The Court of Appeals has upheld the right of a property developer to rescind the P321.6 million contracts it signed with one of the country’s real estate tycoons for the sale of a 150-hectare land in Barangay Batulao, Nasugbu, Batangas.
In a 15-page decision, the CA’s Eight Division through Associate Justice Ronaldo Roberto Martin sustained the judgment rendered by the Regional Trial Court, Branch 14, Batangas City which ordered RGV Development Corporation owned by real estate tycoon Rodolfo Valencia and the Armed Forces of the Philippines Retirement and Separation Benefits System to reconvey Lot 2-A-1 to Group Developers, Inc, which is composed of 150 hectares of land in Nasugbu, Batangas. The property was then mortgaged to Manila Banking Corporation.
The appellate court ruled that RGVDC did not comply with its obligations to GDI under their memorandum of agreement for the sale of the property, thus, entitling the latter to rescind the agreement and the deed of absolute sale.
Under the MOA, the purchase price of the subject property is P321,600,000.00, but out of this amount, P117,166,400.00 is to be distributed to the informal settlers, while P129,474,250.00 is to be spent for the development of the relocation sites of the informal settlers.
Since the subject property was then mortgaged to MBC, it was agreed that out of P321.6 million, , RGVDC will directly pay the amount of P55 million to the Bangko Sentral ng Pilipinas for the partial settlement of the loan of GDI to MBC, while P16.6 million will be for the legal and miscellaneous expenses incurred in the redemption of the subject property with the MBC.
The CA stressed that the trial court correctly ruled that out of the P321.6 million, only P1 million was actually received by GDI as earnest money.
“The amount of P117,166,400.00 and P129,474,250.00 constituted the bulk of the purchase price, and as such, RGVDC’s non-compliance with their obligation constituted non-payment of the full purchase price, and consequently, a breach of contract on their part,” the CA held.
In its complaint for reconveyance of real property with prayer for damages, GDI said following its issuance of a deed of absolute sale over the subject property, it chanced upon an issue in one of the major dailies on April 14, 2007 showing that AFP-RSBS was offering for sale 1.5 million shares of stocks of Monterrosa Development Corporation (MDC) at a 150-hectare residential located in Barangay Batulao, Nasugbu, Batangas for a minimum bid price of P892.5 million.
Because of this, GDI discovered about the transfer of the subject property from MDC to AFP-RSBS, thus, the filing of the complaint.
For its part, RGVD insisted that had already fulfilled its obligation under the MOA by clearing the subject property of its occupants and with the Department of Agrarian Reform (DAR) and that GDI was satisfied, that is why it executed the deed of absolute sale.
They alleged that granting that RGVDC did not comply with the deposit, the beneficiaries of the amount are the tenants/occupants of the subject property, and not GDI.
They further argued that GDI is already barred from denying its satisfaction with its dealings with RGVDC in view of the execution of the deed of absolute sale and the transfer of the title over the subject property to MDC since 1998.
MDC denied GDI’s claim of simulation of contracts as there was an actual transfer of ownership when it paid P321.6 million to GDI, which resulted in the execution of the deed of absolute sale.
On the other hand, AFP-RSBS claimed that that as part of its business undertakings, it entered into a joint venture with AG&P for the construction and marketing of a 28-storey condominium in Binondo, Manila, named as Chinatown Steel Towers, Inc.
On September 7, 1999, CSTI and RGVDC executed a deed of assignment allowing the former to transfer and assign in favor of the latter all its shares of stocks and assets consisting primarily of 120 condominium units at the Chinatown Steel Towers, in exchange for the subject property which at that time was in the name of MDC.
Also, on the same date, RGVDC executed a deed of assignment transferring and assigning all its rights and interests over the shares of stock with MDC to AFP-RSBS.
AFP-RSBS argued that the deed of assignment was in effect a corporate swap, whereby CSTI would hand over all of its shares of stocks comprising of 120 condominium units to RGVDC in exchange for the latter’s right and interest in MDC to AFP-RSBS, which consists of all its shares of stocks including the subject property.
AFP-RSBS also alleged that at the time MDC’s shares and assets were assigned to it, the title of the subject property had no adverse claim annotated in favor of GDI, thus, it claimed that it acted in good faith as MDC’s assignee, and that it was a purchaser in good faith and for value.
This resulted to AFP-RSBS’s filing of a cross-claim against RGVDC where it contended that it was a mere assignee of MDC by virtue of a deed of assignment executed by CSTI and RGVDC.
Thus, it argued RGVDC should likewise be ordered to return the proceeds of the sale of the 120 condominium units of CTS to AFP-RSBS, and to pay damages, among others in case of a ruling that favor GDI.
However, the appellate court said that “in this case, RGVDC failed to pay the purchase price which gave GDI a right to demand the fulfillment or cancellation of the obligation under an existing valid contract.”
“Here, GDI opted to have the contracts rescinded, which is well within its right…,” it added.
With regard to the claim of AFP-RSBS, the CA ruled that it is an assignee in “bad faith.”
“Had AFP-RSBS carefully examined the documents handed over by RGVDC, it would have easily discovered that the latter was not able to comply with its obligations to GDI, which would have prompted AFP-RSBS to inquire into the title of RGVDC as regards the subject property,” the CA explained.
But the appellate court held that RGVDC should pay AFP-RSBS the proceeds of the sale of the 120 condominium units of CSTI.
“Thus, the RTC correctly ordered that Rodolfo and RGVDC return the proceeds of the sale of the 120 condominium units of CSTI to AFP-RSBS as it is an assignee of MDC. Besides, Rodolfo and RGVDC did not present any evidence that it was CSTI that received the proceeds of the sale of the 120 condominium units,” the CA held. Associate Justices Ramon M. Bato Jr. and Ramon A. Cruz concurred with the ruling.