[ Manila Bulletin Online ] October 24, 2008
By REY G. PANALIGAN
The Supreme Court (SC) has upheld the validity of the sale of the entire holdings of the Philippine National Bank (PNB) in its subsidiary, the Management and Development Corp. (MaDeCor), to the Mega Prime Realty Holdings Corp. (MPRHC) in 1996 but it reduced the purchase price of P505.6 million by P19.4 million.
In a decision written by Justice Ruben T. Reyes, the SC said that while the Court of Appeals (CA) correctly ruled that the sale should not be annulled, the purchase price must be reduced because of breach in the warranties on the part of PNB.
On Sept. 27, 1996, PNB sold to MPRHC its entire holdings in MaDeCor for P505.6 million. But MPRHC moved to rescind the sale, claiming that while the incentive for the purchase was the 19,080-square meter property known as the Pantranco lot in Quezon City, one of the lots was a road owned by the Quezon City government. It accused PNB of fraudulent misrepresentations in selling its assets in a case filed before the Malabon City Regional Trial Court (RTC).
PNB denied the allegation and said that MPRHC was given copies of the titles to the Pantranco property and as a reputable real estate firm, it presumed that MPRHC took diligence to ascertain the ownership of the land. It also said that while the Quezon City government was able to secure a title over one of the lots, it did not mean that MaDeCor’s titles were void.
On Dec. 21, 1999, the RTC rescinded the sale and directed PNB to reimburse MPRHC the P150 million loan obtained to develop the Pantranco property and to pay P5 million in exemplary damages, P100,000 in lawyer’s fees, and the P101.1 million partial payment in the contract of sale.
MPRHC was directed by the trial court to return to PNB the five parcels of land covered by Transfer Certificate of Titles Nos. 87881, 87882, 87883, 87884, and 160470 under the principle of mutual restitution.
On PNB’s appeal, the CA reversed the trial court and ruled that MPRHC could not be relieved from its obligation since it voluntarily accepted the risk of an "as is, where is" arrangement of the contract. MPRHC should have been more prudent or careful in making such a huge investment worth millions of pesos, the appellate court added.
Both the PNB and MPRHC filed petitions with the SC. While affirming the CA, the SC noted that the express condition of the Deed of Sale is the transfer of the properties under TCT Nos. 87881, 87882, 87883, 87884, and 160470 in the name of MPRHC which PNB has not accomplished.
"Up to now, the title of the said property is still under the name of the former registered owner Marcris Realty Corp. MPRHC’s subsequent discovery that the property covered by TCT No. 160470 is covered by a title pertaining to the City Government of Quezon City coupled with PNB’s inability up to the present to submit a title in the name of PNB-MaDeCor constitutes a breach of warranty. Hence, a proportionate reduction in the consideration of the sale is justified, applying the Civil Code principle that no person shall be enriched at the expense of another," SC said.
It pointed out that since the Pantranco property covers an area of 19,080-square meters at P26,500 per square meters, and the lot registered in the name of the Quezon City government covers 733.70-square meters, the contract price of P505.6 million should be proportionately reduced by P19.4 million.
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