G.R. No. 154670; January 30, 2012
FONTANA RESORT AND COUNTRY CLUB, INC. AND RN DEVELOPMENT CORP., Petitioners, vs. SPOUSES ROY S. TAN AND SUSAN C. TAN, Respondents.

FACTS

In March 1997, respondent spouses Roy S. Tan and Susana C. Tan bought two class “D” shares of stock in petitioner Fontana Resort and Country Club, Inc. (FRCCI) from petitioner RN Development Corporation (RNDC) for ₱387,300.00. They were enticed by promises from petitioners’ sales agents that the Fontana Leisure Park (FLP) would be a first-class facility fully developed and operational by the first quarter of 1998, and that class “D” shareholders would be entitled to free annual accommodations for five weekdays and two weekends. In March 1999, respondents filed a complaint with the SEC for a refund, alleging fraudulent misrepresentation. They claimed the FLP was unfinished, club rules were obscure, and they were denied reservations on two occasions: first, for a Saturday in October 1998 for their daughter’s birthday, as they were told they had exhausted their free Saturday pass for the year under a rule they were not previously informed of; and second, for a Thursday in April 1999, which was allegedly confirmed but later cancelled due to full booking. Petitioners, in their Answer, asserted that the privileges and rules were explicitly stated in promotional materials, the Articles of Incorporation, and By-Laws, which specified the entitlement was for “one week annually consisting of five (5) ordinary days, one (1) Saturday and one (1) Sunday.” They denied unjustly cancelling the April 1999 reservation, explaining it was a peak season and respondents were only wait-listed. During SEC proceedings, petitioners twice defaulted on presenting evidence, leading the Hearing Officer to deem them to have waived this right.

ISSUE

Whether the petitioners are liable for fraudulent misrepresentation warranting a refund of the purchase price paid by the respondents for the shares of stock.

RULING

Yes. The Supreme Court affirmed the findings of the Court of Appeals and the SEC, which held petitioners liable for fraudulent misrepresentation. The Court found that petitioners, through their agents, made false promises regarding the completion date of the FLP and failed to fully disclose the specific rules governing the free accommodation privileges at the time of the sale. This constituted a scheme to induce the purchase of shares. The failure to finish the development as promised and the denial of reservations based on rules not originally communicated constituted gross misrepresentation detrimental to respondents and the public. The SEC Hearing Officer’s decision, as affirmed by the SEC En Banc and the Court of Appeals, ordering a refund of ₱387,300.00, was upheld. The Court also modified the award of interest, setting it at 6% per annum from judicial demand until finality, and 12% per annum thereafter until full payment, in accordance with prevailing jurisprudence. The award of attorney’s fees was deleted for lack of factual and legal basis, and nominal damages of ₱30,000.00 were awarded to respondents for the violation of their rights.