Case Summary (A.C. No. 7922)
1992 Restructuring and Consent
Philcomsat’s entry was conditioned on corporate approvals (two-thirds stockholder vote) and the Valdeses’ written conformity to a new Montemar concept (golf course and sports complex). Gabriel A. S. Valdes, as attorney-in-fact, signed an August 27, 1992 letter-conformity and participated in MBCI board meetings where the new project and Philcomsat’s investment were discussed, thereby manifesting informed consent.
RTC’s Ruling and Grounds for Annulment
The Regional Trial Court (2009) found (1) a fiduciary joint venture existed; (2) respondents acted in bad faith and without petitioners’ consent; and (3) declared the September 3, 1992 MOA and August 31, 1992 Deed of Sale null and void, ordering reconveyance and denying damages.
Court of Appeals’ Reversal
The Court of Appeals (2012) held that (1) no joint venture existed—only a sale; (2) petitioners’ letter-conformity and corporate approvals effected an express novation extinguishing LCDC’s original obligation; (3) the 1992 MOA and Deed of Sale complied with corporate requirements and were entered into in good faith; and (4) petitioners were not innocent third parties but had binding knowledge and participation.
Issues on Review
- Whether a joint venture existed in 1975 or the transaction was purely a sale.
- Whether LCDC could validly encumber and later sell the properties without Valdeses’ consent.
- Whether the 1992 MOA and Deed of Sale novated and extinguished the 1975 obligation.
- Whether Philcomsat and MRDC were purchasers in good faith for value.
- Whether the remedy of rescission was properly available to petitioners.
Supreme Court Ruling
The Supreme Court affirmed the CA:
• Contract Interpretation: Under Article 1370, the 1975 documents unambiguously establish a sale. No common fund or shared losses existed to constitute a joint venture.
• Novation: The 1992 agreements’ terms were incompatible with the original obligation. Per Article 1292, novation occurred by express consent (letter-conformity) and by changing principal conditions. LCDC’s duty to remit 40% of lot-sale proceeds was equally extinguished.
• Good Faith and Absence of Fraud: Philcomsat required written corporate
Case Syllabus (A.C. No. 7922)
Facts
- The Valdes family (Carlos J. Valdes, Gabriel A.S. Valdes, Fatima de la Concepcion, Asuncion Mercado, and others) were stockholders of Bataan Resorts Corporation (BARECO), owner of a large tract of land in Bagac, Bataan under several Transfer Certificates of Title.
- In 1974, Carlos Valdes, Sr. invited Francisco Cacho and his son Jose Mari Cacho to assess the land for a beach resort and residential subdivision project (“Montemar Project”).
- By Deed of Sale dated May 24, 1975, the Valdeses sold their BARECO shares to La Colina Development Corporation (LCDC) for P20 million: P2.5 million paid in cash (1975–1979) and P17.5 million via promissory notes.
- An Assignment of Rights (October 30, 1975) provided that LCDC would deliver to the Valdeses shares in La Colina Resorts Corporation (LCRC) and remit 50% (later reduced to 40%) of net proceeds from the sale of Montemar Villas lots.
- Carlos Valdes, Sr. executed a Deed of Partition transferring only the project lands to LCDC, which in turn transferred them to LCRC for 50,000 shares; thereby establishing LCDC as 70% and Carlos, Sr. as 30% shareholder in LCRC.
- BARECO was dissolved on June 30, 1975. Montemar Beach Club, Inc. (MBCI) was organized as a non‐stock, non‐profit club; proprietary shares were sold to the public.
- LCDC obtained loans from DBP/APT, Metrobank, and GCC to develop Montemar Villas and Beach Club. Income from share sales and lot sales serviced these loans; eventual delay in remittances (1981–1985) but P16,125,717.31 was ultimately paid to the Valdeses.
- July 13, 1987: Carlos, Sr. filed Civil Case No. 5558 for annulment/rescission or specific performance against LCDC; settled April 26, 1990 by letter agreement whereby LCDC undertook to continue marketing the lots and remitting 40% share until full payment of P20 million. The case was dismissed with prejudice.
- Unpaid LCDC/APT loans led to foreclosure of mortgaged properties of LCDC, LCRC, and MBCI by DBP/APT.
- August 18, 1992: Philcomsat presented a Memorandum of Intent to invest in and bail out LCDC, LCRC, and MBCI, and to form Montemar Resorts and Development Corporation (MRDC) to develop a golf course and sports complex on unsold lots.
- Rafael Cacho outlined two scenarios to Gabriel: public auction with no recovery vs. Philcomsat investment with MRDC ownership (70% Philcomsat; 30% shared by Valdeses, Cachos, creditors).
- Gabriel drafted, then executed on August 27, 1992, a letter‐conformity confirming his support for the new project concept, indicating his preference to sell all his holdings in LCRC and his rights in the Montemar Villas lots at an indicative price of P35 million.
- September 3, 1992: LCDC, LCRC, MBCI, and Philcomsat executed a Memorandum of Agreement consistent with the August 18 Memorandum of Intent; August 31, 1992: LCDC and LCRC conveyed all their Bagac properties to MRDC by Consolidated Deed of Absolute Sale.
- Gabriel ap