BATONG BUHAY GOLD MINES, INC., PETITIONER, VS. THE COURT OF APPEALS AND INCO MINING CORPORATION, RESPONDENTS.

Batong Buhay Gold Mines versus Court of Appeals and Inco Mining

The Case

This is a petition for review brought by Batong Buhay Gold Mines, Incorporated against the Court of Appeals and Inco Mining Corporation. The dispute began when Inco Mining bought shares of stock from a married man, Francisco Aguac, and asked the corporation to register the transfer in its name. The corporation refused, because the seller's wife had written to say the shares were conjugal property. Inco Mining sued to compel the transfer, and the trial court granted the injunction. The real question that reaches the Supreme Court is narrower: whether the appellate court could award damages for unrealized profits when the buyer never proved it intended to sell the shares at all. The case matters because it draws a hard line between recoverable loss and pure speculation, and it reminds the Bar candidate that a stockholder's remedy against a refusing corporation is the transfer itself, not a guess at profits.

Procedural History

Inco Mining commenced an action for injunction and damages before the Court of First Instance of Manila, Branch Two, praying that the corporation be ordered to issue the transfer certificate in its name. The trial court granted a writ of preliminary mandatory injunction, and in compliance the old certificate was cancelled and a new one was issued to Inco Mining. The trial court then rendered judgment ordering the corporation to effect the transfer and declaring the writ permanent. Inco Mining appealed to the Court of Appeals, complaining that the trial court failed to award damages, attorney's fees, the cost of the injunction bond, and litigation expenses. The Court of Appeals modified the judgment, adding an award of five thousand six hundred twenty-five pesos and fifty-five centavos with legal interest from March fifth, nineteen hundred seventy, and dismissing the complaint against Del Rosario and Company, the transfer agent. The corporation's motions for reconsideration and for new trial were denied. Hence this petition for review before the Supreme Court.

Facts

Batong Buhay Gold Mines issued Stock Certificate Number 16807, covering sixty-two thousand four hundred ninety-five shares at a par value of one centavo per share, to Francisco Aguac. Aguac was legally married to Paula Aguac, but the spouses had lived separately for more than fourteen years before that date. On December sixteenth, nineteen hundred sixty-nine, Francisco Aguac sold the shares to Inco Mining for nine thousand three hundred seventy-four pesos and seventy centavos, without the knowledge or consent of his wife.

On that same day, Paula Aguac wrote the president of the corporation asking that the transfer be withheld, on the ground that the shares were conjugal property and her share of the proceeds had not been given to her. Inco Mining nonetheless presented the endorsed certificate for registration and transfer through its counsel, addressing the request to Del Rosario and Company, then the transfer agent. When no action was taken, counsel followed up, and the transfer agent replied that the matter had been referred to the corporation's lawyers because of a technical problem in the transfer.

It turned out that the corporation had actually prepared a new certificate in Inco Mining's name, but withheld the transfer upon receiving the wife's letter. The corporation justified its refusal by its apprehension that it might be held liable for damages under Article 173 of the Civil Code and under the Bucoy versus Paulino ruling. Inco Mining then sued, and the trial court ordered the transfer. On appeal, the Court of Appeals added an award of unrealized profits, computed from the difference in the value of the shares, and it is that award which the corporation challenged before the Supreme Court.

Issues

• Whether or not the Court of Appeals may award damages by way of unrealized profits despite the absence of supporting evidence, or merely on the basis of assumption, speculation, or conjecture.
• Whether or not the appellate court may deny the corporation the chance to present evidence discovered after judgment which was material to its case and would show the untenability of the buyer's position.

Applicable Provisions

Article 173 of the Civil Code, which the corporation invoked to justify its refusal, provides:

Article 173. The father or mother or the guardian of the person or property of a minor, or any other person entrusted with the care of the person or property of a minor, who shall deliver such minor to any person, or who shall consent to the marriage of such minor, without the approval of the court, shall be liable for damages.

This provision bears on the case only as the ground the corporation raised for hesitating to transfer the shares, and the Court did not rest its ruling on it.

Ruling

On the first issue, the Court answered in the negative. The stipulation of facts did not at all show that Inco Mining intended to sell, would sell, or would have sold the shares on specified dates. The Court observed that shares of stock may go up or down in value, and that whatever profits could have been made were purely speculative, for it was difficult to predict with any degree of certainty the rise and fall in the value of the shares. The Court held that speculative damages cannot be recovered. It reasoned that while it is easy to say now that had the buyer gained legal title it could have sold the shares and reaped a profit, it is equally true that its officials could have refused to sell and instead waited for expected further increases in value.

On the second issue, the Court found no necessity to discuss it, since the first issue was resolved in the corporation's favor and disposed of the appeal.

Doctrine

Damages by way of unrealized profits, or lucro cesante, must be duly and sufficiently established by evidence. A claimant must prove that it was in fact damaged by the act or omission complained of, and that it intended to sell or would have sold the property on specified dates. Where the profit depends on the rise and fall of share values, the claim is speculative and cannot be recovered. The rule a candidate should write is simple: speculative damages are not recoverable, and the burden of proving actual loss rests on the claimant.

Disposition

The Supreme Court set aside the decision and resolutions of the Court of Appeals and reinstated the decision of the trial court, without costs. The corporation prevailed on the damages question, while the order to effect the transfer of the shares stood.

Remember This

The single line worth memorizing is that speculative damages cannot be recovered, so unrealized profits must be proved and not merely assumed. Examiners like to use this case to test the requisites of actual and compensatory damages, particularly lucro cesante, and to see whether a candidate will confuse a proven loss with a hopeful guess.