Unlad Resources Development Corporation v. Renato P. Dragon

Summary

This case involves the rescission of a Memorandum of Agreement where respondents, as controlling stockholders of Rural Bank of Noveleta, transferred control to petitioner Unlad Resources in exchange for a P4.8 million investment commitment. When petitioners failed to fulfill their investment obligations despite taking control of the bank, respondents filed for rescission. The Supreme Court affirmed lower court decisions granting rescission, ruling that regular trial courts have jurisdiction over such contractual disputes under RA 8799, that the action was not time-barred under the 10-year prescriptive period for written contracts, and that rescission was proper under Article 1191 of the Civil Code due to petitioners' material breach. The Court also sustained damage awards totaling over P5 million, finding that petitioners acted in bad faith by engaging in unauthorized banking activities and dissipating bank assets through questionable transactions like the mango plantation venture that violated Central Bank regulations. The decision establishes important precedents on jurisdiction over corporate-related contract disputes and the application of rescission principles in commercial agreements.