Case Digest (G.R. No. 138669)
Facts:
Waterfront Philippines, Inc., Wellex Industries, Inc., and The Wellex Group, Inc. v. Social Security System, G.R. No. 249337, July 06, 2021, Supreme Court First Division, Gaerlan, J., writing for the Court.On October 28, 1999, petitioners Waterfront Philippines, Inc. (WPI), Wellex Industries, Inc. (WII), and The Wellex Group, Inc. (WGI) executed a Contract of Loan with Real Estate Mortgage with Option to Convert to Shares of Stock with respondent Social Security System (SSS) for P375,000,000.00, secured by a mortgage over two parcels in Green Meadows (TCT Nos. N-153395 and N-153396) and by shares placed in escrow. Related instruments (an addendum, a convertible promissory note, and an escrow agency agreement) were likewise executed and SSS disbursed the loan in three tranches in October–November 1999.
Interest payments became due in April 2000; WPI made partial payments and additional shares were added as collateral. By October 30, 2000, indebtedness had grown (principal, interest, penalties). SSS approved, by SSC Resolution No. 1003, a partial debt-to-property settlement and on March 14, 2001 the parties executed a dacion en pago obliging transfer of the mortgaged properties to SSS within 60 days; failure would render the dacion en pago void and permit SSS to collect under the original loan. WPI later defaulted on transfer (citing capital gains tax difficulty), made restructuring proposals and additional partial payments, but SSS declared the entire obligation due on April 1, 2003.
SSS foreclosed extrajudicially; at the August 7, 2003 sale SSS was the highest bidder (P198,638,000) and a Certificate of Sale issued September 19, 2003. WPI nonetheless had an outstanding balance as of March 31, 2004. SSS filed a complaint for sum of money with damages on May 13, 2004 against WPI, WII and WGI.
At trial petitioners denied fraud and bad faith, contended the dacion en pago effected transfer, and denied solidary liability; WII and WGI argued they were not co‑borrowers and that foreclosure terminated their collateral obligations. The Regional Trial Court (Quezon City, Branch 76) on January 13, 2015 dismissed SSS’s complaint, found the loan contract void for lack of authority of SSS officers and for acting beyond statutory investment powers under R.A. No. 8282, declared the mortgage accessory invalid, and ordered mutual restitution (including reconveyance of titles and return of stock certificates and funds).
SSS appealed. The Court of Appeals, in an August 30, 2019 Decision (CA‑G.R. CV No. 104941), reversed the RTC: it upheld that petitioners lacked bad faith and that WII/WGI are not solidarily liable, but held that petitioners waived or failed to timely raise the authority issue (pretrial stipu...(Subscriber-Only)
Issues:
- Did SSS (and the SSS officers who signed) have actual authority to enter into the October 28, 1999 contract of loan?
- Is the principal contract of loan valid or, alternatively, void for being ultra vires under R.A. No. 8282 (Sections 3(b) and 26)?
- If the principal contract is void, is the accessory real estate mortgage likewise void and what remedies (including re...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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