G.R. No. 259965 , October 07, 2024
Planters Development Bank (Now China Bank Savings, Inc.), Petitioner, vs. Fatima D.G. Fuerte, Respondent.

FACTS

Respondent Fatima D.G. Fuerte extended a loan to Arsenio J. Jison, secured by a Real Estate Mortgage (REM) over a property covered by TCT No. 4224. Jison defaulted. Spouses Oscar and Angelita Abel proposed to assume Jison’s obligation and pay Fuerte Php 10,000,000.00 in exchange for the cancellation of the REM and the transfer of the property to them. The Spouses Abel applied for and were granted a credit facility by petitioner Planters Development Bank (PDB). Fuerte executed a Cancellation/Release of the mortgage, and Jison executed a Deed of Absolute Sale in favor of the Spouses Abel. At the Spouses Abel’s request, PDB issued a Letter of Guaranty dated July 23, 2010, addressed to Fuerte and Patricia Tan. The letter guaranteed that upon the transfer of ownership of the property to the Spouses Abel and the annotation of PDB’s mortgage on the new title, PDB would remit within seven working days a manager’s check for Php 10,000,000.00 to Fuerte as full payment of the borrower’s (Spouses Abel) outstanding balance with her. It required the title to be “free from other lien and other encumbrance except our mortgage annotated thereon.” Fuerte complied, causing the issuance of a new title (TCT No. 151615) in the Spouses Abel’s name. An REM in favor of PDB was annotated on August 5, 2010. However, PDB received a letter from Atty. Rodinil Bugay dated August 9, 2010, warning that the registered owner Arsenio J. Jison had been dead since 1971, and any transaction involving the property was fraudulent. An Adverse Claim was subsequently annotated on TCT No. 151615 on August 10, 2010. PDB refused to release the manager’s check to Fuerte, citing the Spouses Abel’s failure to provide an alternative collateral or clear the title of the adverse claim. Fuerte sent demand letters and, upon non-payment, filed a Complaint for Specific Performance with Damages against PDB and the Spouses Abel before the RTC. The RTC dismissed the complaint against PDB. On appeal, the Court of Appeals reversed the RTC, ordering PDB to pay Fuerte Php 10,000,000.00 with interest. PDB filed a Motion for Reconsideration, which was denied.

ISSUE

Whether the Court of Appeals erred in holding petitioner PDB liable to respondent Fuerte under the Letter of Guaranty despite the annotation of an adverse claim on the title, which constituted a violation of the condition that the title be free from other liens and encumbrances except PDB’s mortgage.

RULING

No, the Court of Appeals did not err. The Supreme Court denied the petition and affirmed the CA Decision. The Letter of Guaranty created a contract of guaranty where PDB, as guarantor, promised to fulfill the obligation of the Spouses Abel (the principal debtors) to pay Fuerte upon the happening of a specific condition: the transfer of ownership and annotation of PDB’s mortgage on a title free from other liens/encumbrances. The condition was fulfilled when TCT No. 151615 was issued and PDB’s mortgage was annotated on August 5, 2010. The subsequent annotation of the adverse claim on August 10, 2010, occurred after the condition had been satisfied and PDB’s obligation to pay had already arisen. A guarantor’s obligation becomes effective upon the fulfillment of the condition of the guaranty. PDB’s duty to pay was not subject to the continued perfection of the mortgage security. The adverse claim, being a mere notice of an adverse interest, is not a lien or encumbrance that attaches to the property; it does not constitute a violation of the Letter of Guaranty’s condition. PDB’s obligation under the guaranty was direct and primary to pay a sum of money, not contingent on the validity or enforceability of the mortgage. Therefore, PDB was liable to pay Fuerte the guaranteed amount.