Premiere Development Bank Vs CA

PREMIERE DEVELOPMENT BANK, vs.
CA et al
FACTS:
On or about October 1994, Panacor Marketing Corporation, a newly formed corporation, acquired an
exclusive distributorship of products manufactured by Colgate Palmolive Philippines, Inc. To meet the
capital requirements of the exclusive distributorship, which required 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 Panacors creditworthiness, Premiere Bank rejected the loan application and suggested that its
affiliate company, Arizona Transport Corporation, should instead apply for the loan on condition that the
proceeds thereof shall be made available to Panacor. Eventually, Panacor was granted a P4.1 million credit
line as evidenced by a Credit Line Agreement. 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 as credit line of Panacor. As security for the P6.1
million loan, Arizona, represented by its Chief Executive Officer Pedro Panaligan and spouses Pedro and
Marietta Panaligan in their personal capacities, executed a Real Estate Mortgage against a parcel of land
covered by TCT No. T-3475 as per Entry No. 49507 dated October 2, 1995.
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 in the sum of
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. Pursuant to the said take-out agreement, Iba-
Finance was authorized to pay Premiere Bank the prior existing loan obligations of Arizona in an amount
not to exceed P6 million.
Panacor and Arizona filed a complaint for specific performance and damages against Premiere Bank
before the Regional Trial Court of Pasig City.
Iba-Finance filed a complaint-in-intervention praying that judgment be rendered ordering Premiere Bank
to pay damages in its favor.
The trial court rendered a decision in favor of Panacor and Iba-Finance.
For lack of sufficient legal and factual basis, the counterclaim of defendant Premiere Bank is DISMISSED.
ISSUE:
WHETHER OR NOT THE DECISION OF HONORABLE COURT OF APPEALS EXCEEDED AND WENT BEYOND
THE FACTS, THE ISSUES AND EVIDENCE PRESENTED IN THE APPEAL TAKING INTO CONSIDERATION THE
ARGUMENT OF PETITIONER BANK AND ADVENT OF THE DULY APPROVED COMPROMISE AGREEMENT
BETWEEN THE PETITIONER BANK AND IBA FINANCE CORPORATION.
RULING:
Premiere Bank argues that considering the compromise agreement it entered with Iba-Finance, the Court
of Appeals should have ruled only on the issue of its alleged bad faith in downgrading Panacors credit
line. It further contends that the Court of Appeals should have refrained from making any adverse
pronouncement on the refusal of Premiere Bank to recognize the take-out and its subsequent failure to
release the cancellation of the mortgage because they were rendered fait accompli by the compromise
agreement.
The court is not persuaded.
In a letter-agreement dated October 5, 1995, Iba-Finance informed Premiere Bank of its approval of
Panacors loan application in the amount of P10 million to be secured by a real estate mortgage over a
parcel of land covered by TCT No. T-3475. It was agreed that Premiere Bank shall entrust to Iba-Finance
the owners duplicate copy of TCT No. T-3475 in order to register its mortgage, after which Iba-Finance
shall pay off Arizonas outstanding indebtedness. Accordingly, Iba-Finance remitted P6,235,754.79 to
Premiere Bank on the understanding that said amount represented the full payment of Arizonas loan
obligations. Despite performance by Iba-Finance of its end of the bargain, Premiere Bank refused to
deliver the mortgage document. As a consequence, Iba-Finance failed to release the remaining P2.5
million loan it earlier pledged to Panacor, which finally led to the revocation of its distributorship
agreement with Colgate.
Undeniably, the not-so-forthright conduct of Premiere Bank in its dealings with respondent corporations
caused damage to Panacor and Iba-Finance. It is error for Premiere Bank to assume that the compromise
agreement it entered with Iba-Finance extinguished all direct and collateral incidents to the aborted take-
out such that it also cancelled its obligations to Panacor. The unjustified refusal by Premiere Bank to
release the mortgage document prompted Iba-Finance to withhold the release of the P2.5 million
earmarked for Panacor which eventually terminated the distributorship agreement. Both Iba-Finance and
Panacor, which are two separate and distinct juridical entities, suffered damages due to the fault of
Premiere Bank. Hence, it should be held liable to each of them.
While the compromise agreement may have resulted in the satisfaction of Iba-Finances legal claims,
Premiere Banks liability to Panacor remains. We agree with the Court of Appeals that the present appeal
is only with respect to the liability of appellant Premiere Bank to the plaintiffs-appellees (Panacor
and Arizona taking into account the compromise agreement.
For the foregoing reasons, we find that the Court of Appeals did not err in discussing in the assailed
decision the abortive take-out and the refusal by Premiere Bank to release the cancellation of the
mortgage document.

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