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Thursday, May 13, 2004
SC upholds damage suit v. bank over mortgage
By Benjamin B. Pulta
THE Supreme Court (SC) ruling has upheld a decision by the Court of Appeals (CA) requiring the Premiere Development Bank to pay a local firm more than half a million pesos in damages and attorney's fees in relation to a six-year-old mortgage case.
In a decision penned by Associate Justice COnsuelo Ynares-Santiago, the SC's first division also modified the CA ruling that deleted the award of P4,520,000 in actual damages "for lack of factual basis."
The case involves a loan obtained by toothpaste distributor Panacor Marketing Corporation, which acquired exclusive distribution of products manufactured by Colgate Palmolive Philippines Inc.
To meet capital requirements of exclusive distribution, which needed an initial inventory level of P7.5 million, Panacor applied for a loan of P4.1 million with Premiere Development Bank.
After an extensive study of Panacor's credit-worthiness, Premiere Bank rejected the loan application and suggested that its affiliate company, Arizona Transport Corp. (Arizona), should instead apply for the loan on the condition that the proceeds shall be made available to Panacor.
Panacor was granted a P4.1 million credit line. As suggested, Arizona, which was an existing loan client, applied for and was granted a loan of P6.1 million, P3.4 million of which would be used to pay off its existing loan accounts and the remaining P2.7 million will be used as credit line of Panacor.
As security for the P6.1 million loan, Arizona executed a real estate mortgage against a parcel of land.
Since the P2.7 million released by Premiere Bank fell short of the P4.1 million credit line which was previously approved, Panacor negotiated for a take-out loan with Iba Finance Corporation for P10 million, P7.5 million of which will be released outright in order to take out the loan from Premiere Bank and the balance of P2.5 million to be released after the cancellation by Premiere of the collateral mortgage on the property covered by TCT No. T-3475.
Premiere Bank sent a letter-reply to Iba-Finance, informing the agency of its refusal to turn over the requested documents on the ground that Arizona had an existing unpaid loan and that it was the bank's policy to require full payment of all outstanding loan obligations prior to the release of mortgage documents.
(May 13, 2004 issue)
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