Title
United Coconut Planters Bank, Inc. vs. E. Ganzon, Inc.
Case
G.R. No. 244247
Decision Date
Nov 10, 2021
EGI defaulted on loans from UCPB, restructured debt, and transferred properties. UCPB overcharged, foreclosed, and retained units fraudulently. Court ruled UCPB committed fraud, voided transactions, ordered refund, return of units, and awarded damages to EGI.
dispute
transfer of properties
loan obligation
A

Case Summary (G.R. No. 244247)

Key Dates and Transactional Facts

Loans obtained by EGI from UCPB between 1995–1998 aggregated P775,000,000.00. Defaults began in December 1998. A short-term loan of P150,000,000.00 was obtained to meet maturing obligations. On December 28, 1999 (MOA date reflected in the record), the parties executed a MOA fixing EGI’s aggregate obligation at P915,838,822.50 and agreeing that conveyance of listed properties would extinguish that obligation. An Amendment of Agreement (January 18, 2000) adjusted the aggregate appraised value of the listed properties. UCPB foreclosed on 193 of 485 listed properties, applied a bank bid price of P723,592,000.00 (80% of appraised value) against the debt, and later required additional properties by dacion en pago.

Applicable Law and Precedents Relied Upon

Constitutional basis: 1987 Philippine Constitution (decision date post‑1990). Statutory and doctrinal provisions invoked and applied in the decision include: Civil Code provisions (Articles 1225, 2154, 2208, 2209, 2216, 2224, 2225, 2232, 2234), Republic Act No. 4726 (Condominium Act), Presidential Decree No. 957 (Subdivision and Condominium Buyers’ Protection Decree), BSP regulations and circulars referenced in the record (e.g., BSP Circular No. 202), Rules of Court (Rule 45 and Rule 19), and controlling jurisprudence cited in the record (e.g., Nacar v. Gallery Frames and other cases referenced by the courts).

Procedural Posture and Relief Sought

EGI filed for annulment of foreclosure and dacion en pago, rescission/amendment of contract, collection, damages, accounting, return of certificates of title, and related remedies, alleging overcharging, padding of charges, and fraudulent practices by UCPB. The RTC rendered judgment in favor of EGI declaring the loan fully paid and awarding substantial monetary sums and reliefs; the CA affirmed with modification; UCPB elevated issues to the Supreme Court by a petition for review on certiorari under Rule 45. Meadow Brook Realty, Inc. later sought intervention based on a Contract to Sell for some units.

Issues Presented to the Supreme Court

The Supreme Court distilled the dispute into seven issues: (1) whether the MOA and Amendment are contracts of adhesion; (2) whether UCPB could charge interest after execution of the MOA; (3) whether EGI overpaid its loan obligation to UCPB; (4) who should bear transaction costs relative to transfer of listed assets; (5) whether EGI is entitled to depreciated value of movables, furniture, fixtures, and equipment seized in dacion en pago; (6) whether EGI is entitled to value of 28 units at EGI Rufino Plaza held by UCPB; and (7) entitlement to damages and legal interest.

Determination on Contract of Adhesion

The Supreme Court held that the MOA and its Amendment are not contracts of adhesion. The Court relied on the factual context demonstrating negotiations and concessions (including EGI’s own correspondence acknowledging MOA terms and requesting cessation of interest accrual), the mutual advantages conferred on EGI (waiver of penalties and fixed aggregate obligation), and EGI’s sophistication as an established developer. The record showed the MOA terms were negotiated and not a take‑it‑or‑leave‑it form imposed without bargaining, rendering the contract subject to ordinary contractual interpretation rather than strict construction against the drafter.

Effect of the MOA on Interest, Charges, and the Parties’ Obligations

The MOA expressly stated the parties’ computed aggregate obligation (P915,838,822.50) “inclusive of all interest, charges and fees.” The Court determined that this language superseded prior agreements permitting post‑MOA interest accrual; UCPB was not entitled to charge interest on the principal obligation after execution of the MOA. The obligation to extinguish the loan was conditioned on EGI’s transfer and conveyance of the listed properties and EGI’s performance of MOA undertakings; the parties adopted foreclosure, dacion en pago and other mechanisms to effect conveyance as provided in Section 3.1.

Nature of the Obligation Under the MOA — Indivisibility and Practical Effect

The Court analyzed the obligation as an obligation to give (an obligation to transfer the listed properties) and applied Article 1225 on divisibility. Considering the expressed intent of the parties in Section 1.1 and 2.2 of the MOA, the Court concluded the parties intended the complete transfer of all 485 listed properties to extinguish the P915,838,822.50 obligation, rendering the obligation indivisible in principle. Nonetheless, because the parties proceeded with partial transfers by foreclosure and dacion en pago, the Court deemed it equitable to credit EGI for the appraised values stipulated in the MOA for transferred properties and for dacion en pago proceeds, and to compute any overpayment accordingly.

Computation of Overpayment and Credit for Transferred Properties

The Supreme Court accepted the CA’s approach to credit EGI with: (a) the appraised value set out in Annex A of the MOA for the 193 listed assets foreclosed (P904,491,052.00), and (b) the dacion en pago proceeds for additional assets (P166,127,368.50). Using the MOA’s stated aggregate obligation (P915,838,822.50) and subtracting these credited amounts resulted in an excess (overpayment) figure (the CA computed P154,779,598.00). The Supreme Court adopted that figure subject to deduction of transaction costs properly chargeable to EGI.

Allocation of Transaction Costs

The Court applied MOA provisions bearing on transaction costs. Section 6.3 generally made taxes, charges, fees, costs and expenses arising out of execution and performance of the MOA payable by EGI. Section 3.1 recognized that certain alternative modes of transfer chosen by the bank could obligate the bank to bear taxes and expenses if the bank implemented specified alternatives. The Court concluded: (a) transaction costs incurred in extrajudicial foreclosure of the listed MOA assets (e.g., notarial commission, registration fees, documentary stamp tax, withholding tax computed as applicable) are properly charged to EGI pursuant to Section 6.3 and related MOA provisions and conceded documentary support; and (b) transaction costs relative to dacion en pago contracts covering additional properties not included in the MOA should not be charged to EGI because UCPB’s insistence on acquiring these additional assets was grossly disproportionate to EGI’s residual obligation (P11,347,770.50), making it equitable that the bank bear those costs. After deducting allowable transaction costs attributable to EGI from the excess payment, the Supreme Court computed a net refund balance of P82,708,157.72.

Movables, Furniture, Fixtures and Equipment Found in Units

The CA had awarded EGI the depreciated value of movables and fixtures (roughly P32,296,777.78). The Supreme Court reversed that award. The record contained a letter from EGI acknowledging that the “Condominium Assets” subject to foreclosure included fixtures, facilities, improvements and personal assets situated therein; MOA provisions granted the bank proprietary rights and intended turnover of operations so that the bank could assume operations and benefits. The Court found EGI estopped from claiming those movables and that UCPB legitimately acquired them as part of the transferred condominium assets; consequently EGI was not entitled to the depreciated value award.

28 Units Claimed by EGI and the Applicability of the Condominium Act

The 28 disputed items comprised 16 common areas (lobbies on multiple floors) and 12 valet parking areas. The Supreme Court held these are common areas under R.A. No. 4726 (Condominium Act) and thus, even if titles were nominally registered to the developer, the developer could not unilaterally transfer or appropriate them to the prejudice of unit owners. The MOA itself contemplated formation of a condominium corporation to hold titles to common areas. The Court therefore found the CA erred in awarding EGI the value of those 28 units (P87,578,846.60) and instead directed EGI to carry out its contractual obligation to organize a condominium corporation; UCPB (or its assignee) must participate in formation given its substantial ownership. The Court further noted regulatory constraints (e.g., HLURB approval considerations and PD No. 957 provisions) relevant to mortgages or transfers of common areas.

Damages — Moral, Temperate, Exemplary, and Attorney’s Fees

Moral Damages: The Supreme Court vacated the award of moral damages (P30,000,000.00) because EGI, a juridical entity, failed to prove besmirched reputation with the causal link req

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