Facts:

• The case involves Dao Heng Bank, Inc. (now Banco de Oro Universal Bank) as the petitioner and spouses Lilia and Reynaldo Laigo as the respondents.
• The respondents secured loans totaling P11 million from the bank, backed by three Real Estate Mortgages on two parcels of land owned by Lilia Laigo.
• Mortgages were executed on October 28, 1996, November 18, 1996, and April 18, 1997, with a 12-month repayment period.
• By 2000, the respondents defaulted on their obligations and verbally proposed a dacion en pago, offering one of the mortgaged lots to settle the debt.
• An appraisal of the properties was commissioned by the bank, partially funded by both parties, but no further action followed.
• On August 18, 2000, the bank sent a demand letter for an outstanding obligation of P10,385,109.92, which went unanswered.
• The bank filed for foreclosure in September 2000, and the properties were auctioned on December 20, 2000, sold to Banco de Oro Universal Bank for P10,776,242.
• In June 2001, the respondents sought to negotiate redemption, receiving a letter outlining terms for redemption totaling P11.5 million plus interest, but did not respond.
• On December 27, 2001, the respondents filed a complaint in the RTC of Quezon City to annul the foreclosure, claiming a verbal agreement for dacion en pago.
• The RTC denied their request for a Temporary Restraining Order and later dismissed the complaint, citing the Statute of Frauds.
• The Court of Appeals reversed the RTC's decision, prompting the current petition by Banco de Oro Universal Bank.

Issue:

• (Unlock)

Ruling:

• The Supreme Court reversed the Court of Appeals' decision and reinstated the RTC's dismissal of the respondents' complaint.
• The Court held that the complaint did not state a cause of action...(Unlock)

Ratio:

• The Supreme Court reasoned that a valid dacion en pago requires a meeting of the minds, which was lacking in this case.
• Dacion en pago is similar to a contract of sale, necessitating consent, a definite object, and a lawful cause.
• The absence of a written agreement to formalize the dacion en pago rendered the claim unenforceable ...continue reading