FACTS: It is undisputed that petitioners Spouses Chua and LGCTI as well as respondents Jose Go, had existing loan obligations with UCPB prior to the March 1997 JVA. As an offshoot of the JVA, two deeds of trust were executed by the parties involving petitioners’ 44-hectare property covered by 32 titles. The deeds of trust were neither expressly cancelled not rescinded despite the fact that the project under the JVA never came to fruition. On March 21, 2000, UCPB and petitioners entered into the MOA consolidating the outstanding obligations of the Spouses Chua and LGCTI.
Petitioners exchanged their 30 parcels of land to effectively reduce their total unpaid obligations to only P68,000,000.00. To settle the balance, they agreed to convert it into equity in LGCTI in case they would default in their payment. To implement the MOA, they signed the REM drafted by UCPB, which included the properties listed in the MOA as security for the credit accommodation of P404,597,177.04. Unknown to them, however, Jose Go, acting in behalf of Revere, likewise executed another REM covering the properties that Revere was holding in trust for them. When UCPB foreclosed the mortgages, it applied about P75.09 million out of the P227,700,000.00 proceeds of the foreclosure sale to the obligations of Revere and Jose Go. Moreover, UCPB pursued petitioners for their supposed deficiency amounting to P68,000,000.00, which was meanwhile assigned to respondent Asset Pool A by UCPB.
ISSUE#1: Did the REM subsist even after the foreclosure sale of the subject properties?
A review of the MOA dated March 21, 2000 would reveal that petitioners’ outstanding obligation referred to, after deducting the amount of the thirty properties, was reduced to only P68,000,000.00. To settle this balance, petitioners agreed to convert this into equity in LGCTI in case they defaulted in their payment. In this case, what prompted the foreclosure sale of the mortgaged properties was petitioners’ failure to pay their obligations. When the proceeds of the foreclosure sale were applied to their outstanding obligations, the payment of the balance of the P68,000,000.00 was deliberately left out, and the proceeds were conveniently applied to settle P75,000,000.00 of Revere and/or Jose Go’s unpaid obligations with UCPB. This application was in blatant contravention of the agreement that Revere’s or Jose Go’s obligations would be paid only if there were excess in the application of the foreclosure proceeds. Accordingly, the CA should have applied the proceeds to the entire outstanding obligations of petitioners, and only the excess, if any, should have been applied to pay off Revere and/or Jose Go’s obligations.
ISSUE#2: Was the deed of assignment covering the deficiency in petitioner’s obligations to UPCB valid?
Based on the foregoing, therefore, we conclude that the deed of assignment of liabilities covering the deficiency in its obligation to UCPB in the amount of P68,000,000.00 was null and void. According to the apportionment of bid price executed by UCPB ‘s account officer, the bidamounting to P227,700,000.00 far exceeded the indebtedness of the Spouses Chua and LGCTI in the amount of P204,597,177.04, which was inclusive of the P68,000,000.00 subject of the deed of assignment of liabilities as well as the P32,703,893,450.00 corresponding to the interests and penalties that UCPB waived in favor of petitioners.
It can be further concluded that UCPB could not have validly assigned to Asset Pool A any right or interest in the P68,000,000.00 balance because the proper application of the proceeds of the foreclosure sale would have necessarily resulted in the full extinguishment of petitioners’ entire obligation. Otherwise, unjust enrichment would ensue at the expense of petitioners. There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience. The principle of unjust enrichment requires the concurrence of two conditions, namely: (1) that a person is benefited without a valid basis or justification; and (2) that such benefit is derived at the expense of another. The main objective of the principle against unjust enrichment is to prevent a person from enriching himself at the expense of another without just cause or consideration. This principle against unjust enrichment would be infringed if we were to uphold the decision of the CA despite its having no basis in law and in equity.