G.R. No. 221771 , September 18, 2019
TERP CONSTRUCTION CORPORATION, PETITIONER, V. BANCO FILIPINO SAVINGS AND MORTGAGE BANK, RESPONDENT.

FACTS

Petitioner Terp Construction Corporation planned to develop housing and condominium projects. To finance these, it, along with Home Insurance Guaranty Corporation and Planters Development Bank, raised funds through the issuance of P400 million in Margarita Project Participation Certificates (Margarita Bonds). Under a Contract of Guaranty, Planters Bank, as trustee, would hold the asset pool and pay bond interests, while Home Insurance Guaranty Corporation guaranteed payment of the bonds’ value at maturity plus 8.5% annual interest. Respondent Banco Filipino purchased P100 million worth of these bonds. Banco Filipino claimed it was entitled to additional interest beyond the guaranteed 8.5% based on letters dated February 3, 1997 and April 8, 1997 written by Terp Construction’s Senior Vice President, Alberto Escalona, committing to pay 15.5% and 16.5% interest. After the 1997 economic crisis, Terp Construction could not complete the projects. At the bonds’ maturity, the asset pool was insufficient. Home Insurance Guaranty Corporation, as guarantor, paid only the 8.5% interest. Banco Filipino demanded from Terp Construction the unpaid interest differentials, amounting to P18,104,431.33. Terp Construction refused and filed a Complaint for declaration of nullity of interest, alleging the additional interest was conditional on the release of the asset pool funds to it, which never happened. Banco Filipino countered that Terp Construction had paid the additional interest twice during the bonds’ term, inducing its purchase. The Regional Trial Court ruled for Terp Construction, finding no evidence of its obligation and that Escalona’s acts were unauthorized. The Court of Appeals reversed, ordering Terp Construction to pay the interest differentials, finding the obligation pure and unqualified from the letters, and that Terp Construction ratified Escalona’s acts by twice paying the additional interest.

ISSUE

Whether the Court of Appeals erred in ruling that petitioner Terp Construction Corporation expressly agreed to be bound to respondent Banco Filipino Savings and Mortgage Bank for additional interest on the bonds it purchased.

RULING

The Petition is denied. The Supreme Court affirmed the Court of Appeals’ Decision. The Court held that the factual findings of the Court of Appeals, being supported by substantial evidence, are binding, even if contrary to the trial court’s findings. On the substantive issue, the Court ruled that Terp Construction is liable for the interest differentials. The letters from its Senior Vice President, Escalona, committing to the higher interest rates, were binding acts of a corporate officer. Even assuming these acts were initially unauthorized, Terp Construction ratified them through its subsequent conduct. Specifically, the corporation’s repeated payment of the additional interest differentials to Banco Filipino during the bonds’ holding period constituted a clear ratification of Escalona’s commitments. By voluntarily performing the obligation, Terp Construction effectively adopted and confirmed the acts of its officer, making the obligation binding on the corporation. Therefore, Terp Construction is ordered to pay Banco Filipino the interest differential of P18,104,431.33, with legal interest.