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The document summarizes a court case between Multi-Ventures Capital and Management Corporation (petitioner) and Stalwart Management Services Corporation (respondent) regarding the nature of a transaction between the two companies. The petitioner claimed it was a loan, while the respondent argued it was a sale. The Regional Trial Court originally ruled in favor of the petitioner that it was a loan. However, the Court of Appeals reversed this ruling, finding that the transaction was indeed a sale based on the evidence. The Supreme Court then reviewed the case due to the lower courts' differing interpretations and ultimately agreed with the Court of Appeals that the evidence showed it to be a sale rather than a loan.

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168 views

Multi Ven

The document summarizes a court case between Multi-Ventures Capital and Management Corporation (petitioner) and Stalwart Management Services Corporation (respondent) regarding the nature of a transaction between the two companies. The petitioner claimed it was a loan, while the respondent argued it was a sale. The Regional Trial Court originally ruled in favor of the petitioner that it was a loan. However, the Court of Appeals reversed this ruling, finding that the transaction was indeed a sale based on the evidence. The Supreme Court then reviewed the case due to the lower courts' differing interpretations and ultimately agreed with the Court of Appeals that the evidence showed it to be a sale rather than a loan.

Uploaded by

michaelabatralo
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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THIRD DIVISION

[G.R. NO. 157439 : July 4, 2007]

MULTI-VENTURES CAPITAL and MANAGEMENT


CORPORATION, Petitioner. v. STALWART MANAGEMENT
SERVICES CORPORATION, MARIAN G. TAJO, CESAR TAJO and
ARIANA GALANG, Respondents*

DECISION

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 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
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 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 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.2

After trial on the merits, the RTC rendered a Decision dated May 11,
1995, in favor of 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


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; andcralawlibrary

5. To order defendants' jointly and severally, to pay the costs of


suit.

SO ORDERED.3

Dissatisfied, respondent and its officers appealed to the Court of


Appeals (CA). In a Decision dated February 24, 2003,4 the CA
sustained respondent's position that the transaction was, in fact, a
sale; reversed the RTC Decision; and dismissed petitioner's
complaint and respondent's 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 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.
xxx

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

of 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:

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