Case: Multi-Ventures Capital and Management Corp. vs. Stalwart Management Services Corp., et al., G.R. No. 157439, July 4, 2007

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 July 10, 1991, Multi-Ventures Capital and Management Corporation filed with the Regional Trial Court (RTC) of Makati, Branch 134, a Complaint for Reformation of Instrument with the application for attachment against Stalwart Management Services Corporation and its officers. Petitioner alleged that on January 11, 1991, respondent obtained from the former a loan in the amount of P9,000,000.00, with interest, but for purposes of expediency, said the transaction was denominated as a sale whereby petitioner bought from respondent various Land Bank bonds originally valued at P11,557,972.60 at a discounted price, as shown in a Confirmation of Agreement; that the bonds serve as 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 about 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.

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 the respondent, the transaction entered into on January 11, 1991, is really a purchase of Land Bank bonds, and there is no mistake, fraud, inequitable conduct, or accident in the preparation of the true agreement of the parties such that reformation is called for.

Aftertrialonthemerits,theRTCrenderedaDecision dated May11,1995,in favor of the petitioner. The dispositive portion of the RTC Decision reads:

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 June 11, 1992, as the date of maturity plus legal interest until fully paid;

3. To order defendants, jointly and severally, to pay the plaintiff the sumof P100,000.00 PESOS by way of attorneys 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.

Dissatisfied, respondent and its officers appealed to the Court of Appeals (CA). In a Decision dated February 24, 2003 the CA sustained respondents position that the transaction was, in fact, a sale; reversed the RTC Decision; and dismissed petitioners' complaint and respondents counterclaim.

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 LANDBANK BONDS SO AS TO REFLECT THE TRUE INTENTION AND AGREEMENT OF PARTIES THAT THE TRANSACTION WAS THAT OF LOAN OF P9 MILLION PAYABLE FOR APERIODOFONE(1)YEAR,JANUARY11,1992INTHEAMOUNTOF P11,537,972.60 INCLUSIVE OF INTEREST.

Requirements:

1.Make a case digest (lift the facts and issue/s from the case and substitute the ruling part with their own judgment of the case). (20 points)

2.Answer the following questions: (3 items x 10 points)

a.Can the instrument be reformed? Why or why not?

b.How can you determine that the written agreement is different from the intention of the parties?

c.Explain the presumption of validity of contracts.