37. GREGORIO DE VERA, JR.

, 
vs.
COURT OF APPEALS, Q. P. SAN DIEGO CONSTRUCTION, INC., ASIATRUST
DEVELOPMENT BANK, SECOND LAGUNA DEVELOPMENT BANK, CAPITOL
CITY DEVELOPMENT BANK, EX-OFFICIO SHERIFF OF QUEZON CITY and/or
HIS DEPUTY
FACTS: Q. P. San Diego Construction, Inc. (QPSDCI), owned a parcel of land located at
Quezon City, on which it built Lourdes I Condominium. To finance its construction and
development, QPSDCI entered into a Syndicate Loan Agreement with Asiatrust
Development Bank (ASIATRUST) as lead bank, and Second Laguna Development Bank
(LAGUNA) and Capitol City Development Bank (CAPITOL) as participating banks
(FUNDERS). QPSDCI mortgaged to the creditor banks as security the QC property and
the condominium constructed thereon. The mortgage deed was registered with the
Register of Deeds of Quezon City and annotated on the individual condominium
certificates of title (CCT) of each condominium unit.
On 23 June 1983, De Vera and QPSDCI, through its authorized agent Fil-Estate
Realty Corporation (FIL-ESTATE), entered into a Condominium Reservation
Agreement where de Vera undertook to buy Unit 211-2C of the condominium for
P325,000.00 under the following terms of payment: (a) an option money of P5,000.00
payable upon signing of the agreement to form part of the purchase price; (b) a full
downpayment of P175,675.00 broken down into the reservation fee of P5,000.00 and
three (3) equal monthly installments payable beginning the month after the signing of
the contract; and, (c) the remaining balance of P160,000.00 to be secured through
petitioner's Pag-IBIG and Open-Housing Loan. Pending release of the loan, De Vera
was to avail of a bridge financing loan with ASIATRUST or any accredited originating
bank of the Pag-IBIG program.
De Vera then paid the reservation fee of P5,000.00, and later on, the balance of
the downpayment of P167,000.00, thus completing the downpayment of P175,675.00. As
incentive, he was given a full discount on cash payment by QPSDCI to bring the total
payment to P184,040.00.
Pursuant to their Condominium Reservation Agreement, petitioner submitted
through FIL-ESTATE his application for the Pag-IBIG loan. ASIATRUST as originating
bank notified FIL-ESTATE that petitioner's Pag-IBIG loan application had been
approved. However, the amount approved was only P139,100.00 and not P160,000.00.
Additional charges further reduced the amount to P117,043.33.
Petitioner De Vera approached QPSDCI to have the P12,040.00 discount credited
to his additional equity. Since the resultant net loan of P117,043.33 was insufficient to
cover the balance of the purchase price, De Vera negotiated with QPSDCI to defer
payment of the P23,916.67 deficiency until the project was completed and the unit was
ready for turnover. QPSDCI agreed.
The condominium project was substantially completed in June 1984 and the unit
was turned over to De Vera the following month. Accordingly, petitioner paid QPSDCI
the P23,916.67 shortfall between the balance and the granted loan.
ASIATRUST wrote to QPSDCI asking the unit buyers to pay in advance the costs
of the transfer of titles and registration of their Pag-IBIG loan mortgages. QPSDCI
forwarded the letter to De Vera and requested that he pay the amount to QPSDCI. As
ASIATRUST indicated that the amount be paid directly to it, De Vera went to the bank
for clarification. After learning that ASIATRUST was in possession of the certificate of
title, De Vera paid the transfer expenses directly to ASIATRUST.
ASIATRUST sent another notice of approval to QPSDCI and De Vera with the
notation, "additional equity of all accounts have (sic) to be paid directly to the Bank."
ASIATRUST also wrote a letter to De Vera informing him that his housing loan
would only be implemented upon the following conditions: (a) Payment of the
remaining equity directly to ASIATRUST; and (b) Signing of all Pag-IBIG documents
not later than 20 October 1984, so his mortgages could be registered on or before 31
October 1984. Mortgages registered beyond said date shall subject the Pag-IBIG loan to
the increased interest rates of the National Home Mortgage Finance Corp. (per Circular
#27 dated June 21, 1984).
According to De Vera, the letter came as a total surprise to him; all the while he
thought that his loan had already been released to QPSDCI and the titles transferred to
his name; ASIATRUST informed De Vera that the developmental loan agreement
between QPSDCI and the 3 banks, under which the individual titles of the
condominium units were mortgaged in favor of the FUNDERS to secure the loan, shall
be paid out of the net proceeds of the Pag-IBIG loans of the buyers; that the total
amount of loan from the FUNDERS was distributed among all condominium units such
that each unit had to bear a certain portion of the total loan, or a "loan value;" that per
agreement with QPSDCI, ASIATRUST would only grant the Pag-IBIG-Housing Loan
with the release of the mortgage liens, which could not be released unless the buyers
fully paid their respective loan values; and that petitioner's equity payments to QPSDCI
had not been remitted to the bank.
On May 30, 1985, ASIATRUST informed QPSDCI that it could no longer extend
the bridge financing loan to some of the buyers, including De Vera, for various
reasons, among which was that De Vera had already exceeded the age limit, hence, he
was disqualified.
Since De Vera had already invested a substantial amount in improving his unit,
rescinding the sale was no longer a viable option, so he asked the president of QPSDCI
for some assurance that the title would be turned over to him upon full payment.
QPSDCI then suggested that he deal directly with ASIATRUST for any matter
regarding the sale of the unit.
As De Vera failed to obtain the housing loan, he was not able to pay the balance
of the purchase price. QPSDCI sent him a letter presenting him with two options: (a) to
pay the remaining balance of the purchase price, with interest, which had already
ballooned to P263,751.63, on or before 15 August 1987; or, (b) to pay rent for the use of
the unit from 28 July 1984 to June 1987.
De Vera, upon discovering that the FUNDERS had already published a notice of
extrajudicial foreclosure of the mortgage, filed a complaint against respondents for
damages and injunction with urgent prayer for issuance of a writ of preliminary
injunction, annulment of mortgage based on fraud, with urgent prayer for the issuance
of a writ of preliminary attachment and specific performance.
Meanwhile, QPSDCI failed to pay its obligations to the FUNDERS. ASIATRUST
extrajudicially foreclosed the mortgage on twenty-seven (27) condominium units,
including that of De Vera. The units were sold at public auction, with the FUNDERS as
the highest bidder. The certificate of sale was issued and annotated on the CCTs.
RTC rendered judgment "directing the defendants (private respondents) to pay
to the plaintiff (De Vera) jointly and severally the sum equivalent to the penalties and
charges plus whatever amount may be necessary to redeem Unit 211-2C from any lien
and encumbrances so that the title may be released and delivered to the plaintiff, free
from any lien and encumbrances, subject only to the deduction of his unpaid balance of
P139,000.00, which the plaintiff should pay out of his own funds, plus exemplary
damages of P100,000.00 each and to pay plaintiff attorney's fees jointly and severally x x
x P50,000.00 plus the expenses of litigation." The lower court denied plaintiff's prayer
for moral damages and dismissed defendants' counterclaim against the plaintiff and
cross-claims against each other.
The Court of Appeals affirmed the decision of the trial court with the
modification that respondents were ordered solidarily to pay De Vera P50,000.00 as
nominal damages, but the award for actual and exemplary damages was deleted.
ISSUE/S: Whether De Vera was liable to private respondents for penalties, interests and
other charges that accrued by reason of non-payment of the balance of the purchase
price
RULING: No. Respondent ASIATRUST had made several representations to De Vera
that his loan had been approved. The tenor of the letters sent by ASIATRUST would
lead a reasonable man to believe that there was nothing left to do but await the release
of the loan. ASIATRUST cannot hide behind the pithy excuse that the grant of the
bridge financing loan was subject to the release of the Pag-IBIG loan. The essence of
bridge financing loans is to obtain funds through an interim loan while the Pag-IBIG
funds are not yet available. To await the release of the Pag-IBIG loan would render any
bridge financing nugatory. Thus, we agree with the trial court when it said that "the
conclusion is inevitable that although the plaintiff was not able to pay, he was a victim
of circumstances and his failure was not due to his own fault."
Furthermore, Sec. 25 of PD 957 provides:
SECTION 25. Issuance of Title. — The owner or developer shall deliver the title of the lot
or unit to the buyer upon full payment of the lot or unit. No fee, except those required
for the registration of the deed of sale in the Registry of Deeds, shall be collected for the
issuance of such title. In the event a mortgage over the lot or unit is outstanding at the
time of the issuance of the title to the buyer, the owner or developer shall redeem the
mortgage or the corresponding portion thereof within six months from such issuance in
order that the title over any fully paid lot or unit may be secured and delivered to the
buyer in accordance herewith.
From the foregoing it is clear that upon full payment, the seller is duty-bound to deliver
the title of the unit to the buyer. Even with a valid mortgage over the lot, the seller is
still bound to redeem said mortgage without any cost to the buyer apart from the
balance of the purchase price and registration fees. It has been established that
respondent QPSDCI had been negligent in failing to remit petitioner's payments to
ASIATRUST. If QPSDCI had not been negligent, then even the possibility of charges,
liens or penalties would not have arisen. Therefore, as between QPSDCI and petitioner,
the former should be held liable for any charge, lien or penalty that may arise. 
Nevertheless, both trial court and the Court of Appeals found that petitioner De Vera
had superior rights over the condominium unit; that De Vera was not bound by the
mortgage in favor of the FUNDERS and, that QPSDCI violated its contract with De Vera
by its failure to remit the latter's payments.