Case Summary (G.R. No. 244247)
Loan Background and Defaults
Between 1995 and 1998, EGI obtained five separate loans from UCPB totaling ₱775 million. Beginning December 1998, EGI defaulted. The parties restructured by granting EGI a short-term ₱150 million loan and later entered a Memorandum of Agreement (MOA) fixing EGI’s total outstanding debt at ₱915.838 million and agreeing to settle it by transferring 485 real properties.
Memorandum of Agreement (MOA) and Amendment Terms
Under the MOA (December 1999) and its January 2000 Amendment, EGI agreed to assign 485 listed condominium units and land parcels to UCPB “free and clear,” and UCPB agreed that upon satisfactory transfer the ₱915.838 million debt would “be deemed paid and extinguished.” The Amendment adjusted the aggregate appraised value of the properties from ₱1.374 billion to ₱1.419 billion.
Foreclosure and Dacion en Pago Transactions
UCPB foreclosed 193 of the 485 units, applying the bid price of ₱723.592 million (80% of the appraised value) against the debt, then required EGI to convey 107 additional units by dacion en pago worth ₱166.127 million. UCPB still claimed an unpaid balance and sought further assets.
EGI’s Complaint and Lower Courts’ Rulings
EGI filed suit for annulment of foreclosure and dacion en pago, rescission/amendment of contracts, collection, damages, and replevin of 28 titled units held “for safekeeping.” The Regional Trial Court (RTC) found UCPB breached the MOA by undervaluing properties, held EGI had overpaid, and awarded EGI excess proceeds, value of movables, value of 28 units, damages, fees, and mortgage releases. The Court of Appeals (CA) affirmed with modifications, reducing overpayment to ₱154.78 million and adjusting awards and interest rates.
Supreme Court on Contracts of Adhesion and Post-MOA Interest
The Supreme Court held:
- MOA and Amendment are not contracts of adhesion, having been extensively negotiated.
- By their express terms, interest, charges, and fees were inclusive in the ₱915.838 million obligation; no further interest accrues post-MOA.
Nature of MOA as Dacion en Pago and Obligation Extinguishment
The MOA is effectively a dacion en pago: an obligation to give properties to extinguish a money debt. Extinguishment depends on transfer of all 485 listed assets, not on their market or appraised values. The obligation is indivisible, yet the partial transfers made were recognized as partial performance.
Computation of EGI’s Excess Payment
Recognizing payments under the MOA:
• Appraised value of 193 foreclosed units: ₱904,491,052.00
• Dacion en pago proceeds from 107 units: ₱166,127,368.50
Total payments: ₱1,070,618,420.50
Less original obligation: ₱915,838,822.50
Excess payment: ₱154,779,598.00
Allocable Transaction Costs under MOA
MOA Section 6.3 places “taxes, charges, fees, costs and expenses” of implementing its transfer modes on EGI. Foreclosure-related costs (₱72,071,440.28) are chargeable to EGI; costs of subsequent dacion en pago for additional assets are deemed grossly disproportionate to the remaining obligation and thus borne by UCPB. Net excess after deducting foreclosure costs: ₱82,708,157.72.
Movable Properties and Letter of Undertaking
EGI’s own December 31, 1999 letter confirmed that “Condominium Assets, inclusive of the fixtures, facilities, improvements and other personal assets” would be subjected to foreclosure. Therefore, EGI is estopped from claiming depreciation value of movables; these belong to UCPB.
Common Areas and Condominium Corporation Obligation
The 28 disputed units (lobbies and valet parking slots) are common areas under the Condominium Act (R.A. 4726) and cannot be individually conveyed or their titles returned to EGI. Instead, EGI must organize a condominium corporation within 90 days of finality to hold common-area
Case Syllabus (G.R. No. 244247)
Facts and Antecedents
- Between 1995 and 1998, E. Ganzon, Inc. (EGI) obtained five term and omnibus loans from United Coconut Planters Bank (UCPB) totaling ₱775 million.
- EGI defaulted on amortizations beginning December 1998; parties restructured via a short-term ₱150 million loan, of which ₱145.163 million was applied to EGI’s credit.
- By late 1999, EGI’s loan balance had ballooned to over ₱936 million.
Memorandum of Agreement (December 28, 1999)
- Fixed EGI’s aggregate outstanding obligation at ₱915,838,822.50, inclusive of all interest, charges, and fees.
- EGI agreed to assign, cede, transfer, and convey to UCPB 485 condominium units and certain land (Annex A) free of liens and encumbrances.
- UCPB undertook that upon transfer and satisfactory performance by EGI, the obligation would be deemed paid and extinguished and so recorded in its books.
Amendment of Agreement (January 18, 2000)
- Parties readjusted aggregate appraised value of the listed properties from ₱1,374,675,560.00 to ₱1,419,913,861.00.
Foreclosure and Dacion en Pago Transactions
- UCPB foreclosed 193 of the 485 listed properties, appraised at ₱904,491,052.00, but credited EGI only ₱723,592,000.00 (80% of appraised value).
- After applying credits and charges, UCPB demanded an additional ₱226,963,905.50; EGI conveyed 135 more units and executed dacion en pago on 107 units worth ₱166,127,386.50.
- UCPB held certificates of title for 28 remaining units “for safekeeping.”
- An internal UCPB memorandum showed two computations of EGI’s unpaid balance: “DISCLOSED TO EGI” at ₱226,967,194.80 vs. “ACTUAL” at ₱146,849,412.58.
Regional Trial Court Decision (June 28, 2016)
- Declared EGI’s loan obligation fully paid.
- Ordered UCPB to pay EGI:
• Excess foreclosure proceeds (₱158,378,177.82)
• Dacion en pago proceeds (₱166,127,368.50)
• Value of movables, fixtures, equipment (₱32,296,777.78)
• Value of 28 additional units (₱87,578,846.60)
• Court filing fees (₱1,552,403.50)
• Moral damages (₱30,000,000.00)
• Exemplary dama