Case Digest (G.R. No. 221771) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Terp Construction Corporation v. Banco Filipino Savings and Mortgage Bank, G.R. No. 221771, decided on September 18, 2019, Terp Construction planned in 1995 to develop two real estate projects, the Margarita Eastville housing project and the Margarita Plaza condominium. To raise P400 million, it, Home Insurance Guaranty Corporation, and Planters Development Bank entered into a Contract of Guaranty and a Trust Agreement, issuing Margarita Project Participation Certificates (Margarita Bonds). Planters Bank was trustee of the asset pool; Home Insurance Guaranty Corporation guaranteed 8.5% interest per annum and principal at maturity. In February and April 1997, Alberto Escalona, Terp Construction’s Senior Vice President, sent letters committing Terp to pay investors a “guaranteed floor rate of 16.5%” and a yield of “15.5%,” respectively. Banco Filipino purchased P100 million of these bonds and relied on Escalona’s promises. After the 1997 economic crisis, the asset pool proved i Case Digest (G.R. No. 221771) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Project and financing arrangement
- In 1995, Terp Construction Corporation (Terp Construction), Home Insurance Guaranty Corporation (HIGC), and Planters Development Bank (Planters Bank) agreed to issue P400 million Margarita Project Participation Certificates (Margarita Bonds) to fund a housing project (Margarita Eastville) and a condominium (Margarita Plaza). Planters Bank would act as trustee of the asset pool; HIGC would guarantee 8.5% annual interest and principal at maturity.
- Banco Filipino Savings and Mortgage Bank purchased P100 million of these bonds.
- Commitment letters and project failure
- On February 3, 1997 and April 8, 1997, Alberto Escalona, Senior Vice President of Terp Construction, sent letters committing Terp Construction to pay additional yield differentials of 16.5% and 15.5%, respectively.
- Following the 1997 economic crisis, the Margarita projects stalled; asset pool funds proved insufficient to cover interest and redemption.
- Demand, lower court proceedings, and appellate decisions
- Upon maturity, HIGC paid only the guaranteed 8.5% interest; on January 31, 2001, Banco Filipino demanded seven percent (7%) unpaid interest amounting to P18,104,431.33, but Terp Construction refused to pay.
- Terp Construction filed for nullity of the interest obligation; the Regional Trial Court (RTC) ruled in its favor, finding no binding commitment or ratification of Escalona’s letters.
- The Court of Appeals (CA) reversed on October 16, 2014, holding that Terp Construction expressly agreed to pay the differential interest and that ratification occurred when it paid the additional interest twice during the bond term. A motion for reconsideration was denied on December 9, 2015.
- Supreme Court petition
- Terp Construction filed a Petition for Review on Certiorari under Rule 45, arguing that no written contract existed for additional interest, Escalona lacked authority, and mistaken payments cannot effect ratification.
- Banco Filipino and the Philippine Deposit Insurance Corporation (as liquidator) opposed, contending that Escalona had both actual and apparent authority and that payments ratified his commitments.
Issues:
- Procedural Issue
- Whether the Supreme Court may review conflicting factual findings between the RTC and the CA under Rule 45, given the general restriction to questions of law.
- Substantive Issue
- Whether Terp Construction expressly agreed to pay additional interest differentials (beyond the guaranteed 8.5%) through Escalona’s letters and whether those letters bind the corporation.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)