Facts:

The case involves a Petition for Review under Rule 45 of the Rules of Court, with the main parties being International Finance Corporation (petitioner) and Imperial Textile Mills, Inc. (respondent). The events took place following a loan agreement entered into on December 17, 1974, where the International Finance Corporation extended a loan of US$7,000,000.00 to Philippine Polyamide Industrial Corporation (PPIC). The loan was to be repaid in sixteen semi-annual installments over several years with a stipulated interest rate of 10% per annum. To assure the loan's repayment, a 'Guarantee Agreement' was executed simultaneously by Imperial Textile Mills, Inc. (ITM) and Grandtex that guaranteed PPIC's obligations under the loan.

PPIC initially made some payments but later defaulted on its obligations, failing to comply after a rescheduling of payments. As a result, on April 1, 1985, the International Finance Corporation served PPIC a notice of default, leading to the

...

Facts:

Loan and Guarantee Agreements

• On December 17, 1974, International Finance Corporation (IFC, petitioner) and Philippine Polyamide Industrial Corporation (PPIC, respondent) entered into a Loan Agreement.

- A loan of US$7,000,000.00 was extended by IFC to PPIC. - Payment was structured in sixteen semi‑annual installments of US$437,500.00, starting on June 1, 1977 and ending December 1, 1984. - Interest was fixed at 10% per annum, calculated semi‑annually with a 360‑day year. - ITM and Grandtex agreed to guarantee PPIC’s obligations under the Loan Agreement. - The language of the Agreement included terms such as “guarantee,” “guarantors,” and crucially stated that the guarantors were “jointly and severally” liable as “primary obligors and not as mere sureties.”

Performance, Default, and Foreclosure

• PPIC initially complied with some installment payments:

- Payments made on June 1, 1977; December 1, 1977; and June 1, 1978. - Installments due on December 1, 1978; June 1, 1979; and December 1, 1979 were rescheduled. - On April 1, 1985, IFC served a written notice of default demanding payment of the outstanding principal and accrued interests. - PPIC’s failure to cure the default led IFC, together with DBP, to pursue extrajudicial foreclosure on PPIC's real estate and other assets. - A notice of extrajudicial sale was issued on July 30, 1985. - IFC bid P99,269,100.00 (equivalent to US$5,250,000.00) at the auction, which was insufficient to cover the outstanding loan amount of US$8,083,967.00, leaving a balance of US$2,833,967.00.

Enforcement Actions and Trial Court Proceedings

• As PPIC did not settle the remaining balance, IFC demanded payment from ITM and Grandtex, the guarantors under the Guarantee Agreement.
• On May 20, 1988, IFC filed a complaint before the RTC of Manila against PPIC and ITM for the payment of the outstanding balance, interests, and attorney’s fees.
• The trial court:

- Held PPIC liable for the payment. - Ordered PPIC to pay IFC’s attorney’s fees. - Dismissed IFC’s complaint against ITM, thereby relieving ITM of its guaranty obligation.

Court of Appeals (CA) Decision

• The CA reversed the trial court’s exoneration of ITM.

- It held that under the Guarantee Agreement, ITM had undertaken a direct guarantee of PPIC’s obligations. - The CA noted that the Guarantee Agreement clearly bound ITM as a “jointly and severally” liable party.

Petition for Review to the Supreme Court

• IFC filed a Petition for Review under Rule 45 of the Rules of Court to challenge the CA’s reasoning.
• Among the peripheral issues was the alleged change of theory by IFC on appeal and the contention that the matter was a question of fact rather than law.
• The Supreme Court was compelled to review the contractual stipulations firsthand, given the undisputed provisions in the Guarantee Agreement between the parties.

Issue:

Main Issue

• Whether Imperial Textile Mills, Inc. (ITM) is, under the Guarantee Agreement, a surety.
• Consequently, whether ITM is solidarily (jointly and severally) liable with PPIC for the obligations under the Loan Agreement.

Secondary Issues

• Whether the Petition raises a question of law or an issue that is purely factual.
• Whether there was a change of theory on appeal by IFC with respect to ITM’s liability.
• The admissibility of reviewing certain factual findings of the Court of Appeals, given the contractual terms of the Guarantee Agreement.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)