G.R. No. L-7185; August 31, 1955
REHABILITATION FINANCE CORPORATION, petitioner, vs. COURT OF APPEALS and REALTY INVESTMENTS, INC., respondents.

FACTS

On June 17, 1948, Delfin Dominguez contracted to purchase a lot from Realty Investments, Inc., making a down payment and agreeing to pay the balance in installments. To finance a house improvement, Dominguez obtained a P10,000 loan from the Rehabilitation Finance Corporation (RFC), secured by a mortgage on the house and lot. At Dominguez’s instance, the RFC, by letter dated September 17, 1948, requested Realty Investments to execute the documents to transfer title to Dominguez so the mortgage could be registered. The RFC assured that once title was issued to Dominguez and its mortgage registered as a first lien, it would pay Realty Investments the balance of the purchase price (P3,086.98). Relying on this assurance, Realty Investments executed a deed conveying the lot to Dominguez free of liens on September 20, 1948, and the mortgage was subsequently registered. The RFC released P6,500 of the loan to Dominguez but withheld the remainder due to his default on amortizations. The RFC then foreclosed the mortgage, bought the property at the foreclosure sale, and obtained title after the redemption period. When demanded to pay the balance, the RFC refused. Realty Investments sued for recovery from either Dominguez or the RFC. The trial court held Dominguez liable but absolved the RFC. The Court of Appeals reversed, declaring the judgment against Dominguez void (as he had been excluded from the case) and sentenced the RFC to pay the amount.

ISSUE

Whether the RFC is obligated to pay Realty Investments, Inc. the balance of the purchase price for the lot, despite the subsequent letter from Realty Investments agreeing to have the amount paid at the “second release of proceeds” of Dominguez’s loan.

RULING

Yes, the RFC is obligated to pay. The RFC’s unconditional promise to pay the balance upon the transfer of title and registration of its mortgage created a direct obligation. The condition was fulfilled when Realty Investments conveyed the title and the mortgage was registered. Realty Investments’ subsequent letter of September 20, 1948, merely assented to a deferment of payment until the anticipated second release of the loan proceeds, based on information from Dominguez. It did not modify or extinguish the RFC’s primary obligation. The RFC failed to inform Realty Investments that the information about the second release was incorrect or that no further releases would occur. The Court of Appeals’ finding, which is conclusive, is that the RFC kept Realty Investments ignorant of the loan’s terms. Therefore, Realty Investments’ assent to defer payment was not an agreement to make payment contingent on a future loan release. The RFC, having induced the conveyance of title with its assurance of payment, cannot retain the property without paying. The decision of the Court of Appeals is affirmed.