PNB v. MEGA PRIME REALTY (MARJ) stockholdings over PNB-Madecor to Mega Prime.
In September 27,
October 6, 2008 | Reyes R.T., J. |
PETITIONER: PNB
RESPONDENTS: Mega Prime Realty
SUMMARY:
A loan agreement was also entered which Mega Prime executed in favor of
PNB a promissory note for P404,496,000. Respondent further alleged that
one of the principal inducements for it to purchase the stockholdings of
defendant was to acquire its assets, specifically the one referred to as the
Pantranco property. Mega Prime then entered into a joint venture to develop
the Pantranco property. Mega Prime sought the annulment of the deed of sale
on ground of misrepresentation. Respondent likewise sought reimbursement
of the P150,000,000 plus legal interest incurred by Mega Prime as expenses
for the development of the Pantranco property as actual damages and further
sought moral and exemplary damages and attorney’s fees.
WON PNB and Mega Prime are entitled to the damages they respectively
claim against each other.
NO. Basic is the jurisprudential principle that in determining actual damages,
the courts cannot rely on mere assertions, speculations, conjectures, or
guesswork but must depend on competent proof or the best obtainable
evidence of the actual amount of loss.
DOCTRINE: Fraud is never lightly inferred; it is good faith that is. Under
the Rules of Court, it is presumed that “a person is innocent of crime or
wrong” and that “private transactions have been fair and regular.” While
disputable, these presumptions can be overcome only by clear and
preponderant evidence. Applied to contracts, the presumption is in favor of
validity and regularity.
FACTS:
1. Mega Prime Realty filed a complaint for annulment of contract before
the RTC of Malabon. In an amended complaint, Respondent alleged,
among others, that PNB operates a subsidiary by the name of PNB
Management and Development Corporation (PNB-MADECOR). In
line with PNB’s privatization plan, it opted to sell or dispose of all its
1996, a deed of sale was executed between PNB (vendor) and Mega
Prime (vendee) whereby PNB sold, transferred and conveyed to Mega
Prime, on “As is where is” basis, all of its stockholdings in PNB-
Madecor for the sum of P505,620,000. In the deed of sale, it provides
that:
a. The sale of the above stockholdings of the Vendor is on a
clean balance sheet, i.e. all assets and liabilities are squared,
and no deposits, furniture, fixtures and equipment, including
receivables shall be transferred to the Vendee, except real
properties and improvements thereon of PNBMADECOR in
Quezon City containing an area of 19,080 sq. m., situated at
the corner of Quezon Boulevard (presently Quezon Avenue)
and Roosevelt Avenue covered by five (5) titles, namely: TCT
Nos. 87881, 87882, 87883, 87884, and 160470, per Annexes
“B,” “C,” “D,” “E,” and “F” hereof.
2. A loan agreement was also entered on the same date in which Mega
Prime executed in favor of PNB a promissory note for P404,496,000.
3. Respondent further alleged that one of the principal inducements for
it to purchase the stockholdings of defendant was to acquire its assets,
specifically the one referred to as the Pantranco property. Mega Prime
then entered into a joint venture to develop the Pantranco property.
However, its joint venture partner pulled out of the agreement when it
learned that the property covered by TCT No. 160470 was likewise
the subject matter of another title registered in the name of the City
Government of Quezon. Moreover, the lot plan of the Pantranco
property shows that TCT No. 160470 covers real property located
right in the middle of the Pantranco property rendering nugatory the
plans set up by Mega Prime for the said property.
4. Mega Prime sought the annulment of the deed of sale on ground of
misrepresentation. Respondent likewise sought reimbursement of the
P150,000,000 plus legal interest incurred by Mega Prime as expenses
for the development of the Pantranco property as actual damages and
further sought moral and exemplary damages and attorney’s fees.
5. In its answer, PNB maintains that the subject matter of the deed of sale
was PNB’s shares of stock in PNBMadecor which is a separate
juridical entity, and not the properties owned by the latter as evidenced
by the deed itself. The sale of PNB’s shares of stock in PNB-Madecor
to Mega Prime did not dissolve PNB-Madecor. PNB only transferred
its control. Moreover, PNB denied that it is liable for P150,000,000
allegedly incurred by Mega Prime for the development of the
 Pantranco property since Mega Prime itself alleged in its amended
complaint that no such development could be undertaken.
6. As stockholder of PNB-Madecor, PNB did not know nor was it in a
position to know, that the Quezon City Government was able to secure
another title over the lot covered by TCT No. 160470. Mega Prime, as
buyer, bought the shares of stock at its own risk. Moreover, the fact
that the Quezon City Government was able to secure a title over the
same lot does not necessarily mean that PNB-Madecor’s title to it is
void or outside the commerce of man. Only a proper proceeding may
determine which of the two (2) titles should prevail over the other.
Mega Prime, now as the controlling stockholder of PNB-Madecor,
should have instead filed action to quiet PNB-Madecor’s title over the
said lot.
RTC ruled in favor of Mega Prime. CA reversed.
ISSUE/s:
1. WON there are grounds for the annulment of the deed of sale between
Petitioner and Respondent. - NO
2. PNB and Mega Prime are entitled to the damages they respectively
claim against each other. - NO
RULING: SC affirmed the lower courts decision. Pwede rin wherefore.
RATIO:
First issue:
1. NO. A perusal of the deed of sale reveals that the sale principally
involves the entire shareholdings of PNB in PNB-Madecor, not the
properties covered by TCT Nos. 87881, 87882, 87883, 87884 and
160740. Any defect in any of the said titles should not, therefore,
affect the entire sale. Further, there is no evidence that PNB was aware
of the existence of another title on one of the properties before and
during the execution of the deed of sale.
2. In this case, it cannot be said that Mega Prime was able to adduce a
preponderance of evidence before the trial court to show PNB’s
fraudulent misrepresentation:
3. First, PNB correctly argued that with Mega Prime as a corporation
principally engaged in real estate business, it is presumed to be
experienced in its business and it is assumed that it made the proper
appraisal and examination of the properties it would acquire from the
sale of shares of stock.
4. TCT No. 160470 would show that the property is registered under the
name Marcris Realty Corporation and not under PNB or PNB-
Madecor, the alleged owner of the said property. Likewise, it
explicitly shows on its face that it covers a road lot. This fact
notwithstanding, Mega Prime still opted to buy PNB’s shares of stock,
investing millions of pesos on the said purchase.
5. Second, Mega Prime’s remedy is not with PNB. It must be stressed
that PNB only sold its shares of stock in PNBMadecor which remains
to be the owner of the lot in question. Although, admittedly, PNB-
Madecor is a subsidiary of PNB, this does not necessarily mean that
PNB and PNB-Madecor are one and the same corporation.
6. Third, it is significant to note that the deed of sale is a public document
duly notarized and acknowledged before a notary public. As such, it
has in its favor the presumption of regularity, and it carries the
evidentiary weight conferred upon it with respect to its due execution.
7. Lastly, Mega Prime, using its business judgment, entered into a sale
transaction with PNB respecting shares of stock in PNB-Madecor, in
anticipation of owning properties owned by PNB-Madecor. However,
it was found out later that a title in the name of the Quezon City
Government casts a cloud over PNB-Madecor’s title to the socalled
Pantranco Properties. This fact alone cannot justify annulment of a
valid and consummated contract of sale. Mega Prime cannot be
relieved from its obligation, voluntarily assumed, under the said
contract simply because the contract turned out to be a poor business
judgment or unwise investment.
Second Issue:
1. NO. Basic is the jurisprudential principle that in determining actual
damages, the courts cannot rely on mere assertions, speculations,
conjectures, or guesswork but must depend on competent proof or the
best obtainable evidence of the actual amount of loss.
2. Aside from the site development plan adduced by Mega Prime, no
other proof was presented by Mega Prime to show that it had incurred
expenses for the development of the Pantranco property. There is
likewise no basis for PNB to be liable for exemplary damages and
attorney’s fees, absent any adequate proof of bad faith when it entered
into the contract of sale with Mega Prime.