SUMMARY OF THE CASE
Victor Herrera, chairman of the board of Blue Heights Realty and Development Corporation, was anxious to launch his first big project, a mineral hot spring resort at Bucal, Calamba, Laguna. Herrera was confident that the resort, dubbed Halina Mountain Resort, would compete favorably against the established ones in the area. However, he wondered whether Far East Bank & Trust Company, the bank which he applied for a P1.3 million loan for the project, would recognized the merits of his proposal.
Blue Heights Realty and Development Corporation was organized in October 1976, to own, add, improve, and manage any real estate so acquired. The company had an authorized capital stock of P1 million and paid-up capital of P900,000. The corporate board is composed of the following:
Mr. Victor E. Herrera, Sr-Chairman
Mrs. Patricia F. Herrera-Vice Chairman
Mr. Victor F. Herrera, Jr-Director
Mr. Venancio F. Herrera-Director
Mr. Vicente F. Herrera-Director
Herrera was on semi-retirement form a respectable commodities trading firm in Makati and he desired to “leave something for the family”.
The major piece of asset which the company owned was a 2.2 hectare land in Bucal, Calamba, Laguna. Herrera inherited 1.5 hectares of the land from his father in 1974. A few years later, after reaping substantial commissions from commodities trading, he purchased the idle land (700,000 hectares) adjoining his inherited property. Wild grass grew on most of the 2.2 hectare land but there were small patches planted to sugar and corn. The land was on high ground and overlooked some of the well-known resorts in Calamba.
Herrera had a small rest house built atop the land for his family to hideaway during weekends and summer. During their visits, it was not an uncommon sight for Herrera and his family to see resorts below teeming with people and the shoulders of the...