonjua Group; and finally (7) the Litonjua Group is not entitled to exemplary damages.

Issues:

1. Whether PSE is considered a party to the letter-agreement.
2. Whether PSE is liable to return the payment received.
3. Whether the PSE is liable to pay exemplary damages.

Rulings:

1. No. PSE asserts that it is not a party in the letter-agreement due to the absence of any board resolution authorizing the corporation to be bound by the terms of the contract between Trendline and the Litonjua Group. In essence, it avers that no consent was given to be bound by the terms of the letter-agreement. We agree.

According to Article 1305 of the Civil Code, "a contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or render some service." For a contract to be binding: there must be consent of the contracting parties; the subject matter of the contract must be certain; and the cause of the obligation must be established. Admittedly in this case, no board resolution was issued to authorize PSE to become a party to the letter-agreement. From the foregoing, PSE is not considered as a party to the letter-agreement.

2. Yes. This is pursuant to the principles of unjust enrichment and estoppel; it is only but rightful to return the money received since PSE has no intention from the beginning to be a party to the agreement. There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience. The principle of unjust enrichment requires two conditions: ( 1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of another. The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration. Applying law and jurisprudence, the principle of unjust enrichment requires PSE to return the money it had received at the expense of the Litonjua Group since it benefited from the use of it without any valid justification.

3. Yes. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. While the amount of the exemplary damages need not be proven, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded.

PSE, despite demands by the Litonjua Group, continuously refused to return the money received despite the fact that it received it without any legal right to do so. This conduct, as found by the trial court, falls within the purview of wanton, oppressive and malevolent in nature. Thus, absent any other compelling reason to overturn the findings, we uphold the award of exemplary damages.

WHEREFORE, the petition is DENIED. Accordingly, the Decision and Resolution of the Court of Appeals dated 23 May 2012 and 1 7 October 2012 respectively, upholding the 22 February 2010 Decision of the Regional Trial Court of Pasig City are hereby AFFIRMED WITH MODIFICATION. Philippine Stock Exchange is hereby ordered to pay the Litonjua Group the following amounts: 1. as to the imposition of legal interest to be imposed to the P19,000,000.00 from 12% to 6% per annum reckoned from the date of demand on 30 July 2006; 2. Exemplary damages in the amount of Pl,000,000.00; 3. Attorney's fees in the amount of Pl00,000.00; and 4. Cost of suit.