Case Summary (G.R. No. 259965)
Applicable Law
- 1987 Philippine Constitution
- Civil Code of the Philippines
- Presidential Decree No. 1529 - Property Registration Decree
Factual Background
The dispute originated from a complaint for specific performance filed by Fatima Fuerte against Planters Development Bank (PDB) concerning a loan guaranty arrangement. In 2010, Fuerte allowed a certain Arsenio J. Jison to secure a loan of Php 5,000,000 through a Real Estate Mortgage on a property registered under Jison’s name (TCT No. 4224). After Jison defaulted, the Spouses Abel proposed to pay Fuerte Php 10,000,000 in exchange for the cancellation of the mortgage and the transfer of ownership of the property. PDB subsequently granted a loan to the Spouses Abel, and transactions proceeded, including the issuance of a Letter of Guaranty from PDB in favor of Fuerte.
Proceedings
The legal journey began when Fuerte filed a complaint before the Regional Trial Court (RTC) after PDB refused to release her guaranteed manager's check due to concerns regarding the validity of the property titles tied to the Spouses Abel. PDB highlighted that there were additional claims on the property and questioned the legitimacy of the mortgage transactions, noting that Jison had died decades before the alleged sale to Spouses Abel. The RTC ultimately dismissed Fuerte's claim against PDB, citing conditions in the Letter of Guaranty that were not fulfilled due to encumbrances on the title of the property.
Court of Appeals Ruling
Fuerte's appeal to the Court of Appeals (CA) led to a partial reversal of the RTC's judgment. The CA found that the RTC erroneously interpreted the terms of the Letter of Guaranty, clarifying that the conditions for the release of the manager's check were met once the property title was transferred to the Spouses Abel and the mortgage was annotated, regardless of encumbrances. The CA also ruled that Spouses Abel could not be held liable for the manager's check since they were not signatories to the Letter of Guaranty.
The Supreme Court's Ruling
Upon reviewing the CA's decision, the Supreme Court noted several critical points of law and statutory interpretation regarding the obligations tied to the Letter of Guaranty. The Court underscored that the conditions outlined in the Letter must be read together, ruling that the presence of any encumbrance, including adverse claims, negated compliance with the conditions required for PDB's obligation to pay Fuerte. Thus, the Court found that PDB rightfully withheld the release of the manager's check, as the property title presented was encumbered w
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Facts and Antecedents
- The case originated from a Complaint for Specific Performance with Prayer for Damages filed by Fatima D.G. Fuerte (Fuerte) against Planters Development Bank (PDB) and Spouses Oscar and Angelita Abel (Spouses Abel).
- Fuerte granted a loan of Php 5,000,000.00 to Arsenio J. Jison secured by a Real Estate Mortgage (REM) over property located in Pasay City, registered under TCT No. 4224.
- Jison defaulted on the loan;
- Spouses Abel proposed to assume Jison's obligation and pay Fuerte Php 10,000,000.00 in exchange for cancellation of the previous REM and transfer of ownership.
- Spouses Abel obtained a loan of Php 26,000,000.00 from PDB secured by the subject property after a new TCT No. 151615 was issued in their name.
- PDB issued a Letter of Guaranty dated July 23, 2010 promising to remit within seven working days a manager's check to Fuerte for Php 10,000,000.00 upon transfer of ownership and annotation of mortgage.
- Fuerte cancelled Jison's April 13, 2010 REM on TCT No. 4224 and the new title was issued to Spouses Abel.
- However, PDB withheld release of the Php 10,000,000.00 check due to the discovery of an adverse claim and allegations that Jison had died in 1971.
Procedural Background
- Fuerte filed the complaint for specific performance before the RTC of Pasig City.
- The RTC dismissed Fuerte's claim against PDB but ruled Spouses Abel to pay Fuerte Php 10,000,000.00 plus attorney's fees.
- Both parties filed motions for reconsideration which the RTC denied.
- The Court of Appeals (CA) partly granted Fuerte's appeal and reversed the dismissal of her claim against PDB, ordering PDB to pay the Php 10,000,000.00 plus attorney's fees.
- CA held that PDB was liable for breach as it unjustifiably withheld Fuerte’s payment.
- CA clarified that Spouses Abel are not liable since they are not signatories to the Letter of Guaranty.
- The CA Resolution denied PDB's Motion for Reconsideration.
Issues Presented
- Whether the CA erred in ruling that all conditions stated in the Letter of Guaranty dated July 23, 2010, were met by Fuerte.
- Whether PDB was justified in withholding the release of the Php 10,000,000.00 manager's check to Fuerte.
Court’s Analysis - Interpretation of the Letter of Guaranty
- The Letter of Guaranty imposed pre-conditions (transfer of ownership and annotation of mortgage on TCT) and post-conditions (submission of original documents free from other liens or encumbrances, except PDB’s mortgage).
- Pre- and post-release conditions are interconnected and must be considered as an entire agreement.
- The CA erred in isolating only the transfer of ownership and annotation of mortgage as conditions, disregarding the requirement for a title free from other liens or encumbrances.
- Literal reading supports that the certificate of title must b