G.R. No. 261323 - Verga vs. Harbor Star

Case Summary (G.R. No. 261323)

Factual Background

Harbor Star is a domestic corporation engaged in harbor assistance, towing, salvage and related services. Captain Ramon R. Verga, Jr. was a principal of Davao Tugboat and Allied Services, Inc. (DATASI) and a member of Davtug Multi-Purpose Cooperative (DAVTUG). Between 2006 and 2009 Harbor Star pursued collaboration and acquisition schemes with DATASI, including proposals for merger, partnership or joint venture. In the second half of 2008 Harbor Star negotiated with Verga and two other pilots concerning the sale of their DATASI shareholdings. The parties discussed an initial valuation of PHP 6,000,000.00 per shareholding subject to final audit. Harbor Star made installment payments to Verga totalling PHP 4,000,000.00 between September 2008 and July 2009. Harbor Star later learned that Verga divested his DATASI interests, thereby preventing transfer of the shares, and demanded refund by letter dated February 21, 2012.

Trial Court Proceedings

Harbor Star sued Verga for the return of PHP 4,000,000.00 as payment for his DATASI shares and for damages. Verga denied a contract of sale, claiming the sums were resignation incentives and alleging that Harbor Star induced resignations to its competitive advantage; he counterclaimed for PHP 2,000,000.00 as unpaid balance of the alleged resignation incentive. The Regional Trial Court found that an oral contract existed for the sale of Verga’s DATASI shares, credited the testimony of Harbor Star’s Chief Operating Officer Rodrigo P. Bella and payment vouchers, and ruled that Verga’s divestment made performance impossible. The RTC ordered Verga to return PHP 4,000,000.00, to pay attorney’s fees equivalent to five percent of the amount due, legal interest at twelve percent from demand, and costs, and dismissed Verga’s counterclaims.

Court of Appeals Ruling

The Court of Appeals denied Verga’s appeal and affirmed the RTC Decision with modifications. The CA characterized the parties’ agreement as an oral contract to sell but found it binding and supported by Bella’s testimony and documentary evidence, including vouchers and draft memoranda. The CA reduced attorney’s fees to PHP 100,000.00. It adjusted the award of interest, applying twelve percent per annum from judicial demand until June 30, 2013, and six percent thereafter, and awarded interest at six percent per annum from finality.

Petition and Reviewability

Verga filed a Petition for Review on Certiorari under Rule 45, Rules of Court. The Supreme Court denied the petition for lack of merit, holding that it raised primarily factual issues not amenable to reexamination under Rule 45. The Court found no applicable exception to the limited scope of review on factual findings and thus deferred to the concurrent findings of the RTC and CA.

Parties’ Contentions on Contract and Evidence

Verga argued that Harbor Star failed to prove an enforceable sale of shares because no written agreement existed, invoking Lao v. Lao and the Statute of Frauds under Article 1403(2)(d). He claimed the payments were resignation incentives, pointed to voucher notations such as “trade payable” or “AP Trade,” and alleged intercalations on the vouchers. He further contended Harbor Star lacked board approval under Section 42 of the Corporation Code, and he sought moral and exemplary damages and attorney’s fees. Harbor Star maintained that the oral contract was proven by witness testimony and vouchers, that the sale was partially executed and therefore not barred by the Statute of Frauds, and that shareholders later ratified the transaction at an annual stockholders meeting.

Supreme Court’s Characterization of the Agreement

The Court concluded that the parties entered into a binding contract of sale concerning Verga’s DATASI shares. The Court distinguished a contract of sale from a contract to sell, explaining that title in a sale passes upon consent and that the price could be fixed by auditors under Article 1469. The Court found that the draft memorandum, vouchers expressly stating “Partial Payment for DATASI Shares,” and the parties’ conduct evidenced an intention to effect a sale of DATASI shares. The Court limited the subject matter to DATASI shares, noting that the payment vouchers and draft memorandum referred only to DATASI and not to DAVTUG.

Evidentiary Findings on Vouchers and Alleged Forgery

The Court rejected Verga’s claim that voucher notations were intercalated or forged. It applied the settled rule that forgery is not presumed and must be proved by clear, positive and convincing evidence. Neither the RTC nor the CA found forgery, and Verga failed to rebut the contents of vouchers, including a receipt acknowledging PHP 250,000.00 as “Partial Payment for DATASI Shares.” The Court deemed the vouchers and the draft memorandum probative of the parties’ intent.

Application of the Statute of Frauds and Partial Execution

The Court held that the Statute of Frauds did not bar the action because the agreement had been partially executed. Harbor Star’s partial payment of PHP 4,000,000.00 constituted acceptance of benefits within Article 1405 of the Civil Code, thus ratifying the oral agreement. The Court reiterated that the Statute of Frauds applies only to executory contracts and not to partially or fully consummated ones.

Remedy for Nonperformance: Rescission and Restitution

The Court treated Verga’s failure to deliver stock certificates and his subsequent divestment as a substantial breach that rendered performance impossible. Citing Raquel-Santos v. Court of Appeals, the Court held that in the sale of shares physical delivery of certificates is essential under Section 63, Corporation Code and that failure to deliver permits rescission and refund of the purchase price. Harbor Star elected rescission and sought return of PHP 4,000,000.00. The Court sustained the remedy and affirmed the obligation of Verga to return the funds.

Corporate Approval and Section 42 Analysis

Verga argued that Harbor Star lacked the required approval under Section 42 of the Corporation Code to invest in another corporation. The Court applied the principle from De la Rama v. Ma-Ao Sugar Central Co., Inc. that where an investment is reasonably necessary to accomplish the corporation’s primary purpose, board approval alone suffices. Harbor Star’s purchase of DATASI shares was within its primary purpose as both companies operated in towing and harbor services. The Court further noted that the transaction was explained as having apparent authority by the president, who was the majority shareholder, and that shareholders later ratified corporate acts at the annual meeting on Jun

Case Syllabus (G.R. No. 261323)

Parties and Procedural Posture

Petitioner was CAPTAIN RAMON R. VERGA, JR., a former shareholder of DATASI and member of DAVTUG, who appealed to the Supreme Court under Rule 45 of the Rules of Court.
Respondent was HARBOR STAR SHIPPING SERVICES, INC., a domestic corporation engaged in harbor assistance, towing, salvage, and related services.
The case arose from Civil Case No. 12-298 before Branch 66, Regional Trial Court, Makati City, which rendered its Decision on November 17, 2016.
The Court of Appeals denied petitioner’s appeal in its Decision dated October 28, 2021 and denied his Motion for Reconsideration in its Resolution dated June 6, 2022, in CA-G.R. CV No. 109255.
The Supreme Court docketed a Petition for Review on Certiorari challenging the CA rulings and resolved the matter in a decision dated November 27, 2024.

Key Factual Allegations

Harbor Star initiated negotiations with DATASI and its pilots between November 2006 and May 2008 proposing joint schemes including merger, partnership, joint venture, and area assignment.
The parties allegedly agreed in principle on an initial valuation of PHP 6,000,000.00 per shareholding interest, subject to a final audit and adjustment.
Harbor Star presented a draft Memorandum of Agreement reflecting a sale of DATASI shares but the draft was not executed.
Harbor Star made installment payments totaling PHP 4,000,000.00 to petitioner from September 2008 to July 2009, evidenced by vouchers and receipts.
Petitioner resigned from DAVTUG on July 11, 2009 and later divested his DATASI shares by selling them back to the corporation, thereby preventing physical transfer to Harbor Star.
Harbor Star demanded return of the PHP 4,000,000.00 by letter dated February 21, 2012 and filed suit on April 12, 2012 when petitioner refused to return the sums and instead asserted a claim for an unpaid PHP 2,000,000.00 incentive.

Issues Presented

Whether petitioner received PHP 4,000,000.00 from Harbor Star as payment for his shareholdings in DATASI and/or DAVTUG.
Whether petitioner was liable to return the sums he received from Harbor Star after divesting his interest in DATASI.
Whether Harbor Star’s purchase required prior approval of its shareholders representing two-thirds of the outstanding capital stock under Section 42 of Batas Pambansa Blg. 68 (the Corporation Code).
Whether the Court of Appeals correctly awarded attorney’s fees to Harbor Star and fixed the applicable interest.

Lower Courts’ Findings

The RTC found that an oral contract for the acquisition of petitioner’s DATASI shares existed, relied on the testimony of Rodrigo P. Bella and on payment vouchers, and held the Statute of Frauds inapplicable because the contract was partially executed.
The RTC ordered petitioner to return PHP 4,000,000.00, to pay attorney’s fees equivalent to five percent of the amount due, legal interest at twelve percent from demand, and costs.
The Court of Appeals affirmed the RTC but modified relief by reducing attorney’s fees to PHP 100,000.00 and restructuring interest to 12% per annum from judicial demand until June 30, 2013 and 6% thereafter, with 6% per annum from finality until full payment.
The CA characterized the agreement as an oral contract to sell (rather than a perfected contract of sale) but still held petitioner liable because he rendered performance impossible.

Supreme Court’s Ruling and Disposition

The Supreme Court denied the Petition for Review on Certiorari for lack of merit and affirmed the CA Decision with modification.
The Supreme Court ordered petitioner to return PHP 4,000,000.00 to Harbor Star Shipping Services, Inc..
The Court directed petitioner to pay compensatory interest on the PHP 4,000,000.00 at the rate of six percent