G.R. No. 126890; March 9, 2010
UNITED PLANTERS SUGAR MILLING CO., INC. (UPSUMCO), Petitioner, vs. THE HONORABLE COURT OF APPEALS, PHILIPPINE NATIONAL BANK (PNB) and ASSET PRIVATIZATION TRUST (APT), AS TRUSTEE OF THE REPUBLIC OF THE PHILIPPINES, Respondents.

FACTS

Petitioner UPSUMCO obtained “takeoff loans” from respondent PNB in 1974, secured by real estate and chattel mortgages, and containing a setoff clause authorizing PNB to apply UPSUMCO’s deposits to unpaid obligations. From 1984 to 1987, UPSUMCO contracted separate “operational loans” from PNB, also with setoff clauses and secured by pledges of sugar produce. PNB assigned its rights over UPSUMCO to the government, which were subsequently transferred to respondent APT. APT and UPSUMCO agreed to an “uncontested foreclosure” of the mortgaged assets. After a foreclosure sale on August 27, 1987, where APT purchased the properties for ₱450,000,000.00, UPSUMCO executed a Deed of Assignment on September 3, 1987, assigning its right of redemption to APT in exchange for APT “condoning any deficiency amount” under the specified Credit Agreement and Restructuring Agreements for the takeoff loans. Despite this, UPSUMCO filed a complaint alleging illegal appropriation of its funds by respondents through withdrawals from its accounts and application of sugar sale proceeds after the foreclosure. The Regional Trial Court ruled in favor of UPSUMCO. The Court of Appeals reversed, ruling the Deed of Assignment condoned only the takeoff loans, not the operational loans. The Supreme Court (Third Division) initially reversed the CA, but the Court En Banc reinstated the CA Decision. UPSUMCO filed a Motion for Reconsideration.

ISSUE

Whether the Deed of Assignment executed on September 3, 1987 condoned all of UPSUMCO’s obligations to APT (including both takeoff and operational loans), thereby rendering respondents’ subsequent withdrawals from UPSUMCO’s accounts illegal.

RULING

The Supreme Court DENIED the Motion for Reconsideration. It upheld the Court of Appeals’ ruling that the Deed of Assignment condoned only the deficiency under the Credit Agreement dated November 5, 1974, and the Restructuring Agreements dated June 24, 1982, December 10, 1982, and May 9, 1984, which pertained solely to the “takeoff loans.” The operational loans, evidenced by separate documents such as Trust Receipts, Deeds of Assignment/Pledge, Credit Agreements, and Promissory Notes from 1984 to 1987, were not included in the condonation. Therefore, APT was entitled to apply UPSUMCO’s deposits to the satisfaction of the outstanding operational loans. The Court found UPSUMCO’s arguments to be a mere rehash of points already addressed and without merit. It directed an accounting before the Regional Trial Court to determine if any deficiency due to APT existed after applying all payments, including the seized deposits and the foreclosure proceeds, against UPSUMCO’s total obligations.