Republic of the
Supreme Court
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MULTI-VENTURES CAPITAL |
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G.R. No. 157439 |
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and MANAGEMENT |
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CORPORATION, |
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Present: |
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Petitioner. |
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YNARES-SANTIAGO,
J., |
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- versus - |
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Chairperson, |
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AUSTRIA-MARTINEZ, |
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STALWART MANAGEMENT |
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CHICO-NAZARIO, and |
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SERVICES CORPORATION, |
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NACHURA, JJ. |
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MARIAN G. TAJO, CESAR |
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Promulgated: |
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Respondents*. |
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July 4,
2007 |
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D E C I S I O N
AUSTRIA-MARTINEZ,
J.:
The sole issue in this case is whether
the contract entered into by Multi-Ventures Capital and Management Corporation
(petitioner) and Stalwart Management Services Corporation (respondent) is one
of loan or sale.
The facts are as follows:
On P9,000,000.00, with interest, but for
purposes of expediency, said transaction was denominated as a sale whereby petitioner
bought from respondent various Land Bank bonds originally valued at P11,557,972.60
at discounted price, as shown in a Confirmation of Agreement; that the bonds
serve as a partial collateral for the payment of the loan; that respondent and
some of its officers, however, have plans of defrauding their creditors by
absconding and disposing of its properties, thus constraining petitioner to file
the complaint for reformation in order to express the true intent of the
parties, i.e., that the ostensible sale of the bonds is actually a loan
agreement.[1]
Respondent, together with its
co-defendants, filed an Answer denying petitioner's allegations and claiming,
among others, that both petitioner and respondent are companies engaged in
dealing and trading government securities.
According to respondent, the transaction entered into on
After trial on the merits, the RTC
rendered a Decision dated
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant:
1. These
instruments subject matter of this case are hereby ordered REFORMED as Contract
of Loan and not a Contract of Sale.
2. To order the
defendants, jointly and severally, to pay the plaintiff the sum of P11,557,972.60 PESOS from
3. To order defendants, jointly and severally, to
pay the plaintiff the sum of P100,000.00 PESOS
by way of attorney’s fees;
4. Ordering the
dismissal of defendants’ counter-claim for being devoid of legal merit; and
5. To order
defendants' jointly and severally, to pay the costs of suit.
SO ORDERED.[3]
Hence, the present Petition for Review
on Certiorari predicated on the following grounds:
A. THAT DUE TO MISAPPRECIATION OF FACTS AND EVIDENCE, THE COURT OF APPEALS ERRED IN REVERSING THE COURT A QUO'S DECISION AND IN NOT DECLARING THAT THE INTENDED AND TRUE TRANSACTION AGREED UPON AND ENTERED INTO BETWEEN MULTI-VENTURES AND STALWART WAS THAT OF LOAN, NOT SALE OF LAND BANK BONDS.
B. THAT THE COURT OF APPEALS ERRED IN NOT
ORDERING THE REFORMATION OF THE INSTRUMENT OSTENSIBLY APPEARING AS A PURCHASE
AND SALE WITH THE RIGHT TO REPURCHASE LAND BANK BONDS SO AS TO REFLECT THE TRUE
INTENTION AND AGREEMENT OF PARTIES THAT THE TRANSACTION WAS THAT OF LOAN OF P9
MILLION PAYABLE FOR A PERIOD OF ONE (1) YEAR, JANUARY 11, 1992 IN THE AMOUNT OF
P11,537,972.60 INCLUSIVE OF INTEREST.[5]
Ordinarily, the Court will not dwell on the issues raised in
this petition as it pertains to questions of fact, and under Rule 45 of the Rules of Court,
only questions of law may be raised, the reason being that this Court is not a trier of facts, and it is not for this Court to re-examine
and re-evaluate the evidence on record.[6] Considering, however, that the CA and the RTC
came up with divergent findings regarding the real nature of the transaction in
question, the Court is now constrained to review the evidence on record so as
to resolve the conflict.[7]
After a careful examination of the
evidence on record, the Court sustains the CA’s ruling that the transaction
between the parties was one of sale and not of loan.
An action for reformation of an instrument finds ground in
Article 1359 of the Civil Code, which provides:
ARTICLE 1359. When, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed.
x x x x
Reformation is a remedy in equity,
whereby a written instrument is made or construed so as to express or conform
to the real intention of the parties, where some error or mistake has been
committed. In granting reformation, the remedy in equity is not making a new
contract for the parties, but establishing and perpetuating the real contract
between the parties which, under the technical rules of law, could not be
enforced but for such reformation.[8]
In order that an action for reformation of instrument
may prosper, the following requisites must concur: (1) there must have been a
meeting of the minds of the parties to the contract; (2) the instrument does
not express the true intention of the parties; and (3) the failure of the
instrument to express the true intention of the parties is due to mistake,
fraud, inequitable conduct or accident.[9]
In the present
case, there is no question that there was a meeting of the minds between the
parties. What remains to be resolved is
whether the contract expressed their true intention; and, if not, whether it
was due to mistake,
fraud, inequitable conduct or accident.
While intentions involve a state of mind which may sometimes
be difficult to decipher, subsequent and contemporaneous acts of the parties as
well as the evidentiary facts as proved and admitted can be reflective of one’s
intention.[10]
The onus probandi is upon
the party who insists that the contract should be reformed.[11] Moreover, the presumption is that an
instrument sets out the true agreement of the parties thereto and that it was
executed for valuable consideration.[12] Unfortunately, petitioner was not able to
overturn the presumption of validity of the contract and it also failed to
discharge the burden of proving that the true intention of the parties has not
been expressed.
In support of its contention that the
transaction is one of loan, petitioner relies principally on the letter dated P11,557,972.60.[13] According to petitioner, the amount borrowed
by respondent was P9,000,000.00, with interest,
or a total of P11,557,972.60, payable within one year.[14] Petitioner insists that the buy-back letter
proves that the transaction was indeed a loan, for if it was a sale, why would
respondent buy back the bonds in the same amount that was payable under their
alleged loan agreement?[15]
There is nothing on record, as well as
in the buy-back letter, that clearly and convincingly proves or substantiates petitioner’s contention
that the real intent of the parties was to enter into a loan agreement for the amount of P11,557,972.60, inclusive of interest. In fact, respondent’s buy-back letter
supports the finding that the agreement entered into by the parties was a sale
transaction. For if the bonds were only
to serve as a collateral for the loan, why would
respondent offer to buy them back from petitioner if they were not sold in the
first place? Obviously, ownership of the
bonds had been transferred from respondent to petitioner on January 11, 1991;
for if it were not so and the bonds were merely being held by petitioner as a
security for the payment of the alleged loan, then ownership would have
remained with respondent and there would have been no need to buy it back.
The Court agrees with and adopts the
findings of the CA, thus:
The lower court, and the appellee, advance that it was highly improbable that plaintiff would really purchase the Land Bank bonds for 9 million pesos, when it would have called for only 6.5 million pesos if sold in the market. Aside from such self-serving statements, however, there is no direct or substantial proof that the bonds would have demanded a lower actual price when it was sold. In any case, poor business decisions are not adequate grounds to nullify the effects of a contract entered into in the course of business operations. x x x
Furthermore, the fact that the
Confirmation of Agreement (Exhibit “1”) and offer to purchase by defendants
(Exhibit “B”) were executed simultaneously and delivered to the plaintiff, is not inconsistent with the conclusion that the
contract between the parties was truly a
In addition, and more significantly,
what militates against petitioner’s argument that their agreement was a loan is
the fact that subsequent thereto, petitioner endorsed and transferred the bonds
to the AFP Mutual Benefits Association, Inc., as collateral for an
investment. Petitioner did not rebut or
at the very least, offer a plausible explanation for said transfer which is
unmistakably an act of ownership. It sufficiently
established the CA finding that the transaction is one of sale, thus:
Aside from Exhibit “1”, evidence on record, particularly Exhibits “8” to “9” show that the bonds were indeed delivered to the plaintiff pursuant to the Contract of Sale. Furthermore, almost immediately after taking possession of the subject bonds, plaintiff corporation through its Vice-President and incorporator, Natividad Aureola, endorsed and transferred the same to the AFP Mutual Benefits Association, Inc., as collateral for an investment made by the latter. Such endorsement and transfer, to our mind, amount to an act of ownership, which can only be made by one who owns a certain property, and not by one who holds a property only as security for loan. Defendants' position that it had sold the bonds to the plaintiff pursuant to Exhibit “1” is thus fortified. [17]
Finally, petitioner
failed to show that mistake,
fraud, inequitable conduct or accident attended the execution of the agreement
such that their true intention was not reflected. As admitted by petitioner, the parties agreed
to execute a purchase and sale agreement “for purposes of expediency and
convenience.”[18]
Expediency and convenience, however, are
not grounds for the reformation of an instrument. As such, absent any proof of
mistake, fraud,
inequitable conduct or accident, the Confirmation of Agreement dated
The transaction of sale entered
into by the parties on
WHEREFORE,
the petition is DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate
Justice
WE CONCUR:
CONSUELO
YNARES-SANTIAGO
Associate Justice
Chairperson
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MINITA V. CHICO-NAZARIO Associate Justice |
ANTONIO EDUARDO B. NACHURA Associate Justice |
ATTESTATION
I attest that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the
Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S.
PUNO
Chief Justice
* The Court of Appeals, impleaded as respondent, is deleted from the title of herein case, pursuant to Section 4, Rule 45 of the Rules of Court.
[1] Records, pp. 2-4.
[2]
[3]
[4] Penned by Associate Justice Rodrigo V. Cosico, with Associate Justices Rebecca de Guia-Salvador and Regalado E. Maambong, concurring; CA rollo, pp. 138-150.
[5] Rollo, pp. 14-15.
[6] Microsoft Corporation v. Maxicorp, Inc., G.R. No. 140946, September 13, 2004, 438 SCRA 224, 232.
[7]
[8]
Quiros
v. Arjona, G.R. No. 158901,
[9]
The National Irrigation
Administration v. Gamit, G.R. No. 85869,
[10] Sarming v. Dy, 432 Phil. 685, 699 (2002).
[11] Huibonhua v. Court of Appeals, 378 Phil. 386, 407 (1999).
[12] BA Finance Corporation v. Intermediate Appellate Court, G.R. No. 76497, January 20, 1993, 217 SCRA 261, 277.
[13] Records, p. 8.
[14] Rollo, p. 11.
[15]
[16] CA rollo, pp. 149-150.
[17]
[18] Records, p. 2.