G.R. No. 136112 ; January 28, 2003
CONRADO M. VICENTE, CARLOS SOBREVIÑAS, YOLANDA V. GOLI, married to EDGARDO GOLI, and LETICIA WILEY, married to JAMES WILEY, petitioners, vs. PLANTERS DEVELOPMENT BANK and JESUS TAMBUNTING, respondents.

FACTS

In 1985, respondent Jesus Tambunting, President of Planters Development Bank (PDB), invited petitioners Conrado M. Vicente and Carlos Sobreviñas, principal stockholders of Capitol City Development Bank (CCDB), to a meeting and offered to purchase their shares at book value, with a view to merging CCDB with PDB. A Memorandum of Agreement (MOA) dated February 18, 1986, was executed. The MOA stipulated that the purchase price of the shares “shall be at book value of said shares of stock at the date of purchase” and that the sale was conditioned upon PDB’s auditors being able to examine CCDB’s books as facilitated by the sellers. Upon execution of the MOA and upon Tambunting’s demand, petitioners delivered 23,900 shares, which were paid in two installments at P140.00 per share. On July 12, 1988, petitioner Vicente delivered the remaining 737 shares, but Tambunting refused payment unless Vicente signed a receipt stating all shares were priced at P140.00 per share, which Vicente refused. In September 1988, petitioners verbally requested Tambunting to adjust the price to book value per the MOA. Tambunting refused but asked for a computation of the book value. CCDB’s chief accountant computed the book value at P193.09 per share as of February 18, 1986. Tambunting later sold the CCDB shares to a third party at P400.00 per share. Petitioners filed a complaint in the RTC for rescission or recovery of the balance of the purchase price (the differential between P140.00 and the book value of P193.09) with damages. The RTC ruled in favor of petitioners, ordering respondents to pay the balance with interest and damages. The Court of Appeals reversed the RTC, dismissing the complaint and ordering petitioners to pay moral damages and attorney’s fees to respondents, applying Article 1371 of the Civil Code and noting petitioners’ delay in demanding adjustment and prior sales at P140.00 per share.

ISSUE

Whether the Court of Appeals erred in disregarding the clear terms of the MOA that the purchase price shall be at book value and in dismissing petitioners’ complaint.

RULING

Yes. The Supreme Court reversed the decision of the Court of Appeals and reinstated the RTC decision with modifications. The Court held that the terms of the MOA are clear: the purchase price shall be at book value at the date of purchase. The contemporaneous and subsequent acts of the parties did not alter this stipulation. The initial payments of P140.00 per share were merely provisional, as the final price was contingent upon the examination of CCDB’s books by PDB’s auditors to determine the book value—a condition that was not fulfilled through respondents’ own inaction. Respondents’ failure to conduct the audit precluded the final determination of the price, and they cannot benefit from their own omission. The subsequent sale of the shares by respondents to a third party at a much higher price constituted evident bad faith. The Court deleted the award of compensatory damages but affirmed the monetary awards representing the balance of the purchase price (the difference between the book value of P193.09 and the provisional price of P140.00 per share) with legal interest. The Court imposed 12% interest per annum from judicial demand (November 5, 1990) until the finality of the decision, and thereafter 12% interest per annum until full payment.