Marticio, Joyce Ann M.
BSBA401
Requirements:
1. Make a case digest (lift the facts and issue/s from the case and substitute the ruling part
with their own judgment of the case). (20 points)
FACTS:
Stalwart Management Services Corporation loaned P9,000,000 with interest from Capital
and Management Corporation (Multi-Ventures). F or convenience purposes, the sale of
Land Bonds from Stalwart to Multi-Ventures was referred to as the contract by the parties
as set forth in a Confirmation of Agreement. The Bonds are said to be only partial
collateral for the payment of the loan, like Multi Ventures.
Multi-Ventures suspected that Stalwart would reject its loan obligation to instigate
Multi-Ventures to file a Reformation of the Instrument complaint with the application to
attach Stalwart to Makati's RTC to express the true intention of the Parties that the
supposed sale of the bonds would in fact constitute a loan agreement.
Stalwart denied all claims and affirmed the parties' intention of actually selling Land
Bank bonds.
RTC Makati decided that the reform was appropriate from the sale contract to the loan
contract.
RTC Makati's decision that no reform is necessary and that in fact a contract of venture is
reversed by the Court of Appeals
ISSUE:
Whether or not the agreement concluded by Stalwart and Multi-ventures is a sales
agreement.
HELD:
•The Multi-Ventures and Stalwart contract is a sales contract, not a loan agreement.
In Article 1359, When the parties to a contract have met, their true purpose is not
expressed by mistake in the instrument intended to include the Agreement. Unfair
behavior or accident. Fraud. One party may request that the instrument be reformed in
order to express such true intent.
The following requirements must be complied with in order for contract reformation to
prosper: First, a meeting of the minds of the contracting parties must have been held.
Second, it does not express the real intention of the parties; and lastly, it is a mistake that
the instrument is not able to express the true intention of the parties.
Marticio, Joyce Ann M. BSBA401
There is no doubt in this case that a meeting between the parties took place. What
remains to be resolved is whether the contract expressed its true intent and, if not,
whether it was caused by a mistake, fraud inequitable conduct or accident.
It is presumed that the instrument provides the parties with the true consent and has, for
consideration, been executed. Regrettably, the petitioner could not overturn the
presumption that the contract was valid and he was also unable to relieve his burden of
proving that the parties' true intention was not expressed.
The petitioner failed to show that mistake, fraud or accident were involved that their true
intention was not reflected by the execution of the agreement. The parties agree that for
the sake of timeliness and convenience, they shall carry out a buying and selling
agreement. However, expediency and comfort are not reasons for the instrument reform.
In Confirmation of Agreement, the sale transaction concluded by the parties on 11
January 1991 is accurately expressed. Therefore, the petitioner has no cause for reform.
2. Answer the following questions: (3 items x 10 points)
a. Can the instrument be reformed? Why or why not?
The instrument cannot be amended because the Selling transaction between Stalwart and
Multi-Ventures has been correctly reflected in its Confirmation of Agreement. The
purpose of the transaction was stated in your contract explicitly. Reformation does not
work, as it failed to fulfill the reformation requirements which are, first, the meeting of
the parties' minds. Second, the instrument fails to express the parties' true intentions and
lastly, the failure of the instrument to express the parties' real intent arises from error,
fraud, unfair behavior or an accident.
b. How can you determine that the written agreement is different from the intention of the
parties?
Even though intentions are hard to understand. The parties may represent their purpose as
consequent and contemporary acts and evidence and facts in the case
study are proven and recognized. It is the parties responsibility to reform the contract to
show that the intentions of the parties are different. In this case it should have been done
by Multi-Ventures.
c. Explain the presumption of validity of contracts.
The assumption of contract validity and legality is in good faith and adequate in the
absence of evidence to the contrary. Subject to the challenge and reversal by a
contracting party of sufficient, substantive proof that this contract is voidable or invalid,
all agreements entered into are presumed to be valid.
