Case Summary (G.R. No. 221771)
Financial Crisis and Asset Pool Shortfall
Following the 1997 Asian financial crisis, Terp Construction halted development of Margarita Eastville and Plaza. Upon bond maturity, the asset pool lacked sufficient funds to satisfy bondholders. Planters Bank transferred the shortfall to the guarantor, which paid only the contracted 8.5% interest.
Demand for Interest Differentials
Banco Filipino alleged that Escalona’s February 3 and April 8, 1997 letters committed Terp Construction to pay yields of 16.5% and 15.5%, respectively. It demanded the P18,104,431.33 interest differential plus 7% annual rate from January 31, 2001. Terp Construction refused on the ground that it never received asset pool funds and thus never became obligated to pay beyond 8.5%.
Trial Court Decision
The Regional Trial Court granted Terp Construction’s claim for nullity of interest liability. It found no written agreement for additional interest and ruled Escalona lacked authority; his alleged commitments were not ratified by the corporation.
Court of Appeals Decision
On Banco Filipino’s appeal, the Court of Appeals reversed the RTC. It held that the February 3 and April 8 letters constituted a pure obligation to pay the higher interest rates. It further ruled that Terp Construction ratified Escalona’s acts by twice paying interest differentials during the bond term, thereby binding the corporation.
Petition for Review and Procedural Issue
Terp Construction sought Supreme Court review under Rule 45, arguing conflicting factual findings between the RTC and the CA and contesting both the existence of an additional interest agreement and Escalona’s authority. Banco Filipino countered that the CA’s findings were supported by substantial evidence and that ratification and apparent authority applied.
Scope of Review on Factual Findings
The Supreme Court reaffirmed that Rule 45 petitions are generally limited to questions of law. It will not disturb factual findings affirmed by the Court of Appeals if supported by substantial evidence, absent any recognized exception such as findings grounded on conjecture or a misapprehension of facts. Terp Construction failed to demonstrate any exception warranting re-examination of the CA’s factual conclusions.
Evidence Supporting CA’s Findings
Escalona’s letters unambiguously promised guaranteed floor rates of 16.5% and 15.5%, with no conditional release of asset pool funds. Terp Construction’s payment of the differential interest twice during the bond term corroborated the existence of a binding obligation.
Corporate Ratification of Officer’s Acts
Under the Corporation Code, an officer’s unauthorized acts may be ratified by the corporation when it accepts benefits flowing from those acts. Terp Construction’s voluntary payment of the interest differentials constituted an implied ratification of Escalona’s commitments. Corporate errors in making payments do not absolve the corporation from liabilities arising from its own ac
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Facts of the Case
- In 1995, Terp Construction Corporation, together with Home Insurance Guaranty Corporation and Planters Development Bank, issued P400 million in Margarita Project Participation Certificates (Margarita Bonds) to finance the Margarita Eastville housing project and Margarita Plaza condominium.
- Under the Contract of Guaranty, Terp Construction sold the bonds and placed proceeds into the Margarita Asset Pool Formation and Trust Agreement; Planters Bank, as trustee, held the assets and paid interest and principal; Home Insurance Guaranty Corporation guaranteed maturity value plus 8.5% interest per annum.
- Banco Filipino purchased P100 million of these bonds and requested additional interest beyond the guaranteed 8.5%, based on two letters from Terp Construction Senior Vice President Alberto Escalona dated February 3, 1997 (committing to a 16.5% floor rate) and April 8, 1997 (committing to a 15.5% yield).
- The 1997 Asian economic crisis halted project construction, depleted the asset pool, and led Planters Bank to call on the guaranty; Home Insurance Guaranty Corporation paid only the guaranteed 8.5% interest at maturity.
- On January 31, 2001, Banco Filipino demanded the unpaid interest differentials of P18,104,431.33 (7% additional interest) as of July 1, 2001; Terp Construction refused payment.
Procedural History
- Terp Construction filed a Complaint in the Regional Trial Court (RTC) for declaration of nullity of interest, damages, and attorney’s fees, arguing no obligation to pay additional interest absent release of asset pool funds.
- On May 29, 2010, the RTC ruled in favor of Terp Construction, finding no binding commitment or ratification of Escalona’s letters.
- Banco Filipino appealed to the Court of Appeals (CA). On October 16, 2014, the CA reversed the RTC, ordering Terp Construction to pay P18,104,431.33 in interest differentials, holding the commitment a pure obligation and finding ratification by payment.
- Terp Constructi