Title
Spouses Chin Kong Wong Choi vs. United Coconut Planters Bank
Case
G.R. No. 207747
Decision Date
Mar 11, 2015
Spouses Choi paid for a condominium unit, but Primetown failed to deliver. UCPB, assigned receivables, was held liable only for the amount received, not solidarily with Primetown. SC affirmed CA, limiting UCPB's liability.
refund of money
damages
condominium construction
A

Case Summary (G.R. No. 207747)

Factual Background

Spouses Choi agreed to purchase condominium unit A-322 in Kiener from Primetown for P1,151,718.75, payable by a down payment of P100,000.00 and the balance in forty equal monthly installments of P26,292.97 from 16 January 1997 to 16 April 2000. On 23 April 1998, UCPB and Primetown executed a Memorandum of Agreement and a Sale of Receivables and Assignment of Rights and Interests (Agreement). Under the Agreement, in exchange for P748,000,000.00, Primetown assigned, transferred, conveyed, and set over unto UCPB all accounts receivable accruing from Primetown’s Kiener projects, including the assignment of Primetown’s rights, titles, interests, and participation over the units covered by, or arising from, the Contracts to Sell from which the receivables had arisen. The assigned receivables included Spouses Choi’s account. Spouses Choi were able to make at least one amortization payment to UCPB on 3 February 1999.

Complaint Before the HLURB and Early Treatment of the Case

On 11 April 2006, Spouses Choi filed a complaint for refund of money with interest and damages against Primetown and UCPB before HLURB Regional Field Office No. VI (RFO VI). They alleged that despite paying the purchase price, Primetown failed to finish construction and failed to deliver the condominium unit. UCPB took the position reflected in the subsequent HLURB decisions: the nature of the assignment and the extent of UCPB’s liability.

In a Decision dated 29 November 2006, the HLURB RFO VI ruled that only the accounts receivable on the condominium unit were transferred to UCPB. It reasoned that it would be unfair to order UCPB to refund all payments made by Spouses Choi because UCPB received only part of the consideration after the assignment of receivables. The RFO VI also noted that both Primetown and UCPB were liable to Spouses Choi and that Primetown was under corporate rehabilitation; accordingly, it suspended the proceedings and directed Spouses Choi to file their claim before the rehabilitation receiver.

HLURB Board of Commissioners: Refund Ordered Against UCPB

On 18 October 2007, the HLURB Board of Commissioners (BOC) partially reversed the RFO’s approach. The BOC suspended proceedings against Primetown but ordered UCPB to refund the full amount of P1,151,718.80 with legal interest at 6% per annum from the date of Spouses Choi’s extrajudicial demand on May 24, 2005 until full payment. The BOC also held UCPB and Primetown jointly and severally liable for exemplary damages of P30,000.00 and attorneys’ fees of P30,000.00, on the view that UCPB was Primetown’s successor-in-interest such that Spouses Choi’s refund action could be enforced against UCPB. UCPB’s motion for reconsideration was denied on 18 March 2008, prompting UCPB to appeal to the Office of the President.

The Office of the President’s Ruling

In a Decision dated 1 June 2010, the Office of the President (OP) affirmed the HLURB BOC. The OP held that UCPB, as Primetown’s successor-in-interest, was jointly and severally liable with Primetown due to Primetown’s failure to deliver the condominium unit. The OP later denied UCPB’s motion for reconsideration in a Resolution dated 5 January 2011, leading UCPB to file an appeal before the CA.

Appellate Proceedings and the CA’s Application of Stare Decisis

The CA reversed the OP in a Decision dated 29 January 2013. The CA granted UCPB’s petition and adopted the CA’s reasoning in earlier cases involving UCPB, particularly UCPB v. O’Halloran and UCPB v. Liam, invoking the doctrine of stare decisis on the ground that the facts and arguments were similar. The CA thus reversed and set aside the OP’s ruling and reinstated the HLURB RFO VI Decision dated 29 November 2006. The CA denied Spouses Choi’s motion for reconsideration in a Resolution dated 27 May 2013.

Issues Raised by the Petitioners

Spouses Choi challenged the CA’s reliance on stare decisis, arguing that the CA improperly deferred to co-division rulings without adequate merit analysis, and that the doctrine of estoppel was applicable and should have been considered distinctly from the situations in O’Halloran and Liam. They further contended that the CA disregarded the applicability of Supreme Court rulings, including Luzon Development Bank v. Enriquez, Delta Development and Management Services Inc. v. Enriquez, and the more recent decision in PBCOMM v. Pridisons Realty Corporation. Finally, Spouses Choi raised the question of the legal effect of the Agreement styled as “Sale of Receivables and Assignment of Rights and Interests,” through which Primetown allegedly transferred monies, rights, titles, and interests in the Kiener Hills project to UCPB.

Legal Basis and Reasoning

The Supreme Court treated the controlling “primordial issue” as whether, under the Agreement between Primetown and UCPB, UCPB assumed liabilities and obligations arising from Primetown’s contracts to sell with Spouses Choi.

The Court first explained that an assignment of credit is an agreement in which the owner of a credit (the assignor) transfers that credit and its accessory rights to another (the assignee), without the debtor’s consent, by a legal cause such as sale or exchange, thereby giving the assignee the power to enforce the credit to the same extent the assignor could have enforced it. It emphasized that the obligations between assignor and assignee depend on the judicial relation that is the basis of the assignment. The Court also reiterated that contract interpretation aims to ascertain and carry out the intention of the parties. That intention must be derived from the contract as a whole, with all parts given effect, and sought in the words employed. Where the contract terms are clear and leave no doubt, the literal meaning controls.

Applying these principles, the Court focused on the express terms of the Agreement. The Agreement provided that Primetown, in consideration of P748,000,000.00, assigned to UCPB all accounts receivable accruing from Primetown’s Kiener project, together with the assignment of Primetown’s rights, titles, interests, and participation over the units covered by, or arising from, the contracts to sell from which the accounts receivable arose. Crucially, the Agreement also stipulated that the sale/assignment was limited to the receivables accruing from the buyers of the condominium units in Kiener and the corresponding assignment of rights and interests arising from the pertinent contracts to sell, and that it did not include, except for an amount not exceeding P30,000,000.00, Philippine currency, any and all liabilities which Primetown may have assumed under the individual contract to sell.

From this wording, the Court held that the Agreement conveyed the straightforward intent of Primetown to sell and assign to UCPB the receivables and related rights and participation while explicitly excluding any liabilities and obligations assumed by Primetown under the contracts to sell. The Court further relied on Primetown’s subsequent letters to the buyers, which stated that the payment arrangement would not amend other terms and conditions, nor cancel the contracts to sell already executed with Primetown. The Court also applied the basic contract rule that when different constructions are otherwise equally proper, the one most favorable to the party in whose favor the provision was made should be taken, and it concluded that the tenor of the Agreement was clearly in favor of UCPB. It reasoned that the unclear reference to an amount not exceeding P30,000,000.00 was properly read as referring to receivables rather than liabilities.

The Court then supported its construction by reference to CA decisions in UCPB v. O’Halloran and UCPB v. Ho, both of which—according to the Court—interpreted the same Agreement as an assignment of credit limited to receivables, excluding Primetown’s liabilities under the contracts to sell. In UCPB v. O’Halloran, the CA held that there was no legal, statutory, or contractual basis to hold UCPB solidarily liable with Primetown for full reimbursement of the buyers’ payments; rather, UCPB was merely the assignee of receivables to the extent of the amounts it actually received. That decision became final upon entry of judgment. In UCPB v. Ho, the CA treated the Agreement similarly and ruled that UCPB was a mere assignee of Primetown’s right to collect under the contracts to sell, not the owner or developer of the unfinished project, and that it could only be held jointly liable with Primetown for payments actually received. The Court stated that this ruling likewise became final and executory after denial of review.

From the characterization of the Agreement as an assignment of credit, the Court concluded that UCPB did not assume Primetown’s obligations and liabilities under its contract to sell with Spouses Choi. It noted that in an assignment of credit, the vendor in good faith is responsible only for the existence and legality of the credit at the time of sale. It also drew an analogy from Filinvest Credit Corporation v. Philippine Acetylene Co., Inc., where the Court had ruled that an assignee does not acquire burdens such as unpaid taxes when what is transferred are only rights, title, and interest.

On Spouses Choi’s reliance on estoppel, the Court rejected the argument. It found that UCPB’s letters to the buyers only assured them of completion by the developer. The Court held that UCPB did not represent itself as the new owner of Kiener, nor did it represent that it itself would complete the project.

Regarding Spouses Choi’s attempt to invoke Luzon Development Bank v. Enriquez and PBCOMM v. Pridisons Realty Corporation (with reference also to Delta Development and Management Services Inc. v. Enriquez), the Court refused to treat those cases as applicable. It observed that those decisions involved banks’ solidary liability under **Sections 17, 18 and 25 of Presidential Decree No. 957, which makes banks solidarily liable. The Court reiterate

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