Spouses Ong v Roban Lending Corp.

[G.R. 172592 July 9, 2008]

FACTS:

- Petitioner-spouses Wilfredo N. Ong and Edna Sheila Paguio-Ong obtained several loans from
Roban Lending Corporation (respondent) in the total amount of P4,000,000.00. These loans
were secured by a real estate mortgage on petitioners parcels of land located in
Binauganan, Tarlac City
- Petitioners and respondent executed an Amendment to Amended Real Estate Mortgage
consolidating their loans inclusive of charges thereon which totaled P5,916,117.50.
- Parties executed a Dacion in Payment Agreement wherein petitioners assigned the
properties to respondent in settlement of their total obligation, and a Memorandum of
Agreement where it was provided that pursuant to their restructuring agreement the
petitioners shall pay in one year otherwise the dacion will be enforced.

PROCEDURE:
- Spouses Ong filed a Complaint, RTC of Tarlac City, for declaration of mortgage contract as
abandoned, annulment of deeds, illegal exaction, unjust enrichment, accounting, and
damages, alleging that the Memorandum of Agreement and the Dacion in Payment
executed are void for being pactum commissorium.
- Petitioners decried the additional charges ( 3.5% monthly interest rates, 5% penalty per
month and 25% attorneys fees ) as illegal, iniquitous, unconscionable, and revolting to the
conscience as they hardly allow any borrower any chance of survival in case of default.
- Petitioners further alleged that they had previously made payments on their loan accounts,
but because of the illegal exactions thereon, the total balance appears not to have moved at
all, hence, accounting was in order.
- In its answer with counterclaim, the respondents maintaine dthe legality of their transactions.
- Initial hearing of the case, originally set on December 11, 2002, was reset several times due
to, among other things, the parties efforts to settle the case amicably.
- RTC, finding on the basis of the pleadings that there was no pactum commissorium,
dismissed the complaint.
- CA affirmed RTC yet noted that
o ‘the trial court in its decision stated that it was rendering judgment on the
pleadings, x x x what it actually rendered was a summary judgment. A judgment on
the pleadings is proper when the answer fails to tender an issue, or otherwise
admits the material allegations of the adverse partys pleading. x x x On the other
hand, a summary judgment may be rendered by the court if the pleadings,
supporting affidavits, and other documents show that, except as to the amount of
damages, there is no genuine issue as to any material fact.’

ISSUE/S:
- Whether or not the dacion in payment agreement entered into by Spouses Ong and Roban
constitutes pactum commissorium
 - Whether or not Summary Judgment is proper in this case.

RULING:
- The elements of pactum commissorium, which enables the mortgagee to acquire ownership
of the mortgaged property without the need of any foreclosure proceedings, are: (1) there
should be a property mortgaged by way of security for the payment of the principal
obligation, and (2) there should be a stipulation for automatic appropriation by the creditor
of the thing mortgaged in case of non-payment of the principal obligation within the
stipulated period.
- Memorandum of Agreement and the Dacion in Payment contain no provisions for
foreclosure proceedings nor redemption. Respondent, in effect, automatically acquires
ownership of the properties upon petitioners failure to pay their debt within the stipulated
period.
- In a true dacion en pago, the assignment of the property extinguishes the monetary debt. In
the case at bar, the alienation of the properties was by way of security, and not by way of
satisfying the debt.
- SC reduced the penalties and the interests for being unconscionable.
- The prayer for accounting in petitioners complaint requires presentation of evidence, they
claiming to have made partial payments on their loans, vis a vis respondents denial
thereof. A remand of the case is thus in order.
- TC and CA erred in holding that a summary judgment is proper. A summary judgment is
permitted only if there is no genuine issue as to any material fact and a moving party is
entitled to a judgment as a matter of law. A summary judgment is proper if, while the
pleadings on their face appear to raise issues, the affidavits, depositions, and admissions
presented by the moving party show that such issues are not genuine.
- A genuine issue, as opposed to a fictitious or contrived one, is an issue of fact that requires
the presentation of evidence. Petitioners prayer for accounting requires the presentation of
evidence on the issue of partial payment.
- But neither is a judgment on the pleadings proper. A judgment on the pleadings may be
rendered only when an answer fails to tender an issue or otherwise admits the material
allegations of the adverse partys pleadings. In the case at bar, respondents Answer with
Counterclaim disputed petitioners claims that the Memorandum of Agreement and Dation in
Payment are illegal and that the extra charges on the loans are unconscionable.

FALLO:

WHEREFORE, the challenged Court of Appeals Decision is REVERSED and SET ASIDE. The Memorandum
of Agreement and the Dacion in Payment executed by petitioner- spouses Wilfredo N. Ong and Edna
Sheila Paguio-Ong and respondent Roban Lending Corporation on February 12, 2001 are declared NULL
AND VOID for being pactum commissorium.
In line with the foregoing findings, the following terms of the loan contracts between the
parties are MODIFIED as follows:

1. The monthly interest rate of 3.5%, or 42% per annum, is reduced to 12% per
annum;

2. The monthly penalty fee of 5% of the total amount due and demandable is
reduced to 12% per annum, to be computed from the time of demand; and

3. The attorneys fees are reduced to 25% of the principal amount only.

Civil Case No. 9322 is REMANDED to the court of origin only for the purpose of receiving
evidence on petitioners prayer for accounting.