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Chua, et al. v. United Coconut Planters Bank, et al., G.R. No. 215999, 16 August 2017

Third Division

[BERSAMIN, J.]

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 The deeds of trust were neither expressly cancelled not rescinded despite the fact that the project under the JVA never came to fruition.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?

HELD#1: NO.

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?

HELD#2: NO.

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.

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Posted by on January 27, 2018 in Case Digests, Civil Law

 

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GSIS v. Court of Appeals [G.R. No. L-40824. February 23, 1989]

FACTS

Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr. and Mrs. Flaviano Lagasca, executed a deed of mortgage, in favor of petitioner Government Service Insurance System (GSIS) and subsequently, another deed of mortgage, in connection with two loans granted by the latter in the sums of P 11,500.00 and P 3,000.00, respectively. A parcel of land co-owned by said mortgagor spouses, was given as security under the aforesaid two deeds.  They also executed a ‘promissory note” which states in part:

… for value received, we the undersigned … JOINTLY, SEVERALLY and SOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . . (P 11,500.00) Philippine Currency, with interest at the rate of six (6%) per centum compounded monthly payable in . . . (120)equal monthly installments of . . . (P 127.65) each.

Both parties relied on the provisions of Section 29 of Act No. 2031, otherwise known as the Negotiable Instruments Law, which provide that an accommodation party is one who has signed an instrument as maker, drawer, acceptor of indorser without receiving value therefor, but is held liable on the instrument to a holder for value although the latter knew him to be only an accommodation party.

ISSUE

Whether or not the executed promissory note is a negotiable instrument.

RULING

NO.The promissory note hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not negotiable instruments. These documents do not comply with the fourth requisite to be considered as such under Section 1 of Act No. 2031 because they are neither payable to order nor to bearer. The note is payable to a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act No. 2031 would not apply; governance shall be afforded, instead, by the provisions of the Civil Code and special laws on mortgages.

 

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Ramos vs. Sarao (461 SCRA 103)

MYRNA RAMOS, petitioner,

vs. SUSANA S. SARAO and JONAS RAMOS, respondents.

[G.R. No. 149756.  February 11, 2005]

FACTS:

Spouses Jonas Ramos and Myrna Ramos executed a contract over their conjugal house and lot in favor of respondent for and in consideration of P1,310,430.  Entitled “DEED OF SALE UNDER PACTO DE RETRO,” the contract, inter alia, granted the Ramos spouses the option to repurchase the property within six months plus an interest of 4.5 percent. Petitioner tendered to Sarao the amount of P1,633,034.20 in the form of two manager’s checks, which the latter refused to accept for being allegedly insufficient. Myrna filed a Complaint, and she deposited with the RTC two checks that Sarao refused to accept. Sarao filed against the Ramos spouses a Petition “for consolidation of ownership in pacto de retro sale”. Both RTC and CA dismissed petitioner’s complaint and appeal respectively in favor of respondent Sarao.

ISSUE:

Whether or not the pacto de retro sale was in reality an equitable mortgage?

RULING:

YES. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered (Art.1371, NCC). The contract shall be presumed to be an equitable mortgage, in any of the following cases:(1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. (Art. 1602, NCC)

 
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Posted by on March 6, 2013 in Case Digests, Civil Law

 

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Philippine Savings Bank vs. Mañalac, Jr. (457 SCRA 203)

FACTS:

Respondent spouses obtained a loan from petitioner covered by promissory note. As a security for the loan, respondent executed a Real Estate Mortgage in favor of the petitioner over eight parcels of land. Respondents were unable to pay the installments so that the loan obligations were restructured. Respondent entered into Deed of Sale with Assumption of Mortgage on 3 real properties (and another property) with spouses Galicia. Respondent’s repeated default in payment of past due obligations prompted the petitioner to file for extrajudicial foreclosure of remaining mortgaged properties. Respondent asked for partial release of mortgage after enclosing a cashier check payment. Petitioner sold some mortgaged properties that prompted respondent to institute action for damages. Trial court annulled the sale of mortgaged properties. The Court of appeals affirmed with modification the decision of trial court requiring indemnification of the respondent by petitioner.

 

ISSUE:

Whether or not there was novation in applying the payment made by respondent to loan account of Galicia.

 

RULING:

NO. Novation is never presumed. Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. It is obvious that there was no agreement to form a new contract by novating the mortgage contracts of the Mañalacs and the Galicias. Neither can Mañalac be deemed substitute debtor within the contemplation of Article 1293 of the Civil Code. The Decision of the Court of Appeals was reversed and set aside.

 
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Posted by on January 14, 2013 in Case Digests, Civil Law

 

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Iloilo Traders Finance. Inc. vs. Heirs of Oscar Soriano, Jr. (404 SCRA 67)

FACTS:

Respondents executed two promissory notes secured by real property mortgages in favor of petitioner. The respondents defaulted and petitioner moved for extra-judicial foreclosure of the mortgages. Respondent filed a complaint against petitioner. The parties later entered into “amicable settlement” and submitted it to the trial court for approval. The trial court required the parties to give some clarifications on several issues that were not complied.  The amicable settlement was disapproved and the court proceeded. Respondents withdrew the case and filed a (new) case for novation and specific performance which was decided favorably for the respondents. The Court of Appeals affirmed the judgment.

 

ISSUE:

Whether or not the amicable settlement entered into between parties has novated the original obligation.

 

RULING:

NO. The parties entered into the agreement basically to put an end to Civil Case No. 14007 then pending before the Regional Trial Court.Concededly, the provisions of the settlement were beneficial to the respondent couple. The compromise extended the terms of payment and implicitly deferred the extrajudicial foreclosure of the mortgaged property. It was well to the interest of respondent spouses to ensure its judicial approval; instead, they went to ignore the order of the trial court and virtually failed to make any further appearance in court. This conduct on the part of respondent spouses gave petitioner the correct impression that the Sorianos did not intend to be bound by the compromise settlement, and its non-materialization negated the very purpose for which it was executed.

The decision of the court of the Court of Appeals affirming that of the trial court was reversed and set aside.

 
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Posted by on January 14, 2013 in Case Digests, Civil Law

 

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Velarde vs. Court of Appeals (361 SCRA 57)

FACTS:
The private respondent executed a Deed of Sale with Assumption of Mortgage, with a balance of P1.8 million, in favor of the petitioners. Pursuant to said agreements, plaintiffs paid the bank (BPI) for three (3) months until they were advised that the Application for Assumption of Mortgage was denied. This prompted the plaintiffs not to make any further payment. Private respondent wrote the petitioners informing the non-fulfillment of the obligations. Petitioners, thru counsel responded that they are willing to pay in cash the balance subject to several conditions. Private respondents sent a notarial notice of cancellation/rescission of the Deed of Sale. Petitioners filed a complaint which was consequently dismissed by an outgoing judge but was reversed by the assuming judge in their Motion for Reconsideration. The Court of Appeals reinstated the decision to dismiss.

ISSUE:
Whether or not there is a substantial breach of contract that would entitle its rescission.

RULING:
YES. Article 1191 of the New Civil Code applies. The breach committed did not merely consist of a slight delay in payment or an irregularity; such breach would not normally defeat the intention of the parties to the contract. Here, petitioners not only failed to pay the P1.8 million balance, but they also imposed upon private respondents new obligations as preconditions to the performance of their own obligation. In effect, the qualified offer to pay was a repudiation of an existing obligation, which was legally due and demandable under the contract of sale. Hence, private respondents were left with the legal option of seeking rescission to protect their own interest.

 
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Posted by on January 14, 2013 in Case Digests, Civil Law

 

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