FONTANA RESORT AND COUNTRY G.R. No.

154670
CLUB, INC. AND RN
DEVELOPMENT CORP., Present:
Petitioners,
CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
- versus - BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

SPOUSES ROY S. TAN AND Promulgated:

SUSAN C. TAN,
Respondents. January 30, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

LEONARDO-DE CASTRO, J.:

For review under Rule 45 of the Rules of Court is the Decision[1] dated
May 30, 2002 and Resolution[2] dated August 12, 2002 of the Court Appeals in
CA-G.R. SP No. 67816. The appellate court affirmed with modification the
Decision[3] dated July 6, 2001 of the Securities and Exchange Commission
(SEC) En Banc in SEC AC Case No. 788 which, in turn, affirmed the
Decision[4] dated April 28, 2000 of Hearing Officer Marciano S. Bacalla, Jr.
(Bacalla) of the SEC Securities Investigation and Clearing Department (SICD)
in SEC Case No. 04-99-6264.

Sometime in March 1997, respondent spouses Roy S. Tan and Susana

C. Tan bought from petitioner RN Development Corporation (RNDC) two
class D shares of stock in petitioner Fontana Resort and Country Club, Inc.
(FRCCI), worth P387,300.00, enticed by the promises of petitioners sales
agents that petitioner FRCCI would construct a park with first-class leisure
facilities in Clark Field, Pampanga, to be called Fontana Leisure Park (FLP);
that FLP would be fully developed and operational by the first quarter of 1998;
and that FRCCI class D shareholders would be admitted to one membership
in the country club, which entitled them to use park facilities and stay at a two-
bedroom villa for five (5) ordinary weekdays and two (2) weekends every year
for free.[5]

Two years later, in March 1999, respondents filed before the SEC a
Complaint[6] for refund of the P387,300.00 they spent to purchase FRCCI
shares of stock from petitioners. Respondents alleged that they had been
deceived into buying FRCCI shares because of petitioners fraudulent
misrepresentations. Construction of FLP turned out to be still unfinished and
the policies, rules, and regulations of the country club were obscure.

Respondents narrated that they were able to book and avail

themselves of free accommodations at an FLP villa on September 5, 1998, a
Saturday. They requested that an FLP villa again be reserved for their free
use on October 17, 1998, another Saturday, for the celebration of their
daughters 18th birthday, but were refused by petitioners.Petitioners clarified
that respondents were only entitled to free accommodations at FLP for one
week annually consisting of five (5) ordinary days, one (1) Saturday and one
(1) Sunday[,] and that respondents had already exhausted their free Saturday
pass for the year. According to respondents, they were not informed of said
rule regarding their free accommodations at FLP, and had they known about
it, they would not have availed themselves of the free accommodations on
September 5, 1998. In January 1999, respondents attempted once more to
book and reserve an FLP villa for their free use on April 1, 1999, a
Thursday. Their reservation was confirmed by a certain Murphy
Magtoto. However, on March 3, 1999, another country club employee named
Shaye called respondents to say that their reservation for April 1, 1999 was
cancelled because the FLP was already fully booked.

Petitioners filed their Answer[7] in which they asserted that respondents

had been duly informed of the privileges given to them as shareholders of
FRCCI class D shares of stock since these were all explicitly provided in the
promotional materials for the country club, the Articles of Incorporation, and
the By-Laws of FRCCI. Petitioners called attention to the following paragraph
in their ads:

GUEST ROOMS

As a member of the Fontana Resort and Country Club,

you are entitled to 7 days stay consisting of 5 weekdays, one
Saturday and one Sunday. A total of 544 elegantly furnished
villas available in two and three bedroom units.[8]
 Petitioners also cited provisions of the FRCCI Articles of Incorporation
and the By-Laws on class D shares of stock, to wit:

Class D shares may be sold to any person, irrespective of

nationality or Citizenship. Every registered owner of a class D
share may be admitted to one (1) Membership in the Club and
subject to the Clubs rules and regulations, shall be entitled to
use a Two (2) Bedroom Multiplex Model Unit in the residential
villas provided by the Club for one week annually consisting of
five (5) ordinary days, one (1) Saturday and one (1) Sunday.
(Article Seventh, Articles of Incorporation)

Class D shares which may be sold to any person,

irrespective of nationality or Citizenship. Every registered owner
of a class D share may be admitted to one (1) Membership in
the Club and subject to the Clubs rules and regulations, shall be
entitled to use a Two (2) Bedroom Multiplex Model Unit in the
residential villas provided by the Club for one week annually
consisting of five (5) ordinary days, one (1) Saturday and one (1)
Sunday. [Section 2(a), Article II of the By-Laws.][9]

Petitioners further denied that they unjustly cancelled respondents

reservation for an FLP villa on April 1, 1999, explaining that:

6. There is also no truth to the claim of [herein

respondents] that they were given and had confirmed
reservations for April 1, 1998. There was no reservation to
cancel since there was no confirmed reservations to speak of for
the reason that April 1, 1999, being Holy Thursday, all
reservations for the Holy Week were fully booked as early as the
start of the current year. The Holy Week being a peak season
for accommodations, all reservations had to be made on a
priority basis; and as admitted by [respondents], they tried to
make their reservation only on January 4, 1999, a time when all
reservations have been fully booked. The fact of [respondents]
non-reservation can be attested by the fact that no confirmation
number was issued in their favor.

If at all, [respondents] were wait-listed as of January 4,

1999, meaning, they would be given preference in the
reservation in the event that any of the confirmed
members/guests were to cancel. The diligence on the part of the
[herein petitioners] to inform [respondents] of the status of their
 reservation can be manifested by the act of the Clubs personnel
when it advised [respondents] on March 3, 1999 that there were
still no available villas for their use because of full bookings.[10]

Lastly, petitioners averred that when respondents were first

accommodated at FLP, only minor or finishing construction works were left to
be done and that facilities of the country club were already operational.

SEC-SICD Hearing Officer Bacalla conducted preliminary hearings and

trial proper in the case. Respondents filed separate sworn Question and
Answer depositions.[11]Esther U. Lacuna, a witness for respondents, also filed
a sworn Question and Answer deposition.[12] When petitioners twice defaulted,
without any valid excuse, to present evidence on the scheduled hearing
dates, Hearing Officer Bacalla deemed petitioners to have waived their right to
present evidence and considered the case submitted for resolution.[13]

Based on the evidence presented by respondents, Hearing Officer

Bacalla made the following findings in his Decision dated April 28, 2000:

To prove the merits of their case, both [herein

respondents] testified. Ms. Esther U. Lacuna likewise testified in
favor of [respondents].

As established by the testimonies of [respondents]

witnesses, Ms. Esther U. Lacuna, a duly accredited sales agent
of [herein petitioners] who went to see [respondents] for the
purpose of inducing them to buy membership shares of Fontana
Resort and Country Club, Inc. with promises that the park will
provide its shareholders with first class leisure facilities, showing
them brochures (Exhibits V, V-1 and V-2) of the future
development of the park.

Indeed [respondents] bought two (2) class D shares in

Fontana Resort and Country Club, Inc. paying P387,000.00 to
[petitioners] as evidenced by provisional and official receipts
(Exhibits A to S), and signing two (2) documents designated as
Agreement to Sell and Purchase Shares of Stock (Exhibits T to
U-2).

It is undisputed that many of the facilities promised were

not completed within the specified date. Ms. Lacuna even
testified that less than 50% of what was promised were actually
delivered.
 What was really frustrating on the part of [respondents]
was when they made reservations for the use of the Clubs
facilities on the occasion of their daughters 18th birthday on
October 17, 1998 where they were deprived of the clubs
premises alleging that the two (2) weekend stay which class D
shareholders are entitled should be on a Saturday and on a
Sunday. Since [respondents] have already availed of one (1)
weekend stay which was a Saturday, they could no longer have
the second weekend stay also on a Saturday.

Another occasion was when [respondents] were again

denied the use of the clubs facilities because they did not have a
confirmation number although their reservation was confirmed.

All these rules were never communicated to

[respondents] when they bought their membership shares.

It would seem that [petitioners], through their officers,

would make up rules as they go along. A clever ploy for
[petitioners] to hide the lack of club facilities to accommodate the
needs of their members.

[Petitioners] failure to finish the development works at the

Fontana Leisure Park within the period they promised and their
failure or refusal to accommodate [respondents] for a
reservation on October 17, 1998 and April 1, 1999, constitute
gross misrepresentation detrimental not only to the
[respondents] but to the general public as well.

All these empty promises of [petitioners] may well be part

of a scheme to attract, and induce [respondents] to buy shares
because surely if [petitioners] had told the truth about these
matters, [respondents] would never have bought shares in their
project in the first place.[14]

Consequently, Hearing Officer Bacalla adjudged:

WHEREFORE, premises considered, judgment is hereby

rendered directing [herein petitioners] to jointly and severally pay
[herein respondents]:
 1) The amount of P387,000.00
plus interest at the rate of 21% per annum
computed from August 28, 1998 when demand
was first made, until such time as payment is
actually made.[15]

Petitioners appealed the above-quoted ruling of Hearing Officer Bacalla

before the SEC en banc. In its Decision dated July 6, 2001, the SEC en
banc held:

WHEREFORE, the instant appeal is hereby DENIED and

the Decision of Hearing Officer Marciano S. Bacalla, Jr. dated
April 28, 2000 is hereby AFFIRMED.[16]

In an Order[17] dated September 19, 2001, the SEC en banc denied

petitioners Motion for Reconsideration for being a prohibited pleading under
the SEC Rules of Procedure.

Petitioners filed before the Court of Appeals a Petition for Review

under Rule 43 of the Rules of Court. Petitioners contend that even on the sole
basis of respondents evidence, the appealed decisions of Hearing Officer
Bacalla and the SEC en banc are contrary to law and jurisprudence.

The Court of Appeals rendered a Decision on March 30, 2002, finding

petitioners appeal to be partly meritorious.

The Court of Appeals brushed aside the finding of the SEC that
petitioners were guilty of fraudulent misrepresentation in inducing respondents
to buy FRCCI shares of stock. Instead, the appellate court declared that:

What seems clear rather is that in inducing the respondents to

buy the Fontana shares, RN Development Corporation merely
repeated to the spouses the benefits promised to all holders of
Fontana Class D shares. These inducements were in fact
contained in Fontanas promotion brochures to prospective
subscribers which the spouses must obviously have read.[18]

Nonetheless, the Court of Appeals agreed with the SEC that the sale of
the two FRCCI class D shares of stock by petitioners to respondents should
be rescinded. Petitioners defaulted on their promises to respondents that FLP
would be fully developed and operational by the first quarter of 1998 and that
as shareholders of said shares, respondents were entitled to the free use of
first-class leisure facilities at FLP and free accommodations at a two-bedroom
villa for five (5) ordinary weekdays and two (2) weekends every year.

The Court of Appeals modified the appealed SEC judgment by ordering

respondents to return their certificates of shares of stock to petitioners upon
the latters refund of the price of said shares since [t]he essence of the
questioned [SEC] judgment was really to declare as rescinded or annulled the
sale or transfer of the shares to the respondents.[19]The appellate court
additionally clarified that the sale of the FRCCI shares of stock by petitioners
to respondents partakes the nature of a forbearance of money, since the
amount paid by respondents for the shares was used by petitioners to defray
the construction of FLP; hence, the interest rate of 12% per annum should be
imposed on said amount from the date of extrajudicial demand until its return
to respondents. The dispositive portion of the Court of Appeals judgment
reads:

WHEREFORE, premises considered, the appealed

judgment is MODIFIED: a) petitioner Fontana Resort and
Country Club is hereby ordered to refund and pay to the
respondents Spouses Roy S. Tan and Susana C. Tan the
amount of P387,000.00, Philippine Currency, representing the
price of two of its Class D shares of stock, plus simple interest at
the rate of 12% per annum computed from August 28, 1998
when demand was first made, until payment is completed; b) the
respondent spouses are ordered to surrender to petitioner
Fontana Resort and Country Club their two (2) Class D shares
issued by said petitioner upon receipt of the full refund with
interest as herein ordered.[20]

Petitioners filed a Motion for Reconsideration, but it was denied by the

Court of Appeals in its Resolution dated August 12, 2002.

Hence, the instant Petition for Review.

Petitioners, in their Memorandum,[21] submit for our consideration the

following issues:

a. Was the essence of the judgment of the SEC which

ordered the return of the purchase price but not of the thing sold
a declaration of rescission or annulment of the contract of sale
between RNDC and respondents?
 b. Was the order of the Court of Appeals to
FRCCI which was not the seller of the thing sold (the seller was
RNDC) to return the purchase price to the buyers (the
respondents) in accordance with law?

c. Was the imposition of 12% interest per

annum from the date of extra-judicial demand on an obligation
which is not a loan or forbearance of money in accordance with
law?[22]

Petitioners averred that the ruling of the Court of Appeals that the
essence of the SEC judgment is the rescission or annulment of the contract of
sale of the FRCCI shares of stock between petitioners and respondents is
inconsistent with Articles 1385 and 1398 of the Civil Code. The said SEC
judgment did not contain an express declaration that it involved the rescission
or annulment of contract or an explicit order for respondents to return the
thing sold. Petitioners also assert that respondents claim for refund based on
fraud or misrepresentation should have been directed only against petitioner
RNDC, the registered owner and seller of the FRCCI class D shares of
stock. Petitioner FRCCI was merely the issuer of the shares sold to
respondents. Petitioners lastly question the order of the Court of Appeals for
petitioners to pay 12% interest per annum, the same being devoid of legal
basis since their obligation does not constitute a loan or forbearance of
money.

In their Memorandum,[23] respondents chiefly argue that petitioners

have posited mere questions of fact and none of law, precluding this Court to
take cognizance of the instant Petition under Rule 45 of the Rules of
Court. Even so, respondents maintain that the Court of Appeals did not err in
ordering them to return the certificates of shares of stock to petitioners upon
the latters refund of the price thereof as the essence of respondents claim for
refund is to rescind the sale of said shares. Furthermore, both petitioners
should be held liable since they are the owners and developers of
FLP. Petitioner FRCCI is primarily liable for respondents claim for refund, and
petitioner RNDC, at most, is only subsidiarily liable considering that petitioner
RNDC is a mere agent of petitioner FRCCI. Respondents finally insist that the
imposition of the interest rate at 12% per annum, computed from the date of
the extrajudicial demand, is correct since the obligation of petitioners is in the
nature of a forbearance of money.

We find merit in the Petition.

 We address the preliminary matter of the nature of respondents
Complaint against petitioners. Well-settled is the rule that the allegations in
the complaint determine the nature of the action instituted.[24]

Respondents alleged in their Complaint that:

16. [Herein petitioners] failure to finish the development

works at the Fontana Leisure Park within the time frame that
they promised, and [petitioners] failure/refusal to accom[m]odate
[herein respondents] request for reservations on 17 October
1998 and 1 April 1999, constitute gross misrepresentation and a
form of deception, not only to the [respondents], but the general
public as well.

17. [Petitioners] deliberately and maliciously

misrepresented that development works will be completed when
they knew fully well that it was impossible to complete the
development works by the deadline. [Petitioners] also
deliberately and maliciously deceived [respondents] into
believing that they have the privilege to utilize Club facilities,
only for [respondents] to be later on denied such use of Club
facilities. All these acts are part of [petitioners] scheme to attract,
induce and convince [respondents] to buy shares, knowing that
had they told the truth about these matters, [respondents] would
never have bought shares in their project.

18. On 28 August 1998, [respondents] requested their

lawyer to write [petitioner] Fontana Resort and Country Club,
Inc. a letter demanding for the return of their payment. x x x.

19. [Petitioner] Fontana Resort and Country Club, Inc.

responded to this letter, with a letter of its own dated 10
September 1998, denying [respondents] request for a refund. x
x x.

20. [Respondents] replied to [petitioner] Fontana Resort

and Country Clubs letter with a letter dated 13 October 1998, x x
x. But despite receipt of this letter, [petitioners] failed/refused
and continue to fail /refuse to refund/return [respondents]
payments.

xxxx
 22. [Petitioners] acted in bad faith when it sold
membership shares to [respondents], promising development
work will be completed by the first quarter of 1998 when
[petitioners] knew fully well that they were in no position and had
no intention to complete development work within the time they
promised. [Petitioners] also were maliciously motivated when
they promised [respondents] use of Club facilities only to deny
[respondents] such use later on.

23. It is detrimental to the interest of [respondents] and

quite unfair that they will be made to suffer from the delay in the
completion of the development work, while [petitioners] are
already enjoying the purchase price paid by [respondents].

xxxx

26. Apart from the refund of the amount of P387,300.00,

[respondents] are also entitled to be paid reasonable interest
from their money. Afterall, [petitioners] have already benefitted
from this money, having been able to use it, if not for the
Fontana Leisure Park project, for their other projects as
well. And had [respondents] been able to deposit the money in
the bank, or invested it in some worthwhile undertaking, they
would have earned interest on the money at the rate of at least
21% per annum.[25]

The aforequoted allegations in respondents Complaint sufficiently state

a cause of action for the annulment of a voidable contract of sale based on
fraud under Article 1390, in relation to Article 1398, of the Civil Code, and/or
rescission of a reciprocal obligation under Article 1191, in relation to Article
1385, of the same Code. Said provisions of the Civil Code are reproduced
below:

Article 1390. The following contracts are voidable or

annullable, even though there may have been no damage to the
contracting parties:

1. Those where one of the parties is incapable

of giving consent to a contract;
2. Those where the consent is vitiated by
mistake, violence, intimidation, undue influence or fraud.
 These contracts are binding, unless they are annulled by
a proper action in court. They are susceptible of ratification.
Article 1398. An obligation having been annulled, the
contracting parties shall restore to each other the things which
have been the subject matter of the contract, with their fruits,
and the price with its interest, except in cases provided by law.

In obligations to render service, the value thereof shall be

the basis for damages.

Article 1191. The power to rescind obligations is implied

in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.

The injured party may choose between the fulfillment and

the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless

there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of

third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law.

Article 1385. Rescission creates the obligation to return

the things which were the object of the contract, together with
their fruits, and the price with its interest; consequently, it can be
carried out only when he who demands rescission can return
whatever he may be obliged to return.

Neither shall rescission take place when the things which

are the object of the contract are legally in the possession of
third persons who did not act in bad faith.

In this case, indemnity for damages may be demanded

from the person causing the loss.

It does not matter that respondents, in their Complaint, simply prayed

for refund of the purchase price they had paid for their FRCCI
shares,[26] without specifically mentioning the annulment or rescission of the
sale of said shares. The Court of Appeals treated respondents Complaint as
one for annulment/rescission of contract and, accordingly, it did not simply
order petitioners to refund to respondents the purchase price of the FRCCI
shares, but also directed respondents to comply with their correlative
obligation of surrendering their certificates of shares of stock to petitioners.

Now the only issue left for us to determine whether or not petitioners
committed fraud or defaulted on their promises as would justify the annulment
or rescission of their contract of sale with respondents requires us to
reexamine evidence submitted by the parties and review the factual findings
by the SEC and the Court of Appeals.

As a general rule, the remedy of appeal by certiorari under Rule 45 of

the Rules of Court contemplates only questions of law and not issues of
fact. This rule, however, is inapplicable in cases x x x where the factual
findings complained of are absolutely devoid of support in the records or the
assailed judgment of the appellate court is based on a misapprehension of
facts.[27] Another well-recognized exception to the general rule is when the
factual findings of the administrative agency and the Court of Appeals are
contradictory.[28] The said exceptions are applicable to the case at bar.

There are contradictory findings below as to the existence of fraud:

while Hearing Officer Bacalla and the SEC en banc found that there is fraud
on the part of petitioners in selling the FRCCI shares to respondents, the
Court of Appeals found none.

There is fraud when one party is induced by the other to enter into a
contract, through and solely because of the latters insidious words or
machinations. But not all forms of fraud can vitiate consent. Under Article
1330, fraud refers to dolo causante or causal fraud, in which, prior to or
simultaneous with the execution of a contract, one party secures the consent
of the other by using deception, without which such consent would not have
been given.[29] Simply stated, the fraud must be the determining cause of the
contract, or must have caused the consent to be given.[30]

[T]he general rule is that he who alleges fraud or mistake in a

transaction must substantiate his allegation as the presumption is that a
person takes ordinary care for his concerns and that private dealings have
been entered into fairly and regularly.[31] One who alleges defect or lack of
valid consent to a contract by reason of fraud or undue influence must
establish by full, clear and convincing evidence such specific acts that vitiated
a partys consent, otherwise, the latters presumed consent to the contract
prevails.[32]
 In this case, respondents have miserably failed to prove how
petitioners employed fraud to induce respondents to buy FRCCI shares. It can
only be expected that petitioners presented the FLP and the country club in
the most positive light in order to attract investor-members. There is no
showing that in their sales talk to respondents, petitioners actually used
insidious words or machinations, without which, respondents would not have
bought the FRCCI shares. Respondents appear to be literate and of above-
average means, who may not be so easily deceived into parting with a
substantial amount of money. What is apparent to us is that respondents
knowingly and willingly consented to buying FRCCI shares, but were later on
disappointed with the actual FLP facilities and club membership benefits.

Similarly, we find no evidence on record that petitioners defaulted on

any of their obligations that would have called for the rescission of the sale of
the FRCCI shares to respondents.

The right to rescind a contract arises once the other party defaults in
the performance of his obligation.[33] Rescission of a contract will not be
permitted for a slight or casual breach, but only such substantial and
fundamental breach as would defeat the very object of the parties in making
the agreement.[34] In the same case as fraud, the burden of establishing the
default of petitioners lies upon respondents, but respondents once more failed
to discharge the same.

Respondents decry the alleged arbitrary and unreasonable denial of

their request for reservation at FLP and the obscure and ever-changing rules
of the country club as regards free accommodations for FRCCI class D
shareholders.

Yet, petitioners were able to satisfactorily explain, based on clear

policies, rules, and regulations governing FLP club memberships, why they
rejected respondents request for reservation on October 17, 1998.
Respondents do not dispute that the Articles of Incorporation and the By-Laws
of FRCCI, as well as the promotional materials distributed by petitioners to the
public (copies of which respondents admitted receiving), expressly stated that
the subscribers of FRCCI class D shares of stock are entitled free
accommodation at an FLP two-bedroom villa only for one week annually
consisting of five (5) ordinary days, one (1) Saturday and one (1)
Sunday. Thus, respondents cannot claim that they were totally ignorant of
such rule or that petitioners have been changing the rules as they go
along. Respondents had already availed themselves of free accommodations
at an FLP villa on September 5, 1998, a Saturday, so that there was basis for
petitioners to deny respondents subsequent request for reservation of an FLP
villa for their free use on October 17, 1998, another Saturday.

Neither can we rescind the contract because construction of FLP

facilities were still unfinished by 1998. Indeed, respondents allegation of
unfinished FLP facilities was not disputed by petitioners, but respondents
themselves were not able to present competent proof of the extent of such
incompleteness. Without any idea of how much of FLP and which particular
FLP facilities remain unfinished, there is no way for us to determine whether
petitioners were actually unable to deliver on their promise of a first class
leisure park and whether there is sufficient reason for us to grant rescission or
annulment of the sale of FRCCI shares. Apparently, respondents were still
able to enjoy their stay at FLP despite the still ongoing construction works,
enough for them to wish to return and again reserve accommodations at the
park.

Respondents additionally alleged the unreasonable cancellation of their

confirmed reservation for the free use of an FLP villa on April 1,
1999. According to respondents, their reservation was confirmed by a Mr.
Murphy Magtoto, only to be cancelled later on by a certain Shaye. Petitioners
countered that April 1, 1999 was a Holy Thursday and FLP was already fully-
booked. Petitioners, however, do not deny that Murphy Magtoto and Shaye
are FLP employees who dealt with respondents. The absence of any
confirmation number issued to respondents does not also discount the
possibility that the latters reservation was mistakenly confirmed by Murphy
Magtoto despite FLP being fully-booked. At most, we perceive a mix-up in the
reservation process of petitioners. This demonstrates a mere negligence on
the part of petitioners, but not willful intention to deprive respondents of their
membership benefits. It does not constitute default that would call for
rescission of the sale of FRCCI shares by petitioners to respondents. For the
negligence of petitioners as regards respondents reservation for April 1, 1999,
respondents are at least entitled to nominal damages in accordance with
Articles 2221 and 2222 of the Civil Code.[35]

In Almeda v. Cario,[36] we have expounded on the propriety of granting

nominal damages as follows:

[N]ominal damages may be awarded to a plaintiff whose right

has been violated or invaded by the defendant, for the purpose
of vindicating or recognizing that right, and not for indemnifying
the plaintiff for any loss suffered by him. Its award is thus not for
the purpose of indemnification for a loss but for the recognition
and vindication of a right. Indeed, nominal damages are
damages in name only and not in fact. When granted by the
 courts, they are not treated as an equivalent of a wrong inflicted
but simply a recognition of the existence of a technical injury. A
violation of the plaintiff's right, even if only technical, is sufficient
to support an award of nominal damages. Conversely, so long
as there is a showing of a violation of the right of the plaintiff, an
award of nominal damages is proper.[37]

It is also settled that the amount of such damages is addressed to the sound
discretion of the court, taking into account the relevant circumstances. [38]

In this case, we deem that the respondents are entitled to an award

of P5,000.00 as nominal damages in recognition of their confirmed
reservation for the free use of an FLP villa on April 1, 1999 which was
inexcusably cancelled by petitioner on March 3, 1999.

In sum, the respondents Complaint sufficiently alleged a cause of

action for the annulment or rescission of the contract of sale of FRCCI class D
shares by petitioners to respondents; however, respondents were unable to
establish by preponderance of evidence that they are entitled to said
annulment or rescission.

WHEREFORE, in view of the foregoing, the Petition is

hereby GRANTED. The Decision dated May 30, 2002 and Resolution dated
August 12, 2002 of the Court Appeals in CA-G.R. SP No. 67816
are REVERSED and SET ASIDE. Petitioners are ORDERED to pay
respondents the amount of P5,000.00 as nominal damages for their
negligence as regards respondents cancelled reservation for April 1, 1999,
but respondents Complaint, in so far as the annulment or rescission of the
contract of sale of the FRCCI class "D shares of stock is concerned,
is DISMISSED for lack of merit.

SO ORDERED.