G.R. No. 217368 - Ruby Shelter Builders and Realty Development Corporation vs. Romeo Y. Tan, Roberto L. Obiedo and Atty. Tomas A. Reyes

Petitioner Ruby Shelter Builders and Realty Development Corporation (Ruby Shelter), represented by its president Ruben Sia, obtained a loan from respondents Romeo Y. Tan and Roberto L. Obiedo.
The loan was secured by a real estate mortgage covering five parcels of land in Concepcion Pequeña, Naga City, evidenced by transfer certificates of titles (TCT Nos. 29918, 38374, 38376, 39225, and 39232).
As of March 2005, Ruby Shelter’s outstanding debt amounted to PHP 95,700,620.00.

To secure an extension for repayment, the parties executed the MOA detailing the obligation and terms of payment.
Key stipulations included:

Ruby Shelter’s offer to execute simultaneous Deeds of Absolute Sale over the five mortgaged properties dated January 2, 2006.
The Second Party (creditors) agreed to condone/write off interest, penalties and surcharges totaling PHP 74,678,647.00 covering October 1, 2004, to December 31, 2005.
Ruby Shelter was allowed to pay off the indebtedness either by individual lots or the entire parcels by December 31, 2005.
If unable to pay, creditors were authorized to register and cause issuance of titles in their name through the executed deeds of sale.
There was also a stipulated liquidated damages amounting to PHP 10,000,000.00 for any contest by Ruby Shelter.
Alternatively, Ruby Shelter could consider the entire liability extinguished by executing deeds of sale for PHP 5,000,000.00, representing dacion en pago.

Ruby Shelter executed the Deeds of Absolute Sale dated January 3, 2006, covering the mortgaged properties.
Ruby Shelter, through Sia, sent a letter on December 27, 2005, expressing intention to redeem the properties and disputes over interest and penalties.
Despite meetings, parties failed to agree on computation of the final amount.
Ruby Shelter filed a complaint to annul the deeds of sale, alleging the sale constituted void pactum commissorium.

RTC dismissed Ruby Shelter’s complaint, holding the MOA constituted a novation and the Deeds of Absolute Sale were valid as dacion en pago.
RTC ordered Tan and Obiedo to pay PHP 5,000,000 as full payment.
Upon motion for partial reconsideration, RTC modified its decision, affirming the MOA and deeds of sale, dismissing claims and ordering Ruby Shelter and Sia to pay PHP 10,000,000 in liquidated damages.
The CA initially reversed and set aside the RTC decision partially, declaring the MOA partially void regarding automatic appropriation and annulled the deeds of absolute sale.
The CA held that the MOA did not novate the loan agreement but merely supplemented it, perceiving the deeds of sale as conditional sales treated as security.
Liquidated damages and monetary obligations were upheld against Ruby Shelter and Sia.
However, on motion for reconsideration, the CA reversed its October 2014 ruling and affirmed the RTC decision in toto.

Whether the parties novated the real estate mortgage and entered into a dacion en pago, thereby extinguishing Ruby Shelter’s original obligation.
Whether the MOA and deeds of sale are void for constituting an unlawful pactum commissorium.
Whether the liquidated damages stipulated in the MOA are unconscionable and should be reduced or deleted.